Doctored Data Cast Doubt on Argentina

By Juan Forero
Washington Post Foreign Service
Sunday, August 16, 2009

BUENOS AIRES -- Workers at the government's National Institute of Statistics call it crass manipulation: Their agency, under pressure from above, altered socioeconomic data to reflect numbers palatable to the presidency. Inflation and poverty miraculously dropped, they said in interviews, and the economy boomed.

At least officially.

"They just erased the real numbers," said Luciano Belforte, an 18-year veteran at the institute. "Reality did not matter."

The alleged manipulation, which is under investigation by anti-corruption prosecutors, has angered Argentines. But in a globalized world, where a pensioner in Italy might be as likely to invest in Argentina as in Fiat, the suspected modifications are being felt far beyond this city.

In fact, an association of community college professors in New Jersey, a cattleman in Colorado and a Latino business group in California say they too are being shortchanged because they hold Argentine bonds. By underreporting inflation figures, economists say, Argentina is cheating investors of proper compensation on nearly $50 billion in debt benchmarked to inflation.

"The way these bonds work is that every month, or every six months, the principal adjusts for inflation," said Robert Shapiro, co-chair of the American Task Force Argentina, a Washington group lobbying for Argentina to pay its debt to American investors. "So if inflation is actually 30 percent, and they're only adjusting 10 percent, that's a huge loss."

Kathy Malachowski, president of the New Jersey professors group, said its pension plan invests in Argentine bonds. "We want to be able to retire and know that our money is going to be there," she said.

Officials at the Economy Ministry, the presidency and the INDEC, as the statistics institute is known, declined interview requests. A spokesman for the Economy Ministry, Sergio Poggi, said the new minister, Amado Boudou, is undertaking a review of INDEC methodology going back to 1999 and is creating a technical council of academics to advise the institute.

"This is the best way for all of us to be sure that things are being done correctly," President Cristina Fernández de Kirchner said last month.

But credit-rating agencies and financial investment companies, among them Credit Suisse, say they are skeptical anything will change.

The problems at the INDEC, recounted in interviews with seven current workers and one former administrator, began in late 2006 during the presidency of Fernández de Kirchner's predecessor, her husband, Néstor Kirchner.

In accounts backed up by a 91-page complaint by prosecutors, institute employees recalled incessant phone calls from high-ranking government officials who wondered aloud whether there was a way to arrive at lower inflation numbers.

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