Brazil & Southern Cone - September 2007 (ISSN 1471-4431

The right is trying to allege that there is something fishy about the country's inflation figures, even though the rate in August was the highest for four months. The central bank president, Martí­n Redrado, was the first to give the issue a stir, by saying that the bank was deeply concerned about inflation. What concerns economists and politicians is not so much the rate of inflation but whether the rate is being calculated honestly. The official rate, for Buenos Aires in August, was 0.6%. This meant that consumer prices had risen by 5% in the first eight months of the year and 8.7% in the past 12 months. 

What does not seem to add up is that although government revenues and spending are surging, and domestic consumption is booming, none of this demand is feeding through into higher prices, even though most economists agree that there has been little investment in new capacity. 

2008 budget: The government sent a draft budget to congress in mid September. The budget sets an exchange rate of Arg$3.20 and calls from GDP growth of 4%. This is likely to be another low estimate: the Kirchner government has developed the habit of picking a low growth figure and then using the windfall revenues produced by faster growth as it likes as the revenues are beyond congressional scrutiny.