Cooking the Books in Buenos Aires

Rather than seek to improve price stability through policy changes, Kirchner and her allies have been harassing and threatening media outlets that dare to question the government’s (obviously bogus) inflation figures. On September 22, the campaign of intimidation reached a new level, when Judge Alejandro Catania subpoenaed several Argentine newspapers for the contact information of journalists who have published or edited articles on economic issues over the past half-decade. Judge Catania is also using his subpoena power to pursue the private consultants who have been supplying legitimate inflation data to the IMF and other institutions.

“After a signal like that,” writes Council on Foreign Relations scholar Walter Russell Mead, “stockholders should be able to sue the management of any company which puts money into Argentina. It is hard to think of measures which send a more unmistakable warning of dishonesty and impending crisis. Nothing and no one can be safe in a country where such things are done.”

Indeed, under Cristina Kirchner and her late husband, Néstor, who preceded her as Argentine president (serving from 2003 to 2007), the onetime “jewel of South America” has often seemed like a banana republic. By doctoring its official economic data and hounding journalists who report the truth, the government is showing a thuggish contempt for the rule of law. “The numbers have more than political consequences,” explains AP reporter Michael Warren. “Because much of Argentina’s debt is issued in inflation-indexed bonds, the government saves billions on repayments to bondholders if official inflation remains low. Most bondholders are now Argentine taxpayers, since the government nationalized private pensions and required the new system to invest in government debt.”

Speaking of debt and bondholders, it’s been roughly a decade since Argentina’s financial collapse, and the government is still refusing to accept a fair settlement with its erstwhile creditors. It owes private creditors about $16 billion, and it owes an additional $9 billion to Paris Club member nations. Understandably, the United States is now attempting to block Argentina from receiving new development loans, hoping this will convince Kirchner to reach equitable agreements with former bondholders and investors.

Comparisons between the Argentine president and Hugo Chávez can be taken too far. The latter is a raving demagogue who has destroyed Venezuela’s democratic institutions and created a virtual petro-dictatorship. Kirchner’s attacks on basic civil liberties have been much less egregious, and (unlike Venezuela) Argentina remains a genuine democracy, albeit one that has witnessed a disturbing erosion of press freedom. Still, her Chávez-like economic management has poisoned the investment climate in a country whose global reputation continues to decline. As Wall Street Journal columnist Mary O’Grady recently noted, “Capital flight in the first half of this year was nearly equal to what left the country in all of last year.”

Aided by a commodity boom and a hopelessly divided opposition, Kirchner will almost certainly win reelection this month, giving her another four years in the presidential palace. But Argentines will be paying the price of Kirchnerism for much longer than that.

Read this article in Spanish here