Critics: Argentina’s falsified GDP could trigger $4 billion in needless bondholder bonuses
BUENOS AIRES, Argentina — Argentina’s Congress, controlled by President Cristina Fernandez, has passed a budget that inflates economic growth numbers and puts the country on track to unnecessarily pay billions of dollars in bonus payments to bondholders next year, opposition lawmakers say.
Senators passed the budget 40-27 Wednesday after debating for more than 11 hours as Fernandez recuperated from skull surgery. The Chamber of Deputies, also controlled by the president’s party and allies, approved it two weeks ago.
The budget anticipates annual growth of 5.1 percent for 2013, even though various analysts say the economy is growing less than 3 percent this year.
Serious money is at stake: If the government reports growth of 3.2 percent or more for 2013, it will trigger billions of dollars in bonus payments to bondholders in 2014. The sweeteners were promised years ago to investors who had to write off two-thirds of Argentina’s defaulted debt in exchange for new bonds.
“The government is foreseeing growth that’s not real; this will cost the country $3.8 billion to pay its dollar-denominated debt on GDP warrants,” said opposition lawmaker Federico Pinedo.
The budget also assumes a bright 2014, with strong 6.2 percent growth and inflation of just 10 percent. But outside economists say these estimates are wildly optimistic, that gross domestic product could grow by as little as 1 percent next year, and that inflation is running at double the official estimate.
They say Argentina’s economy is much weaker than government number-crunchers are reporting, and the statistics Fernandez cites in her “victorious decade” speeches are costing the country dearly in many different ways.
“It’s completely illogical,” said Gabriel Torres, a vice president at Moody’s Investors Service who analyzes Argentina’s sovereign debt.
“Argentina pays less than it should on its peso bonds; we estimate 20 percent less, because it lies about inflation. And meanwhile, it’s paying too much to people with dollar bonds linked to growth. It’s paying too much to foreigners, and too little to its own people. I don’t understand the logic.”
The government rejects such criticism, saying its goal is social justice, not economic orthodoxy.
The official data reflect its efforts to centrally control the economy, subsidizing major industries, fixing prices and controlling currency flows to the point that it’s almost impossible now to legally trade pesos for dollars.
“We are consolidating public policies that have nothing to do with orthodox policies” like those of Europe, ruling party Sen. Anibal Fernandez, chairman of the budget committee, said during Wednesday’s debate.
He promised that government spending would boost the economy and provide strong growth despite adverse conditions globally, putting more money into Argentines’ pocketbooks.
Argentina’s inflation numbers have been in doubt since 2007, when Fernandez’s late husband and predecessor, Nestor Kirchner, had political appointees change the methodology of the official statistics agency, INDEC.