Director of Argentina's Statistics Bureau resigns—Is Milei also trying to "manipulate inflation data"?

According to a Wall Street Journal report on Friday, Marco Lavagna, head of Argentina's national statistics bureau, resigned on Monday due to the government's postponement of a plan to update the inflation index. This event is testing investors' confidence in President Milei's economic reforms and is reviving memories of manipulation of inflation data.

Lavagna's resignation sparked market turmoil. Since last Friday, Argentina's benchmark S&P Merval index has fallen by about 8%. Economists pointed out that the current inflation index underestimates the present price increases, while the new index was originally expected to be launched last month. However, in recent comments, Economy Minister Luis Caputo said the government would only move forward with the update 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 over 200% annualized to about 31% by the end of 2025. But any erosion of confidence in Argentina's inflation data threatens not only Milei's credibility but also bets on Trump—using him as proof that radical market reforms are feasible in Latin America.

Inflation data has long been a political and financial flashpoint in Argentina, determining wage agreements, pensions, poverty calculations, as well as payments on inflation-linked bonds.

Outdated Index Underestimates True Inflation

While the current inflation index uses up-to-date prices, weights are based on household spending surveys from nearly 20 years ago. Today, utility costs occupy a larger share in Argentinians’ budgets, but the impact of such increases is diluted in the current index.

According to private sector inflation indexes, the new index would only cause a slight rise in measured inflation. Economist and policy advisor Carlos Melconian noted that, calculated by the proposed index, last year’s inflation rate was only about one percentage point higher than the reported 31.5%. But economists pointed out that planned energy tariff hikes this year could significantly widen the gap.

Argentinian economists and the International Monetary Fund have urged Milei to update the inflation index ever since he took office at the end of 2023. Former deputy minister of economy Joaquín Cottani said in a radio interview on Wednesday that the new index was ready as early as June 2024, with the original plan to implement it in September. He said Lavagna’s resignation is worrying, as he was "the person who helped restore the credibility of the statistics bureau."

Market Confidence Faces Test

Argentine consultancy Exquanti said: "This is data manipulation; by delaying the change, Lavagna helped Milei and Caputo for two years, at the cost of losing his and the institution’s credibility. He couldn’t keep doing this without risking his standing in the serious statistical community."

Milei is a close political ally of Trump, who openly supports the Argentine leader's agenda and considers it a template for reducing the state's role in the economy. In October 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 said investors will now closely watch the difference between official inflation figures and private sector calculations to gauge the extent of distortion. "The initial reaction, especially in circles such as Wall Street abroad, has been negative," he said regarding Lavagna's resignation.

The peso may also be affected. The currency is managed within a narrow band, but in January the band was allowed to widen with monthly inflation, as part of a market-friendly deregulatory move. Thus, higher inflation now gives the peso more room to depreciate, which could further push up prices.

The reputation of the statistics bureau was severely damaged during the Kirchners' rule. During their government, technical staff and career civil servants who refused to manipulate data were dismissed, and poverty statistics were suspended for a time. Banks and consulting companies began offering private inflation estimates but faced government sanctions and legal threats. By artificially suppressing inflation data, the government initially saved billions of dollars in interest on inflation-linked debt—at the cost of market trust.

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