In what has turned into a schoolboy spat about who has the bigger economy, Argentina’s finance minister has posted a flurry of angry tweets aimed at Colombia’s former finance minister Juan Carlos Echeverry.
Echeverry along with head of macroeconomic policies Luis Fernando Mejia, claimed on Monday as guest bloggers on Financial Times blog Beyondbrics, that Colombia’s economy had overtaken Argentina’s as Latin America’s thrid largest after Brazil and Mexico.
Argentina’s finance minister Hernan Lorenzino responded to the blog on his Twitter account. “With all due respect,” tweeted the angry Argentine, “it is wrong to say that Colombia’s GDP is bigger than Argentina’s” In a series of posts Lorenzino added: “We can say that the affirmation is not only inexact, but intentionally damaging to our country.”
— HernánLorenzino (@HernanLorenzino) October 18, 2012
According to the two Colombians, technical staff “crunched some numbers” and came up with the answer that their country was speeding past Argentina with bulging pockets-full of pesos.
However, the Financial Times calls this “a dubious boast.” Echeverry is seemingly not using the official currency rate of the Argentine peso of 4.65/dollar, but the black market rate which has grown to 6.37/dollar over currency restrictions imposed by the administration of Cristina Fernandez.
This is not the first time Colombia’s former finance minister has made these claims. In September he congratulated himself before leaving his post to apply for the position as IMF’s next western hemisphere director. “It’s not wishful thinking,” said the proud minister, “I am leaving my post with Colombia as the third economy in the region.”
According to International Monetary Fund (IMF) figures however, Argentina’s GDP was $448 billion last year and should be about $473 billion this year. Colombia’s GDP last year was $328 billion and is expected to hit $379 billion this year, which seems to be worlds away from the figures the former finance minister is claiming.
However, Argentina evidently has a range of exchange rates, starting at the official rate which is about 4.65 pesos/ dollar and stretching out to the black market rate of around 6.37 pesos/ dollar.
So Echeverry has chosen to make his calculations using the black market rate which would make Argentina’s GDP be only $348 billion, down below Colombia’s. The black market exchange rate comes from a small market with few players and does not represent the real exchange rate, according to the Financial Times.
Echeverry wrote in the blog that two years ago they worked to overtake Venezuela’s economy, and then sat back and asked “now what?” So Echeverry and his economists set their sights on Argentina, with a GDP almost 30% greater than Colombia’s. Two years later says Echeverry, the famous number-crunching happened, and “showed how close we were to achiveing that goal.”
Colombia certainly did close the gap but critics say that it is being greedy to say that it surpassed Argentina.
Lorenzino for his part used IMF data to show that Argentina was still the biggest economy, but didn’t comment on how the multiple exchange rates alter the picture.
Relations between the IMF and Argentina have deteriorated since the country defaulted on $95 billion in bonds in 2001, and the IMF has repeatedly been on Argentina’s back about the government’s statistics saying they do not accurately reflect inflation.
Argentina has formally been put under watch by the IMF and will be sanctioned unless it improves its GDP numbers and discredited inflation by December which means things could get really uncomfortable for Argentina if Echeverry succeeds in landing the IMF directors job.