Argentina's statistics chief resigns, and Milei also wants to "manipulate inflation data"?

According to a report by The Wall Street Journal on Friday, Marco Lavagna, the head of Argentina's National Institute of Statistics and Censuses, resigned on Monday due to the government's delay in updating the inflation index. This event is testing investors' confidence in President Javier Milei's economic reforms and evoking memories of his manipulation of inflation data.

Lavagna's resignation has caused market turbulence. Since last Friday, Argentina's benchmark stock index, the S&P Merval, has fallen by about 8%. Economists point out that the current inflation index underestimates the current price increases, and the new index was originally expected to be launched last month, but Economy Minister Luis Caputo recently stated that the government would only proceed after Milei's measures to control runaway inflation are consolidated.

Milei's political strength and the success of his economic "shock therapy" largely depend on a rapid decline in inflation. The inflation rate has dropped from an annualized rate of over 200% to about 31% by the end of 2025. However, any erosion of the credibility of Argentina's inflation data threatens not only Milei's reputation but also the bets on Trump—viewing him as proof of the feasibility of radical market-oriented reforms in Latin America.

Inflation data has long been a political and financial sensitive point in Argentina, determining wage agreements, pensions, poverty estimates, and payments on inflation-linked bonds.

Outdated Index Underestimates Real Inflation

The current inflation index, while using current prices, is weighted based on a household expenditure survey conducted about 20 years ago. Nowadays, utilities occupy a larger share of Argentineans' budgets, but the impact of rising costs for such items is diminished by the current index.

According to private sector inflation indices, the new index would only lead to a slight increase in inflation. Economist and policy advisor Carlos Melconian stated that under the proposed index, last year's inflation rate was only about 1 percentage point higher than the reported 31.5%. However, economists note that planned energy tariff increases this year could significantly widen this gap.

Argentine economists and the International Monetary Fund have been urging Milei to update the inflation index since he took office at the end of 2023. Former Deputy Economy Minister Joaquín Cottani stated in a radio interview on Wednesday that the new index was ready as early as June 2024 and was originally scheduled for implementation in September of that year. He expressed concern over Lavagna's resignation, as he was "one of the people helping to restore the credibility of the statistics bureau."

Market Confidence Under Pressure

Argentine consulting firm Exquanti stated: “ This is data manipulation; Lavagna helped Milei and Caputo for two years by delaying changes at the cost of losing credibility for himself and the agency. He could not continue doing this without risking his standing in the serious statistical community.”

Milei is a close political ally of Trump, who has openly supported the Argentine leader's agenda and views it as a template for reducing the role of the state in the economy. In October of last year, the U.S. Treasury provided financial assistance to Milei's government in the form of a $20 billion currency swap.

Political analyst Sergio Berensztein noted that investors will now closely monitor the discrepancies between official inflation data and private sector calculations to gauge the extent of distortion. “The initial reaction, especially in circles like Wall Street abroad, is negative,” he said regarding Lavagna's resignation The peso may also be affected. The currency is managed within a narrow range, but in January, this range was allowed to expand with monthly inflation as part of a market-friendly measure to relax regulations. Therefore, higher inflation now provides greater room for the peso to depreciate, potentially driving prices even higher.

The reputation of the statistics bureau was severely damaged during the Kirchner couple's administration. During their government, technicians and long-term civil servants who refused to manipulate data were dismissed, and the release of poverty data was suspended at one point. Banks and consulting firms began to provide private inflation estimates, but faced government sanctions and legal threats. By artificially suppressing inflation data, the government initially saved billions of dollars on interest for inflation-linked debt—at the cost of market trust