Javier Milei’s free-market reforms have put him on a collision course with Argentina’s icy, protectionist outpost close to Antarctica, because the president rethinks a decades-old undertaking to advertise sovereignty within the south Atlantic via trade.
Tierra del Fuego province, on an island on the southern tip of the Americas that’s cut up between Argentina and Chile, is the largest beneficiary of elaborate commerce limitations and subsidies that Argentine governments have used to defend native trade.
A particular financial regime has drawn many of the nation’s electronics manufacturing to the distant space, swelling its inhabitants from simply 13,000 within the Seventies to 185,000.
Leftwing supporters of these measures say the settlers bolster Argentina’s declare to the Antarctic Peninsula and the UK-controlled Falkland islands. Pictures of the Malvinas, as Argentines name them, are posted round Ushuaia, the sleet-covered provincial capital of 80,000.
“We see industry as a tool for building sovereignty,” stated Federico Greve, a legislator for the province’s left-leaning ruling get together. “It’s one of the few Argentine public policies that has been sustained over time.”
Nevertheless, Milei’s imaginative and prescient for Argentina may be very totally different. The libertarian economist is slashing import tariffs to scale back excessive client costs, and desires to pivot the financial system from manufacturing in the direction of mining, power and tech. On the identical time, he’s tentatively restarting defence co-operation with London as he seeks a grand Western alliance between “all countries who defend freedom”.
In Might, Milei introduced the top of Argentina’s 16 per cent tariffs on imported cell phones. Politicians in Tierra del Fuego say that instantly threatens 1 / 4 of the island’s 11,000 industrial jobs, and will set off a vicious financial cycle provided that manufacturing generates 35 per cent of provincial GDP.
“The measure is devastating for us, because without the tariffs it’s very difficult for us to compete,” stated Martin Pérez, the mayor of Rio Grande, an industrial metropolis of 100,000 folks. “It’s not easy to live down here, and if many people lose their jobs they will leave.”
Tierra del Fuego’s rugged panorama of mountains and lakes is battered by chilly wind from the Atlantic, and its distant location, 1,400 miles from Buenos Aires, makes its largely imported meals and different items costly.
Deregulation minister Federico Sturzenegger stated on X final month that sectors akin to tourism, fishing and power might change misplaced jobs in Tierra del Fuego.
“It should be a global amusement park that receives millions of tourists each year. It would reach European income levels within a few years,” he stated. “Instead, we blight the landscape with industrial sheds. It’s like the North Americans putting an industrial park in Yosemite or Yellowstone.”
These feedback angered Argentina’s highly effective labour unions, which ran a nine-day strike in Tierra del Fuego in response to tariff reductions. Staff solely returned after corporations promised to not minimize workers till January.
“There is no other activity on the island that can absorb all the industrial workers,” stated Pablo Ibáñez, a Steel Staff Union delegate. “The government always talks about our natural resources, like they think the island’s big problem is the Argentines that live here.”
Tierra del Fuego acquired its begin as an industrial hub in 1972 when the federal government, aiming to lure Argentines to a area then dominated by Chileans, exempted its residents from earnings tax and VAT, and allowed corporations to import components tariff-free. Brazil runs the same scheme within the remoted Amazonian metropolis of Manaus.
Ushuaia, on the southern Beagle Channel, and Rio Grande, on the north-east coast, are, respectively, the closest cities to Antarctica and the Falklands, which have remained a prime international coverage precedence for Argentina since its 1982 struggle with the UK.
Milei introduced final 12 months he would construct a brand new naval base in Ushuaia in partnership with the US, saying: “The best way to defend our sovereignty . . . is to reinforce our strategic alliance with the US and all countries who defend freedom”.
Nevertheless, Milei’s officers argue that defending native trade affords little strategic profit. “Cutting tariffs has nothing to do with geopolitics. It’s about the fact that Argentines pay twice as much for phones as in neighbouring countries,” one stated.
The federal government predicts the tariff minimize will scale back mobile phone costs by 30 per cent, whereas separate tax reductions will decrease tv and air conditioner costs by 10 per cent. The expiry of a number of anti-dumping measures over the following two years may additionally scale back duties.
Milei has not touched Tierra del Fuego’s tax exemptions. However the IMF pinpointed the scheme as a prime goal for fiscal reform when it agreed to mortgage Argentina $20bn in April.
Leaders throughout the political spectrum have criticised the exemptions, with many seeing them as a handout to some manufacturing corporations, together with Mirgor, which is part-owned by a cousin of financial system minister Luis Caputo.
Fundar, a think-tank, estimates the misplaced tax income at greater than $1bn a 12 months. “It’s a big cost when you consider that Tierra del Fuego could develop other economic opportunities,” stated researcher Leonardo Park.
Electronics companies declare they may not generate earnings in Argentina with out the provincial exemptions and tariffs, as a result of excessive taxes, labyrinthine paperwork and dear logistics make it unimaginable to compete with imports.
“I don’t have problems with competing, but first give me the same conditions as my competition,” stated Pierre Iribarren, plant supervisor at Newsan, Ushuaia’s largest electronics producer.
Tierra del Fuego’s location raises prices. Merchandise have to be flown or pushed to the mainland by way of Chile due to an absence of ports. Critics say telephones there are “assembled not made” as a result of kits with all of the components are imported from Asia, although televisions and air conditioners endure extra complicated manufacturing on the island.
Milei’s authorities is attempting to enhance competitiveness, together with by chopping inside taxes on electronics and permitting producers to promote on to shoppers.
Even so, Iribarren stated “no country in the world” can compete with Chinese language trade, citing current threats by US President Donald Trump, Milei’s closest ally, to impose 25 per cent tariffs on Asian-made iPhones. “If you want an electronics industry, you’ll have to protect it from China.”
A fund to diversify Tierra del Fuego’s financial system was launched below Milei’s predecessor in 2021, with producers diverting round 3 per cent of gross sales income to develop new industries and infrastructure.
Mirgor is investing in a luxurious lodge and cruise ship terminal in Ushuaia, and has proposed a plan to construct Rio Grande’s first port. Newsan is rising its stake in native fishing. However each are additionally increasing their companies outdoors Tierra del Fuego.
Juan Pablo Deluca, head of a meals firm owned by Rio Grande’s municipality, stated Milei’s insurance policies had been sending “a very strong signal to companies . . . to invest in tourism rather than industry and heavy infrastructure.”
“They have a very different model for the territory,” he stated. “We’re at a turning point, with a lot of eyes on Antarctica and on our resources. Things could move very fast.”
