With expiration date in 2023, the promotional regime of Tierra del Fuego is the axis of a strong debate about the costs and benefits of extending, modifying or closing the industrial pole where electronic products are assembled (cell phones, TV and air, among others) , under a structure of subsidies and privileges. The discussion involves companies, provincial and national officials, in which business, commercial and political interests are mixed.
The industry of Tierra del Fuego concentrates criticism and support since its inception in 1972. Established by law 19.640, the regime was extended, modified, expanded and limited over the years. Today, four years after expiration, manufacturers and businessmen claim to extend the tax benefits (production does not pay VAT, profits or import duties) 20 years, minimum. They argue that the activity spills on the economy of the island, the employment and that contributes 38% of the provincial collection.
Its opponents hammer on the fiscal cost of sustaining the regime ($ 44,000 million annually, as it appears in the last Budget) and the high prices of products, which are paid by consumers throughout the country. There are differences of opinion within the Government itself. Among the most tolerant of the regime (the pigeons) are the Minister of the Interior, Rogelio Frigerio, and the Production Minister, Dante Sica, considered “a friend of the industrialists”, according to the definition of Rubén Cherñajovsky, president of the Fuengian Newsan group. Among the most critical (hawks) are the head of the Cabinet, Marcos Peña, the Minister of Finance, Nicolás Dujovne and the vice-president of that portfolio, Miguel Braun.
Although Tierra del Fuego is not a priority in the official agenda, industrialists and officials recognize that there are already talks. “Companies need to have a broader horizon to make investments. The expectation is that a negotiation can be opened, because adjustments are needed, such as adding new products, “says Fabio Rozenblum, CEO of Mirgor, which manufactures TV and cell phones for Samsung.
Federico Hellemeyer, president of AFARTE (the sector chamber) adds that all companies intend to extend the promotion, “as Brazil did with Manaus”, the “mirror” industrial pole of Tierra del Fuego, which was extended until 2073. Hellemeyer warns that if Argentina does not do the same, “we would deliver the market to Brazil, which can enter the country without tariffs as a member of Mercosur.”
“The problem is not Brazil, but China. Without the Fuegian promotion, it could be imported directly cheaper. The government’s vision is that the regime has a high fiscal cost and as a result of that, the impact is negative because it hinders access to technology, because cell phones cost more than they should cost, “a senior official told the Economic of Finance. However, he clarified that “the official policy” is to move towards a scenario of greater competition, gradually, but stressed that “the opinion of the Ministry of Finance is to move faster”.
More contemplative, an official from the Sica area points to the crossroads of the Fuegian industrial pole. “There is a population that lives from this and we must find some scheme so that it can continue with some benefits, in a route of greater competition,” he said. The same source recognizes that there are differences within the Government on how to find economic alternatives for the island. “But there is a high consensus that we must begin to reduce the regime and prevent it from growing.”
The promotional regime of Tierra del Fuego is set to reach 50 years. Conceived to populate an island that in 1972 had just 7,000 inhabitants, the Special Customs Area extended beyond the original plan, underpinned by fiscal stimuli. According to the Budget Law, in 2018 the State would stop collecting $ 43,992 million, an estimate that represents the taxes paid if imported the same products that are assembled in the country.
The amount is significantly greater than the fiscal effort represented by other strategic activities, such as the “Promotion for scientific research and development” law ($ 150 million), technical education ($ 740 million) and the software law ($ 2,580 million). Anyway, the manufacturers and from the Government itself warn that the figures of the fiscal cost of the island are inflated. “It’s not a real number and