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

The debate over inflation has been a factor in the decline in popularity of the government, with a recent poll showing that over 80% of those questioned believed that inflation was getting worse. More generally a poll by the Fundación Mercado showed that in September indices of Consumer Confidence (ICC), Savers (ICA) and Families (ICF) were 43.4%, 38.8% and 42.8% respectively. 

Much of the media casts doubt on every monthly inflation figure released by the national statistics agency, Indec and has been doing so ever since February when the government replaced the Indec official responsible for calculating the consumer price index (CPI) with an official loyal to Guillermo Moreno, the trade secretary. The most recent report by the Indec released on 4 October showed consumer prices in Buenos Aires and its environs at between 0.6%-0.8%, much lower than the estimates of independent economists who believe the figure to be over 1%. Similarly, figures for August showed prices rising much higher in certain provinces than in the capital, which added to speculation that the government was manipulating inflation data. These complaints culminated in the resignation of the official responsible for Indec's inflation department, Beatriz Paglieri, at the end of September.

The government has undoubtedly been concerned about the possible impact of the criticism, with the issue seized upon by the opposition; candidates Roberto Lavagna and Elisa Carrió have both accused the government of ignoring the truth. After the release of September's inflation figure, Kirchner publicly addressed the issue, assuring that "the index is perfect _ there is the Indec index and the opposition's index because we are in an electoral year".

According to local daily La Nación, the government made numerous phone calls to top businessmen asking them to dampen the row over inflation, efforts which would appear to have paid off; representatives from organisations such as the Unión Industrial Argentina and the Confederación Argentina de la Mediana Empresa endorsed the inflation data. The newspaper suggested that one reason firms were happy to toe the government's line was due to the fact that unions would increase their wage demands if there is evidence of rapid inflation.

While the issue has been exploited for its political value in the campaigning period, questions nevertheless emerge over why cabinet chief Alberto Fernández told union leaders during a meeting in the Casa Rosada on 24 August that a new methodology for the Indec CPI would be released "but on 29 October".

In obvious attempts to address the issue, on 10 October Kirchner announced a 5% reduction in the cost of key household goods in supermarkets - reflecting the concern that the fear of price rises will drain confidence in the government ahead of the elections. The popular outcry over prices peaked on 8 October when consumer associations announced a boycott on tomatoes after the price rose six-fold between August and the start of this month. 

Following a call to the banks to lower interest rates or "face government action", Kirchner made a deal with banks on 17 October to reduce the cost of borrowing. Under the agreement, banks will lend as much as Arg$5000 (US$1,581) to consumers at 12% while they will lend up to Arg$75,000 (US$23,687) to companies at 9%. The day before the agreement was unveiled, the central bank released funds worth just over US$600m to free up the credit markets. The opposition complained about the timing of the agreement, describing it as a blatant piece of electioneering by Kirchner on behalf of his wife Cristina.

• Poverty drop
  President Néstor Kirchner boasted at a political rally in mid September that the percentage of Argentines living below the poverty line had dropped to 23% during the first half of the year, from 26.9% in the second half of last year. Indigence, he said, had fallen to 6% from 8.7%. While Kirchner's government has substantially reduced poverty from its high level of 54% in the first half of 2003, the credibility of the latest figures released by Indec is in doubt since it is calculated with inflation data.