This article is from: srnnews.com
By Leila Miller
BUENOS AIRES, Feb 6 (Reuters) – Argentina’s inflation data has become a political flashpoint after the abrupt resignation this week of the head of the national statistics agency exposed tensions at the heart of President Javier Milei’s economic strategy.
Economy Minister Luis Caputo acknowledged that the departure of INDEC head Marco Lavagna stemmed from a disagreement over the Milei government’s decision to delay an update to the methodology used to calculate inflation – a sensitive move in a country scarred by past data manipulation scandals.
Argentina was reprimanded by the International Monetary Fund in 2013 for under-reporting its numbers.
Opposition lawmakers seized on Lavagna’s resignation to accuse the government of trying to protect Milei’s political standing.
“It’s a trick,” congresswoman Julia Strada told Reuters, saying reducing inflation has been Milei’s “primary tool” to boost popularity.
Lavagna’s resignation set off a broader debate over trust and transparency just as Milei touts a dramatic reduction of what was once double‑digit level monthly inflation to now under 3%.
While the INDEC chief is appointed by the executive branch, the role has traditionally operated without political interference, making the incident a red flag, according to Marcelo Garcia of consultancy Horizon Engage.
“What surprises me was how vehemently obvious the government was in saying he resigned because the president did not agree with a policy that this institute, which should be autonomous to make these professional decisions, was launching,” Garcia said.
Milei has pledged to bring monthly inflation below 1% by August.
The INDEC previously said the new methodology would be implemented for January’s data. The current methodology is based on a 2004 household spending survey.
Caputo told a local radio station the vision with Milei was to not implement the change “until the process of disinflation has been consolidated.” He did not provide a new timeline.
Five market sources told Reuters that the updated formula would likely have shown at least a slightly higher inflation rate.
Argentina’s economy ministry declined to comment.
HISTORY OF DOUBT
The credibility of Argentina’s official inflation data was dented under the leftist Peronist government of former President Nestor Kirchner and his wife and former President Cristina Kirchner, when authorities were accused of systematically understating price growth.
The controversy began in 2007, after Nestor Kirchner replaced staff at INDEC. In subsequent years, official inflation readings were often less than half those estimated by private economists. That meant Argentina was paying less interest on inflation‑linked bonds.
The distorted data scared off foreign investors and complicated Argentina’s return to international credit markets after its 2001 default.
“Not only did investors lose their compass of what was happening in Argentina but they were scammed,” said Aldo Abram of local think tank Liberty and Progress Foundation.
Today, government inflation figures generally align with independent economists’ forecasts.
PESO POWER
Argentina is notorious for cycles of high inflation, which in the past drove people to spend their pesos before they lost value amid often-daily price fluctuations.
While Milei has been applauded by investors and the IMF for taming inflation, the true economic indicator for some Argentines is how far their pesos stretch.
Ailen Menta, 31, who works at an insurance brokerage, said that her purchasing power has declined under Milei.
Half of her income goes toward rent now, up from about 30% previously, since his administration slashed rent controls. (Many other renters, however, have seen a decline in prices since landlords have not needed to set high initial rents to counter inflation risk.)
Lavagna’s resignation plunged her trust in the statistics agency to “zero.”
“There’s something that the government doesn’t want us to know,” Menta said.
Many people are still feeling the pain from a sharp surge in inflation, driven by a devaluation of the peso, and Milei’s cuts to gas and electricity subsidies in 2024, according to economist Laura Caullo.
The situation stabilized in 2025, “but no one returns to you what you lost before,” Caullo said.
The shakeup at the INDEC, though, hasn’t rattled Milei’s staunch supporters, who have cheered him for stabilizing the economy.
“I’m calm,” said Roberto Colliard, 58, a pharmacy worker. “In a few days the markets will recover, everything will continue as normal and we’re going to forget about this.”
(Reporting by Leila Miller; additional reporting by Jorge Otaola; Editing by Cassandra Garrison and Alistair Bell)
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