Declar­ing a “sta­tis­tics emer­gency,” Ar­gentina’s new pres­i­dent throws open the books

▶▶Ar­gentina’s new pres­i­dent, un­like the old one, wants to talk ▶▶Draw­ing “a line be­tween what’s true and what’s a lie”

Bloomberg Businessweek (Asia) - - CONTENTS - −Michael Smith and Carolina Millán, with Pablo González, Dan Can­cel, and Char­lie Dev­ereux

From a run­down govern­ment build­ing in Buenos Aires, a re­served econ­o­mist named Jorge Todesca is lead­ing a glas­nost of sorts in Ar­gentina. A few weeks af­ter win­ning Novem­ber elec­tions, Pres­i­dent Mauri­cio Macri—a wealthy busi­ness­man and for­mer Buenos Aires mayor—put Todesca in charge of the na­tional sta­tis­tics in­sti­tute. Macri cleared Todesca and his min­is­ters to talk freely about the na­tion’s eco­nomic data and just about ev­ery­thing else.

That may seem like the norm in other democ­ra­cies, but not Ar­gentina. The govern­ment of Macri’s pre­de­ces­sor, Cristina Fernán­dez de Kirch­ner, was sus­pected of ma­nip­u­lat­ing sta­tis­tics so much that in 2013 Ar­gentina be­came the first na­tion to be cen­sured by the In­ter­na­tional Mon­e­tary Fund for in­ac­cu­rate data. The then-fi­nance min­is­ter called the cen­sure “base­less.” Now, Todesca openly dis­cusses re­cov­er­ing the abil­ity to pro­duce be­liev­able sta­tis­tics: “This in­sti­tu­tion and oth­ers draw a line be­tween what’s true and what’s a lie.” Fernán­dez didn’t re­spond to re­quests for com­ment.

Macri, who was born into a wealthy fam­ily and was once pres­i­dent of the wildly pop­u­lar Boca Ju­niors soc­cer club, won a nar­row runoff vic­tory on prom­ises to at­tack cor­rup­tion and drug traf­fick­ing, erase poverty, and scrap heavy state con­trols over the econ­omy. Since tak­ing of­fice on Dec. 10, he’s elim­i­nated cur­rency con­trols, slashed ex­port taxes, and sacked no-show state work­ers.

In mid-Jan­uary, Macri sent his top fi­nance of­fi­cials to New York for talks with cred­i­tors de­mand­ing pay­ment for bonds the na­tion de­faulted on in 2001. A set­tle­ment would let the govern­ment bor­row from for­eign in­vestors for the first time in a decade. “That trans­parency is go­ing to be crit­i­cal,” says David Tawil, co-founder of dis­tressed-as­set fund Maglan Cap­i­tal in New York. Un­der Macri so far, of­fi­cials at all lev­els are talk­ing about in­fla­tion, taxes, ex­change rates, and har­vests.

Fernán­dez, a life­long mem­ber of the pop­ulist Pero­nist move­ment, seized con­trol of vast sec­tions of the econ­omy, in­clud­ing the en­ergy and me­dia in­dus­tries. She used wel­fare, gen­er­ous state sub­si­dies, taxes, trade pro­tec­tion, and cur­rency con­trols to try to fuel growth. She left be­hind an econ­omy in tat­ters, with in­fla­tion up­wards of 25 per­cent, two years of stag­na­tion, dwin­dling re­serves, and es­ca­lat­ing bud­get deficits.

Fernán­dez’s min­is­ters rarely com­mented on any­thing in pub­lic. The fear of speak­ing up touched all lev­els of so­ci­ety, busi­ness, and govern­ment, says José Nun, who was sec­re­tary of cul­ture un­der Fernán­dez and Nés­tor Kirch­ner, Fernán­dez’s late hus­band and pre­de­ces­sor. “You have to un­der­stand that Cristina was above all a pop­ulist, and pop­ulists be­lieve they are the sole rep­re­sen­ta­tives of the peo­ple’s de­sire,” says Nun, who quit Fernán­dez’s govern­ment to join the op­po­si­tion and now runs the doc­tor­ate pro­gram in so­ci­ol­ogy at San Martín Na­tional Univer­sity.

In her eight years in of­fice, Fernán­dez com­mu­ni­cated via pro­lific tweet­ing, pro­nounce­ments on na­tional tele­vi­sion, and pro-govern­ment pro­gram­ming on state me­dia—but held very few news con­fer­ences. Mar­cos Peña, Macri’s 38-year-old cab­i­net chief, says his boss is al­ready rad­i­cally dif­fer­ent. Macri has called two news con­fer­ences in his first month. He’s also plan­ning to at­tend the an­nual gath­er­ing of the eco­nomic elite in Davos, Switzer­land, some­thing Fernán­dez never did.

“Unit­ing Ar­gen­tines has a lot to do with your word,” says Peña. “There has been al­most a mega-de­val­u­a­tion of the value of the word of the state or of politi­cians, and that’s one of the big­gest prob­lems this coun­try has,” he says, sit­ting in his sprawl­ing of­fice in the pres­i­den­tial palace, known as the Pink House.

Macri is try­ing to tone down a quar­rel Fernán­dez started. She clashed with farm­ers across the pampa, a Texas-size re­gion of fer­tile farm­land. She tried to jack up taxes on farm ex­ports to make farm­ers sell more grain do­mes­ti­cally. They faced her down with strikes and road­blocks, lead­ing to food short­ages. For years, she branded farm­ers as hoard­ers and spec­u­la­tors. “We never got any­one in her govern­ment to meet with us,” says Gabriel De Raede­maeker, whose fam­ily has 9,400 acres of soy, corn, wheat, and ranch­land near Cor­doba in the north­ern pampa. Says Raede­maeker, who’s vice pres­i­dent of a re­gional farm­ing as­so­ci­a­tion: “You can­not imag­ine how ex­haust­ing that bel­li­cose rhetoric was.”

Raede­maeker says he knows how the govern­ment muz­zled crit­ics. “Like clock­work, I would get a no­tice from the tax agency right af­ter be­ing quoted in the me­dia,” he says. “And I had to go down there with my ac­coun­tant and prove my in­no­cence.” Ri­cardo Echegaray, who ran the tax agency un­der Fernán­dez, de­clined to com­ment.

Macri has drawn crit­i­cism for by­pass­ing congress via a flurry of de­crees, in­clud­ing ap­point­ing two judges to the supreme court. “De­crees can be used, but not like this,” says Daniel Sab­say, a lawyer and an ex­pert on Ar­gentina’s con­sti­tu­tion. “It comes close to a vi­o­la­tion of the sep­a­ra­tion of pow­ers.”

Macri doesn’t con­trol congress, and he’ll need to form al­liances with the op­po­si­tion—in­clud­ing for­mer Fernán­dez al­lies—if he wants to gov­ern, says Sen­a­tor Juan Manuel Abal Me­d­ina, Fernán­dez’s for­mer cab­i­net chief.

“We think that some of th­ese changes are not right,” says Abal Me­d­ina, re­fer­ring to the cur­rency de­val­u­a­tion and other ini­tia­tives by Macri. “They might be good for the fi­nan­cial mar­kets in the short term, but over time they will erode ad­vances for the poor that we worked hard to achieve.” Pero­nists con­trol the se­nate and form the largest op­po­si­tion group in the lower house.

Macri’s chal­lenges be­come clear in the dimly lit of­fices of the sta­tis­tics in­sti­tute. He has de­clared a “sta­tis­tics emer­gency,” giv­ing Todesca the free­dom to make rad­i­cal changes. Todesca says it will take months just to get a re­li­able read on in­fla­tion—and he has op­po­si­tion. Among the in­sti­tute’s 1,700 work­ers are 200 del­e­gates from a fiercely pro-Fernán­dez union who are try­ing to block his re­forms.

Todesca is used to get­ting heat. In 2011 the com­merce sec­re­tar­iat fined the econ­o­mist 500,000 pe­sos ($37,000) for pub­lish­ing his own in­fla­tion in­dex. The fine was over­turned in court. “I think that’s why the pres­i­dent chose me, be­cause I tried to speak the truth about eco­nomic sta­tis­tics and was pun­ished for it,” Todesca says. “It’s a com­plex task, but worth it.”

The bot­tom line Pres­i­dent Macri has in­au­gu­rated a new kind of open­ness and re­form in Ar­gentina, but he still has to deal with op­po­si­tion in congress.

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