Macondo's inflation INDEKS

If you haven't heard of magic realism, you might be tempted to (and should probably) read some of the works of Gabriel García Márquez, or query Wikipedia, or ask an acquaintance with a PhD. Or you could read Argentine news!! Case in point: INDEC.

INDEC (sometimes spelled Indec, or lately, IndeK), is the official organization that performs all manners of statistical surveys, from the national census every ten years to the monthly inflation measurements.

Earlier this year I spoke about government intervention in the workings of INDEC. The Kirchner administration is extremely concerned with inflation, and has tackled it with aggressively heterodox policies, including price controls (they call them price-keeping agreements), negotiated/forced by Secretary of Interior Commerce Guillermo Moreno.

After an initial success, the price controls started to show problems. Many people don't know this, but the controls were only valid in the Greater Buenos Aires area — that's where most major producers, distributors and sellers are, that's where one third of the population of Argentina lives, and most importantly, that's where INDEC has always measured inflation. The inflation rate in "the interior" has been measured for some time now, though only in the largest metropolitan areas (like Córdoba, Rosario and Mendoza); it's published later, without fanfare, and doesn't interest anyone. The national government, sadly, lives for the headlines — the price controls were, since the very beginning, focused exclusively on the goal of showing smaller inflation figures in the headlines of the lead Buenos Aires newspapers.

When prices escape controls, inflation rises. At first the controls were widened and hardened. Kirchner accused big business of restricting offer to raise prices and collect extraordinary profits. Moreno sent teams of inspectors ("hounds") to check that those that had agreed with keeping prices stable were indeed doing so, and pressure those who weren't. It didn't work. For whatever reason (I'm not going to discuss that here) prices continued rising. Enraged, the government removed top officials of INDEC. New employees were appointed in key areas. Administrative workers and professionals in INDEC protested, told the press the government was manipulating the surveys and faking the numbers.

All this time it was obvious for all of us that this was all a farce. Circumstancially wrong statistical samples were not enough to explain the inflation rate. When tourism in February this year turned out to be cheaper (according to INDEC) than tourism in the same month of 2006, I commented on it humorously.

Now this was beginning to look like a bizarre confusion of make-believe and reality, or a reality where natural laws, logic and common sense are suspended — magic realism. But this month was the last stroke. First, INDEC announced the March inflation rate (0.7%) before the usual day, to avoid doing it on the same day as a protest organized by its employees. Then, INDEC's employees leaked the figure of inflation for the "basic food basket", i.e. the sample of food items used by INDEC: it was 3.6%, the largest since 2002. They warned that this was the "real" figure. Days later (yesterday), INDEC officially announced... hold your breath... deflation!

Deflation! INDEC wants us to believe that prices of the basic food basket have decreased by 0.2%!

I think I'll metaphorically slam the door on the way out of my mind.