Connections for the STEM Classroom
The Outlaw Statistician
By Kirk Anderson, Associate Professor of Statistics, Grand Valley State University
We know that some politicians are as trustworthy as used car salesmen, but at least we can rely on statisticians to tell us the truth. At great personal cost, in some cases.
The annual inflation rate in Argentina is one of the highest in the world. Independent, private (i.e. non-governmental) agencies estimate it to be 20-25% over the last several years. This is not the official party line. The government reports annual inflation rates between 5-11% over the same period.
Who to believe? The evidence is strongly in opposition to the government numbers. Provincial statistical offices in Argentina and independent firms such as PriceStats (based in the United States) all agree on the higher numbers. Click here for an interactive graph. The International Monetary Fund (IMF) has reprimanded Argentina, setting (non-binding) deadlines for the government figures to align with reality. The World Trade Organization (WTO) has also chimed in, saying that Argentina’s restrictive trade policies could make matters worse. The government has remained defiant to the charges. President Cristina Fernandez de Kirchner has downplayed the effects of higher prices on citizens and business owners. She has stated that Argentina is a sovereign nation, and would not cave in to “any pressure, let alone any threat” from the IMF. In 2001, Argentina defaulted on its bonds, and is currently engaged in a dispute with NML Capital Ltd., a Cayman Islands-based hedge fund. The government has taken to seizing or nationalizing privately held assets. In February 2012, The Economist announced that it was dropping the government numbers from its statistical tables, stating “we are tired of being an unwilling party to what appears to be a deliberate attempt to deceive voters and swindle investors.” Instead, The Economist is now using information from the previously mentioned PriceStats. Certainly, inflation is a sensitive domestic matter. Recent demonstrations in Buenos Aires against rising prices of consumer goods suggest that the people aren’t buying the government’s story. On May 1, Reuters reported that the Argentine energy company YPF, which translates to Treasury Petroleum Fields in English, “warned that inflation in the South American country may keep rising and affect its results, a rare admission considering the company is controlled by a government known for playing down the problem.”
But wait, don’t statisticians (and economists) working for the government produce those (faulty) numbers? Here is where the story turns to Graciela Bevacqua. Educated in mathematics, physics, and economics, she taught statistics to high school students before taking a government job. From 1984 to 2007, she worked in the Instituto Nacional de Estdistica y Censos (INDEC), the government’s national institute for statistics and the census. She served as Director of the Consumer Price Index (CPI) group. In 2005, the CPI was 12.3%, trending upward. Bevacqua was questioned on this figure by the Minister of Economics, but the troubles really started in 2006 when Guillermo Moreno was appointed to the Secretary of Domestic Trade position. He immediately demanded that INDEC provide lower CPI numbers, claiming that the real figures negatively affected the morale of Argentinians. Moreno accused Bevacqua and her staff of being “unpatriotic” if they didn’t comply. Despite being unqualified to do so, Moreno questioned the statistical methods INDEC used, going as far as giving dubious rounding instructions (for instance, 2.599 was to be rounded down to 2.5)! Moreno’s reasons were political and believed to be tied to the upcoming 2007 elections. Moreno also demanded to know which businesses INDEC used for pricing information in the CPI calculation, a clear violation of confidentiality law. This was so that the bullying could be extended to the businesses as well. Retailers have complained of visits from government agents who gave instructions on what to report regarding price increases – of course, they were asked to downplay them.
Bevacqua removed several of these businesses from the CPI calculation, since the data were no longer trustworthy. This angered Moreno, who fired Bavacqua in 2007. The story doesn’t end there. Not surprisingly, the reported CPI decreased after Bevacqua’s dismissal. Along with 20 volunteer students from Buenos Aires University, she produced a more truthful, much larger, CPI. Other independent agencies did the same, and most incurred the government’s wrath. In 2011, Bevacqua and seven other entities were fined 500,000 pesos, about $125,000, each. The infraction? Producing statistics that didn’t comply with “appropriate methodological requirements.” Understandably, this is a hefty fine for an unemployed person to pay, and Bevacqua fears she may lose the home she shares with her children. Even worse, Moreno filed a criminal charge against Bevacqua, which carried a potential sentence of 2-6 years in prison. The charges were dismissed by the judge in September 2011 who ruled that “the allegations could not be considered as constituting a crime,” but Moreno appealed the ruling.
Bevacqua and her embattled colleagues have received the support of the American Statistical Association (ASA). In 2009, then-President Sally Morton wrote a letter in support of the independence of Argentina’s statistical agencies. In 2011, the ASA Committee of Scientific Freedom and Human Rights (CSFHR) sent a letter of inquiry to the Argentine government, which was ignored. The ASA has appealed to the United Nations and the U.S. State Department for assistance.
The saga continues. Statisticians (and others) around the world will be watching.
Bronstein, H. (2013, April 30). Argentina’s YPF breaks taboo by warning of inflation. Reuters. Retrieved from http://uk.reuters.com/article/2013/05/01/uk-argentina-ypf-idUKBRE94004820130501
Butler, E. (2012, December 13). IMF data deadline looms for Argentina’s fragile economy. BBC. Retrieved from http://interamericansecuritywatch.com/imf-data-deadline-looms-for-argentinas-fragile-economy/
Carriquiry, A. (2012, December). Graciela Bevacqua. Significance, 9(6), 34-36.
Champkin, J. (2012, September 19). A small victory for honesty in Argentina – but the struggle must continue. Significance. Retrieved from http://www.significancemagazine.org/details/webexclusive/2654801/A-small-victory-for-honesty-in-Argentina--but-the-struggle-must-continue.html
Here is how Argentina’s government fakes its inflation statistics. (2012, January 16). Brazilian Bubble. Retrieved from http://brazilianbubble.com/here-is-how-argentinas-government-fakes-its-inflation-statistics/
Kadane, J. B. (2013, January 30). Numbers racket in Argentina. Los Angeles Times. Retrieved from http://interamericansecuritywatch.com/numbers-racket-in-argentina/
Official Statistics: Don’t lie to me, Argentina. (2012, February 25). The Economist. Retrieved from http://www.economist.com/node/21548242
Seltzer, W. & Kadane, J. B. (2012, December 1). Politics and statistics collide in Argentina. Amstat News, #426, 7-8.
Stohr, Greg. (2013, April 15). Argentina may get U.S. high court hearing in bond case. Bloomberg News. Retrieved from http://www.bloomberg.com/news/2013-04-15/argentina-may-get-u-s-high-court-hearing-in-bond-case.html
Woods, R. (2012, May 15). Argentina – the lies. Significance. Retrieved from http://www.significancemagazine.org/details/webexclusive/2051071/Argentina---the-lies.html
Page last modified May 17, 2013