Report Nº: 102218/05/2025
The decision to lower tariffs on the import of cell phones and household appliances benefits millions of consumers. It has a low impact on total employment, but is very high in Tierra del Fuego. To facilitate its implementation, it is essential to have a reconversion strategy involving the Nation and the province.
Tariffs on imports raise the domestic price of goods since their impact is added to the international cost. In this way, the domestic production of the good is promoted. The cost of this protection is borne by local consumers who are forced to pay a higher price than the international price. Therefore, the decision to reduce tariffs on cell phone and home appliance imports will benefit the families that buy these goods.
A large part of the domestic production of cell phones and household appliances is located in Tierra del Fuego province. Therefore, the impact on output and employment will be concentrated on the island. The buyers of these products, on the other hand, who are millions distributed throughout the country, will benefit from the price reduction of cell phones and household appliances. It is estimated that 15 million families in Argentina use cell phones.
While the benefits of eliminating tariffs are distributed throughout the country, the direct impact on employment loss is concentrated on the island. One way to measure this problem is to quantify the impact on employment that the measure will have. According to the Secretary of Labor, it is observed that:
These data show that the benefit of 15 million families harmed by having to pay higher prices for cell phones are 6 thousand formal jobs generated in Tierra del Fuego. This represents a very marginal fraction of the total employment in the country, but is very important within the island. Therefore, dismantling the protection of the electronics industry has a high benefit for society with limited costs, but very concentrated in Tierra del Fuego.
Reinserting 17% of employment in other activities without conflicts is a great challenge. The starting point should be deep self-criticism. For decades, governments of different political signs, by action or omission, have endorsed this policy, which is very harmful to the country and unsustainable for the island. Creating industrial jobs at the cost of inflicting a great cost on welfare is an act of irresponsibility. Assuming this great mistake, it will help to reverse the error. Moreover, it is also advisable –as already proposed by the government– to eliminate the regime by which companies in Tierra del Fuego appropriate the VAT they charge on the products they sell. In other words, it is necessary to put an end not only to the tariff protection but also to the tax subsidy.
In order to make the elimination of tariffs and tax subsidies viable, a retraining plan for workers is essential. The objective is to distribute more equitably the costs of the bad policies applied so far. Self-criticism is also essential in the design of reconversion strategies. For example, it is necessary to review the rejection of the island to develop the salmon industry for ecological reasons when industrial activity, besides not being ecological, is not competitive either. Chile shows that the salmon industry can generate competitively more jobs in Tierra del Fuego than the electronics industry. In addition, Tierra del Fuego has strong advantages in oil, gas, tourism and fishing.
In a federal regime, transformations need the involvement of the provincial governments. Therefore, regardless that the announcement to eliminate cell phone tariffs was made within pointing to the local election in CABA, it is extremely relevant and urgent to call upon a majority of provincial governments, not necessarily all of them, to join the structural transformation process proposed and implemented by the national government.
