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inflation StatS aRe queStioned
Economists question the validity of Puerto Rico’s inflation statistics
Ileanexis Vera Rosado, The Weekly Journal
While in the US. inflation rate stood at 8.5% by the end of March —the highest level in the last 40 years— it is estimated it reached 4.7% in Puerto Rico, a figure economists on the island do not agree with because it is based on prices from a food basket dating back to 2006. Juan Villeta Trigo, president of the Puerto Rico Financial Analysts Association, and who was also the project manager for the last review of the Consumer Price Index (CPI) in 2006, argued the figure published by the government “is real” because it corroborates [the information from] collected statistics, despite them not being accurate or precise. “The survey says that’s the number, even if it is poorly designed or incomplete. It must be admitted that we have flaws, but funds are not being allocated to bring in technical personnel. Without that, we can’t get very far in telling the truth. In the U.S. they have a very sophisticated statistical structure,” said Villeta Trigo. “In Puerto Rico, we are behind in the cost analysis and adjustment. There is little measuring and updating”, he added after admitting that inflation on the island, while underestimated, doesn’t exceed that of the U.S. For Villeta Trigo, subsidies, federal funds and government aid have served as a kind of buffer that has acted upon cost reduction. “There is no other way to look at it. Inflation —which is nothing more than an increase in prices— is a social evil that impedes society to continue living… It doesn’t allow budgeting, thus society cannot function”, he argued. Despite the cost of energy being excluded from the CPI, it is one of the reasons why economists insist inflation in Puerto Rico is above the 4.7%, estimated by the Department of Labor and Human Resources. Villeta Trigo estimated the cost of energy and the cost of transportation have had an increase of 18.4% and 32%, respectively. For economist Leslie Adames, the cost of electricity is not taken into account in the CPI, to avoid mentioning the burden it represents to the consumer’s budget. “The problem calculating the CPI stems from the data used in Puerto Rico, vis a vis the data used in the U.S. A 4.7% inflation is very low and does not make sense based on what we are experiencing”, he said. Adames emphasized that the difference between the figures for Puerto Rico and the U.S. “is worrying.” Having such inaccurate data also worries economist Adrián Alós, who considers that, consequently, the government has no updated and truthful information, making it impossible to take the correct decisions. “The [inflation] rate is wrong. It is much higher than that. Here, most of the goods are imported from the U.S. and if prices have increased there, how much more so here, where the cost of transportation must be added? The pattern of consumption on which the analysis is based, has changed significantly since 2006. This index must be recalibrated and the [food] basket updated,” said Alós, who estimates inflation on the island
In fact, must be around 7.5%. On his part, economist José Alameda agreed that the island’s inflation rate “is not very credible” and attributed the lack of certainty to problems The last review of with the data from the Price Index. He explained the Consumer Price that fine-tuning the Index would require surveys Index (CPI) was done every ten years on the income and expenses in 2006. of consumers, a consumption pattern that changes over the years. This survey has not been conducted since the administration of former governor Aníbal Acevedo Vilá. “Given the situation, the data does not correspond to Puerto Rico’s current circumstances. It [the data] has little credibility. Here, where there is a monopoly or an oligopoly structure in place because almost everything we consume comes from there [the U.S.], it [inflation] seems even higher than in the US. Definitely there are many hurdles with the reality”, Alameda said.
