The Tierra del Fuego regime costs the state more than USD 1 billion per year.

The decision by Javier Milei's government to eliminate import tariffs on cell phones has reignited the discussion about the true need to maintain the tax benefit scheme that has been in place in Tierra del Fuego for more than five decades.

This regime represents a high cost for public coffers and Argentinians, has little impact on job creation and added value, and has negatively influenced the prices of electronic and mobile products, especially during periods of strong import protection, severely harming consumers.

In recent days, prominent officials from Javier Milei's team have expressed their disagreement with the current production model on the Patagonian island. "What they do is assemble products that come disassembled from abroad," said the Chief of Staff, Guillermo Francos.

Meanwhile, the Minister of Deregulation and State Transformation, Federico Sturzenegger, added: "The lower cost of electronics for 47 million Argentinians means 'extra' money in their pockets that they will spend on other things."

"The Fuegian regime is a poorly designed regime that is increasingly costly because instead of generating sustainable activity, it is increasingly struggling to compete with global electronic activity, and activities have had to be added to the scheme in recent years. The last one was cell phones in 2009," explained to Infobae Juan Carlos Hallak, a Conicet researcher and co-author of the study conducted by the Fundar Foundation on this regime.

According to the analyst, maintaining the tax benefits of the Tierra del Fuego industrial sub-regime represents an annual cost of 1.070 billion dollars to the State and the pockets of Argentinians, funds that could be allocated to more efficient and profitable activities, according to Juan Carlos Hallak.

On the island, there is a general regime that grants tax exemptions to its inhabitants —originally created to encourage settlement in the southernmost part of the country— and, at the same time, a specific sub-regime for companies, mainly in the electronics sector, which entails the greatest fiscal expense. Given that the province's population is small, the impact of the general regime is much smaller.

According to Hallak, "what costs money is the industrial sub-regime, which regulates that companies can import inputs for production, which in electronics are the kits, and then sell the finished product on the continent."

The same day the new measures were announced by Milei's government, Hallak had pointed out that, although cutting fiscal incentives could have a negative effect on employment on the island, the overall impact on the national labor market would be positive.

According to his calculations, the regime caused a net loss of about 60,000 jobs across the country, because it is an activity with low labor demand, especially when compared to the services sector. "The lower cost of electronics for 47 million Argentinians means 'extra' money in their pockets that they will spend on other things," the official added.

"It's a terrible money drain. It's a lot of cost without much benefit. It's few people, 10,000 people to maintain an inefficient system that doesn't make sense to be there. That's why we propose the reformulation of the regime, which aims to reward added value," expressed the Conicet researcher.