The Argentine Senate on Wednesday approved a budget for 2009 that analysts say exaggerates economic growth, underreports inflation and doesn’t account for $23 billion in private pension funds the government may be able to dip into if a nationalization bill passes later this month.
But the allegedly skewed numbers should have minimal impact on the confidence of investors, who tend to rely on independent numbers crunched by private firms.
"I don’t think (investors) even take these figures into account," said economist Carolina Schuff, an analyst with the Buenos Aires-based economic Web site abeceb.com.
Both the business community and a wide swath of the public believe the government has distorted official inflation numbers for the past two years.
The 48-14 vote was the final step in making the 2009 budget law. Argentina’s lower house approved the measure last month. President Cristina Fernandez’s Peronist party has a majority in both houses of Congress.
Fabian Rios, head of the Senate’s budget commission, defended the budget in commments to Clarin newspaper, saying it is based on reality.
"This budget is going to actively contribute to sustaining employment in Argentina and to generating jobs," Rios was quoted as saying on the daily’s Web site.
The budget estimates annual economic growth at 4 percent — nearly double what most private economists are anticipating.
Jose Luis Espert, an economic analyst with Buenos Aires-based Espert & Asociados, calls the government estimate "absurd." He says the economy may actually shrink 2 percent in 2009.
Other analysts predict economic growth will range from 0 to 3.5 percent — far lower than the 8 percent and higher annual growth Latin America’s third-largest economy has seen since 2003.
"There’s a kind of schizophrenia with the figures on the part of the government," Espert said. "Official data has nothing to do with reality."
Also causing consternation in the financial community is Fernandez’s proposal to nationalize $23 billion in private pension funds in an attempt to protect retirees from the whims of the financial markets. Congress is expected to adopt the measure by the end of this month.
Because the money is not included in the annual budget, the government will be able tap it at its own discretion, with no accountability, said Aldo Abram, a Buenos Aires analyst with the Exante economic consultancy.
When the government first drafted the budget in July, commodity prices were high and the economy was strong, which made the official 4 percent growth estimate too low, according to analysts. Now, amid the financial crisis, they say the 4 percent projection is too high.
Underestimating growth, as the government did in the first draft, has in the past given the state access to millions of dollars not included in the annual budget, a practice employed by Fernandez’s husband and predecessor, Nestor Kirchner, analysts say.
The government has used these spending "superpowers," originally approved during Argentina’s 2001-2002 economic crisis, to boost off-budget spending by about 15 percent a year since 2006. But the financial crisis has made the possibility of off-the-record spending next year increasingly difficult, analysts say.
Another government projection causing doubt is an estimated 2009 foreign trade balance of $12 million — much too optimistic, says economist Fausto Spotorno of Orlando Ferreres y Asociados in Buenos Aires.
International demand for Argentina’s top commodities, such as soy and beef, will continue to fall, driving prices down and shrinking the foreign trade balance even further, Spotorno said.
The government estimates inflation at 8 percent for 2009, but private economics say it is more likely to range from 14 to 23 percent, depending on the decelerating effects of the financial crisis.
Every point of inflation that isn’t reported allows the government to save $600 million in government-issued bond payments that are tied to inflation figures, Abram said.