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Venezuela inflation data questioned by economists

Thursday, January 2, 2014

CARACAS—For three weeks Venezuelan economists have complained that the central bank is delaying delivery of its inflation report to hide the government’s poor record of containing prices. Its release on Friday only fueled those suspicions.


The report showed inflation slowing in the past two months and for the first time omitted data that track the level of shortages in South America’s biggest oil economy. Critics say they don’t buy the numbers and fear that the bank, long a redoubt of balance and credibility in polarised Venezuela, is caving to political pressure and losing its autonomy from President Nicolas Maduro’s socialist government.


“It makes me very sad to read this report,” said Asdrubal Oliveros, director of Caracas-based economic think tank Econanalitica. “It looks like propaganda written by the Information Ministry, not a technical report that you’d expect from a central bank.” The central bank said that inflation slowed after the Government took “exceptional and historic” actions to combat a speculative run-up in prices by groups trying to destabilise the country.


Prices jumped 4.8 per cent in November and 2.2 per cent in December, according to the report. In October, prices jumped 5.1 per cent. As is customary, the report didn’t provide an annualised rate of inflation. But Maduro, when asked about the omission at a press conference on Friday, conceded that prices rose 56.2 per cent this year judging by the “bourgeoisie” methodology employed by the central bank’s statisticians.


He defended the strident, ideological tone of the central bank’s 10-page report, saying that if opponents hadn’t waged an “economic war” in the aftermath of President Hugo Chavez’s death in March, inflation would’ve ended 2013 under 10 per cent. “We’ve seen a speculative, induced inflation that exceeds the natural rules of the economy,” Maduro told foreign reporters at the presidential palace.


Also missing from the report is the closely-watched scarcity index, which in October showed a record 22 of 100 products were out of stock. The bank’s report goes to lengths to align itself with recent economic policies announced by Maduro, concluding that it’s on the side of the Venezuelan people in its construction of socialism and a “new national economic order.”


As such, the bank said 2014 is a “propitious” moment to review the methodology used to calculate the consumer price index, a sign to Oliveros that future reports will understate inflation much like Argentina’s national statistics institute has been criticized for doing by the International Monetary Fund.


Economists had been warning that the report would be compromised ever since Maduro last month rebuked the bank for the way it measures prices. He said last month that internal calculations showed prices fell 5 per cent in November as a result of the Government’ slashing of prices of television, refrigerators and stoves after it seized several retail chains accused of charging speculative prices.


The forecast was immediately questioned because appliances carry only a small weighting in the price index, making it impossible to swing the gauge at a time prices for food, clothing and services are rising in tandem with a steep decline of Venezuela’s currency in the black market. Intrigue about the delay began to build after the bank abruptly cancelled a Dec. 19 news conference to release the report.


The central bank’s bylaws require it to publish inflation data within the first 10 days of each month. On the rare occasions when it has missed the cutoff date before, it was late by only a few days. Never before has the bank published inflation data for two months simultaneously nor before the period under study has ended. The central bank on Friday justified the delay because it said it needed to go back and verify price movements after the government’s action.





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