Towards a possible productive transformation in Tierra del Fuego

The year 2022 marked the 50th anniversary of the regime implemented in Tierra del Fuego. Established by Law 19,640 of 1972, it has by now more than achieved its original purpose. It has proven to be an effective tool to boost population growth and economic activity through the creation of industrial jobs. The law has played a crucial role in this process carried out in a “virtually empty” territory and, until then, less dynamic than other regions in the country, and managed to level the playing field considerably. Today the industrial sub-regime costs $1.07 billion dollars annually, which is equal to 0.22% of the national GDP. This is more than double the CONICET budget for 2021, or 39.3% of the annual public spending on the Universal Child Allowance (AUH) and the Pregnancy Allowance (AUE). As designed, it rewards total sales over the creation of local value, neglects measures to encourage exports and has not provided Tierra del Fuego with the economic independence it needs to break free from the ups and downs of federal governments. Can this sub-regime be reframed to facilitate a productive transformation in Tierra del Fuego? Fundar intends to contribute to this debate through a series of three articles that provide evidence on the possibilities and the consensus required to do so. It suggests alternative public policy recommendations to gradually and significantly reduce the fiscal cost of this promotion regime over an 11-year period, while repurposing economic incentives to foster innovation and value creation. The goal is for Tierra del Fuego to become an increasingly prosperous province that is less dependent on the decisions made by the national government.