Expand Fuegian promotion to deepen sovereignty

"In this article we will see that not only are the negative myths about the Fuegian industry not true, but that being the only province with territories occupied by the United Kingdom of Great Britain, we cannot analyze its economy without looking at the national sovereignty", * Juan Augusto Rattenbach and Juan Pablo Deluca

24 de July de 2023 12:25

The province of Tierra del Fuego, Antarctica and the South Atlantic Islands is the largest in our country and the most significant in terms of national interests and geopolitical relevance at the national and international level.

Executive Summary

The province of Tierra del Fuego, Antarctica and the South Atlantic Islands is the largest in our country and the most significant in terms of national interests and geopolitical relevance at the national and international level. This explains the need to have an industrial promotion regime that develop Argentine productive capacities in this vital space. However, for some time now the province has faced two attacks simultaneously: those who challenge foreign investments given the geopolitical interests at stake, added to the detractors of the industrial promotion sub-regime because they consider it “inefficient” and who deepens the fiscal deficit. In this article we will see that not only are the negative myths about the Fuegian industry not true, but since it is the only province with territories occupied by the United Kingdom of Great Britain, we cannot analyze its economy without a look centered on sovereignty. national.

 


Map of the province of Tierra del Fuego, Antarctica and South Atlantic Islands (Source: IGN)

 

Introduction and context

The province of Tierra del Fuego, Antarctica and South Atlantic Islands (commonly known by its acronym TDFAIAS) is the largest in our country and the most significant in terms of national interests and geopolitical relevance, not only nationally but internationally. .

In the center and south of the Fuegian territory (specifically south of the 60° parallel) the space of the province is under international regulation and, therefore, is intended only for peaceful use. The validity of the Antarctic Treaty, signed in 1959, explains the current location of bases for scientific missions, with military logistical support.

In the North and East sector we have the South Atlantic Islands (Malvinas, Georgias and South Sandwich) illegally and colonially occupied by the United Kingdom of Great Britain. The occupation is not only limited to the island territories but also includes (after 1982) 200 nautical miles around each one, which violates the sovereignty of the maritime spaces that correspond to Argentina.

To the northwest of the provincial territory, and crossed by the Andes mountain range, is the Argentine sector of the Big Island of Tierra del Fuego, made up of three famous towns: Ushuaia (the gateway to Antarctica), Tolhuin (the “ heart of the Island”) and Río Grande (National Capital of the Vigil for the glorious Deed of Malvinas).

Historically, both the Malvinas and Antarctica were under the scrutiny of the great powers, and the British (colonialism through) in particular, in opposition to our national interests. The sector of the Big Island of Tierra del Fuego, where the industrial subregime is located , is no stranger to this equation and just as it was in the spotlight in the 19th and 20th centuries, it is also in the 21st century. This occurs fundamentally because it is the terrestrial platform that allows it to pivot as a gateway to four blocks: the Antarctica, South America, the Atlantic Ocean and the Pacific Ocean through the Strait of Magellan, the Beagle Channel or the Drake Passage.

Industry, neither own nor foreign

 

Satellite image of Patagonia including Santa Cruz, the Big Island of Tierra del Fuego and the Malvinas archipelago (Source: ESA)

 

Today the province of Tierra del Fuego, Antarctica and the South Atlantic Islands faces two attacks simultaneously: on the one hand, foreign investments seeking to settle in the province are constantly observed and even challenged by sectors that, out of interest or ignorance, respond to powers located more than 10 thousand kilometers away given the geopolitical interests at stake, not only in the face of the projection towards Antarctica, but also in relation to the British position (and therefore NATO) in the Malvinas and in the South Atlantic.

On the other hand, the people of Fuegian have to deal with the detractors of the territorial economic promotion regime under the slogans of “inefficient” and that they represent a “huge” expense for the accounts of the national treasury. The economist and former director of the BCRA Lucas Llach and the opposition deputy Martín Tetaz are two of its best-known exponents.

Regarding the first aspect we have two clear and recent examples. The first has to do with the Antarctic Logistics Pole project in Ushuaia which, according to rumors, was going to be carried out jointly with Chinese capital. In April 2021 the then Head of the US Southern Command, Craig S.Faller, visited the city.The message was clear: the United States would not oppose Argentina building a project of these characteristics, but would oppose it being financed with Chinese capital. Of course, the economic situation of our country makes an investment of that scale not easy. A possible solution is for the United States to be in charge of financing and be a partner of Argentina. Why do not you do it? Because it would compromise its link with Great Britain, which is precisely occupying the Malvinas Islands. This episode had a happy ending and the Ushuaia Integrated Naval Base is currently being built through an agreement between the Ministry of Defense and the shipyard. TANDANOR.

Recently (June 2023), the national deputies of the Civic Coalition, Mariana Zuvic and Maximiliano Ferraro, criminally denounced a Chinese investment project that consisted of the construction of a multipurpose port, a fertilizer plant and a power plant in the city of Río Grande. The opposition to these investments, beyond the legal rhetoric, had to do with the sensitivity of the region, taking into account that Tierra del Fuego “is a few hours by boat from the largest military base in the South Atlantic that is located in the Malvinas” (verbatim words of deputy Mariana Zuvic) and could therefore cause strong reactions from NATO.

 

Criticism of the industrial promotion subregime

The special fiscal and customs regime of Law 19,640 was born more than 50 years ago and covers the entire province of Tierra del Fuego, Antarctica and the South Atlantic Islands. Thus, it constitutes the Isla Grande de Tierra del Fuego as a Special Customs Area. Fuego and in the Free Area to the rest of the territories of the province, that is, to the Argentine Antarctic Sector and the South Atlantic Islands. Within the general regime, there is the so-called industrial subregime, which grants tax incentives for productive projects located in the Special Customs Area, that is, in the Argentine part of the Big Island of Tierra del Fuego.

In relation to the criticism of the industrial promotion sub-regime, in mid-June of this year, a group of specialists of the highest academic level published a study on the subject through FUNDAR. This think tank is an organization founded in 2020 dedicated to the study, research and design of public policies with “focus on the development of a sustainable and inclusive Argentina under the missions of generating wealth, promoting well-being and transforming the State.” The publication in question is titled Towards a possible productive transformation in Tierra del Fuego, 143 pages long, divided into three chapters, to which is added an introduction that addresses the technical-economic aspects of the Fuegian industry and a third chapter that includes a possible productive reconversion plan based on the promotion of tourism, centered on Antarctica [1] .

[1] The first is titled Diagnosis of the Tierra del Fuego Regime followed by Reformulation of the industrial subregime of Tierra del Fuego: proposal and simulation of expected impacts and finally Tierra del Fuego: analysis of the viability of the productive transformation.

The objective of this article is not to replicate the entirety of this work but to focus on its foundations, which were reflected in the different media (local and international) and social networks. For this we are going to use a selection of textual fragments as triggers. of the introduction, to which we will respond with a look at the comprehensiveness of what Tierra del Fuego, Antarctica and the South Atlantic Islands mean.

Can industrial promotion be analyzed ignoring national sovereignty?

 

“We cannot hide the conversation behind the flag of “national sovereignty” as if it were a dictum that settles all debate simply by stating it out loud. The province already has 190 thousand people, the objective of populating it has been largely achieved”

 

We will begin with the most general: geopolitical interests and Argentine sovereignty in the South Atlantic. Without stating it out loud or in capital letters, we firmly believe that analyzing the subregime of industrial promotion of Tierra del Fuego without a sovereignist approach is very difficult, not to mention say, impossible.

As we mentioned at the beginning, the province of Tierra del Fuego, Antarctica and South Atlantic Islands is not only limited to a geographical space on a North (Strait of Magellan) - South (South Pole in Antarctica) axis but also includes a space that goes from West (Andes mountain range) to East (South Sandwich Islands), including, of course, the Malvinas Islands.

Of the entire 143 pages of the study, key variables such as Malvinas, South Atlantic (as a conflict space) , United Kingdom/Great Britain, Colonialism, Resolution 2065, United States/Southern Command, NATO, South Atlantic Conflict/War of Malvinas and key terms such as sovereignty are completely absent.

In this sense, it is very difficult to analyze the complexity of the largest province in the country if we omit a very important portion, which is insular and maritime, under British colonial occupation and which forms part of one of the fundamental pillars, both of the policies applied to the defense,   as well as the international insertion and foreign policy strategies implemented by the Argentine Foreign Ministry.

In the same way that the triumph of the Provincia Grande project that included the Malvinas, Georgias and South Sandwich Islands as part of the Fuegian territory in 1990 was no coincidence, nor is it a coincidence that it has been formally established as a Free Trade Zone since 1945 through of Decree 3824 signed by Perón and which later evolved into territorial economic promotion by Law 19,640 in 1972, ratified by the National Congress once democracy was restored the following year [2] .

[2] When we talk about Tierra del Fuego as a zone free of duties and taxes, we would have to go back to at least 1828, the year in which it was established as a “free zone” as a territory dependent on the Malvinas Command.

This brings us to the question of what the geopolitical objective of Fuegian territorial economic promotion is , which is often reduced to a mere quantitative-demographic purpose. It is not enough that human beings living north of the Strait of Magellan are encouraged to live in the bicontinental province, but it is necessary to define what the economic model will be that generates these incentives and how it can be inserted into the strategy for the recovery of sovereignty in the South Atlantic.

The person who best understood that the economic development of Tierra del Fuego is a tool to approach the Malvinas was the former developmentalist governor Ernesto Campos, who was not only the protagonist of the promotion, but was one of the promoters (along with General Perón) of the landing. of state companies in the Malvinas between 1973 and 1976. In this scheme of bringing the occupied spaces closer to the rest of the national territory, Ushuaia would emerge as the tourist center that would connect the Big Island of Tierra del Fuego with the Malvinas and Antarctica, and Río Grande would be positioned as the industrial epicenter responsible for providing productive capacity and energy to provincial spaces.


During Perón's third government (under the auspices of Ernesto M. Campos) YPF landed in Malvinas thanks to the logistical support of the city of Río Grande (Source: Museo Malvinas)

  The South Atlantic Conflict was a turning point that resulted in Britain's non-compliance with United Nations resolutions (which dictate starting negotiations for sovereignty with Argentina), hand in hand with the deepening of colonialism in the South Atlantic from the occupation of the maritime spaces of 200 miles around each island. This Argentine territorial encroachment at the hands of the United Kingdom forces us to think about Fuegian economic development not only from a strictly economic logic, but rather from a geopolitical perspective. which exceeds the mere demographic quantification of its inhabitants. As an international example of containment of territories usurped by the United Kingdom, we have the case of the city of Shenzhen, which not coincidentally was the first Special Economic Zone established by the People's Republic of China, in 1980, as an element of containment and advance on Hong Kong, which was finally returned by the British in 1997.

  

What is the balance of 50 years of territorial economic promotion?

 

“Public coffers give up US$ 1,070 million annually in fiscal matters to support an industrial promotion regime with low added value and that does not provide foreign currency”

 

“After 50 years, the Fuegian industry continues to be an “infant industry”, with low added value and that does not contribute foreign currency to a country that desperately needs it”

 

The study finds that, indeed, the current Fuegian industrial configuration is efficient (contrary to the communication sense that is emphasized) in two fundamental aspects for the current national political economic situation. On the one hand, it allows electronic goods that are manufactured in Tierra del Fuego, Antarctica and the South Atlantic Islands and which are widely consumed by people, are more accessible to Argentines: Fuegian cell phones have a price 35% lower than imported import-parity ones; while televisions 45% and air conditioners 49%. [3] This without considering the financing of consumption (many times at negative real rates) that companies based on the Big Island of Tierra del Fuego agree with the national government, which would currently add no less than 20 percentage points more to the price differential. mentioned.

[3] In relation to this aspect, on page 17 of the second volume of the study it is concluded: “...the price of products manufactured in Tierra del Fuego is considerably lower than the imported price, being 35% lower for cell phones, 45% lower in televisions and 49% lower in air conditioners. Even if we do not include the tariff equivalent in the import price, and contrary to a notion widely spread in the public debate, the national price is still significantly lower than the import parity. The implication of this is that the partial or total removal of the economic benefits of the subregime can push up the average prices of the sector. This last is also a finding that differs from what is usually stated in the public discussion about the Fuegian promotion regime.”

On the other hand, the study finds that the Fuegian industrial sub-regime allows for saving foreign currency, which provides a partial solution to one of the core problems of the national economy. According to the numbers they work with, it can be estimated that the industrial sub-regime allows for savings as minimum 150 million dollars in imports per year, product of the difference between the value of importing the kit of parts and parts or importing the final good. The difference is in televisions (17% savings) and air conditioners (26% savings ). [4]

[4] In relation to this aspect, on page 18 of the second volume of the study it is stated: “The price difference between the kit and the final product is a measure of the value added by the factories in Tierra del Fuego according to their international valuation.Using this form of measurement, this represents 0% of the international price of cell phones, 17% of that of televisions and 26% of that of air conditioners. This measure, at the same time, also indicates the foreign currency savings generated by Fuegian production.”

According to the same study, the Fuegian subregime uses two billion dollars in imports for pieces and parts and, if the subregime did not exist, no less than 7% more foreign currency would be used for the import of final goods. Likewise, it is mentioned that the fiscal cost of the subregime is approximately 1,070 million dollars . This conclusion is misleading given that the numbers that are included under the guise of “cost” actually correspond to tax expenditure , that is, amounts that the treasury refrains from collected by granting a differential tax treatment (in this case the industrial promotion sub-regime) that deviates from that established under the general tax regulations. At the same time, as we all know, both the income to the treasury from tax obligations, as   Expenses derived from exceptions are paid in national currency (pesos) and not in foreign currency (dollars).


Industrial Park in the city of Río Grande

 

In addition to these records of industrial efficiency, the study does not consider other capacities developed by the Fuegian industry in its decades of validity, such as those gained to produce locally in a doubly peripheral and strategic territory, nor the local chains generated, the value added by Fuegian workers and the high public-private coordination that the functioning of the Fuegian subregime needs to function.

The greatest example of these capabilities was evident during the COVID-19 pandemic, when the national State urgently needed to increase the scale of production of artificial respirators and this was achieved through public-private coordination between the State, an electronic Río Grande and an electromedicine company from Córdoba. In addition, there are logistics and foreign trade capabilities gained that undoubtedly have enormous potential for Antarctic supply in the short and medium term.

And the cost of British colonialism in the Malvinas and the South Atlantic?

 


After the Malvinas War, the United Kingdom occupied 200 miles around the Malvinas, Georgias and South Sandwich to the detriment of national and provincial sovereignty and economy.

 

Although the study investigates the diagnosis of the province of Tierra del Fuego, Antarctica and the South Atlantic Islands, only the Big Island of Tierra del Fuego is addressed and in its last chapter Antarctica is partially mentioned. But, as As we mentioned previously, the study omits a very important sector that includes precisely the South Atlantic Islands and the Malvinas archipelago in particular.

The British occupation of this national sector was aggravated by the usurpation of the maritime spaces around each island after the South Atlantic Conflict. Like any British colony, there is no transparency in terms of statistical data. This does not prevent us, however, from carrying out some estimates that actually make the fiscal cost .

To begin with, to present relatively recent figures, we have that the Malvinas colonial economy had a balance of exports of 406 million dollars in 2020 and 308 million in 2021, while imports resulted in 110 million dollars in 2020 and 145 million in 2021.Fishing permits reached 40 million dollars per year [5] .

[5] According to data from the colonial government's fishing reports

To all this we should add the income from hydrocarbon exploration permits in the offshore basins of the archipelago, plus everything that does not enter the national State in terms of contributions and contributions to the social security system. [6] Regarding Georgia and the South Sandwich Islands, we barely have data on catches of krill and southern cod published by the Commission for the Conservation of Antarctic Marine Living Resources ( CCAMLR ), which results in 117 thousand tons in 2020. For To give us an idea, in the Malvinas the catches that same year were equivalent to 182 thousand tons. How much are those thousands of tons caught in the Georgia and Sandwich Islands worth? How much did the British colonial government charge for these fishing permits?

We don't know and everything is hidden under a blanket of mist .

[6] This data is not minor if we take into account that in the sector of the Big Island of Tierra del Fuego it does contribute to social security through pension contributions from workers and what is known as “employer contributions.”

What is the degree of political consensus on Fuegian promotion?

 

“From Dante Sica to Matías Kulfas, former Ministers of Production of governments on opposite sides, there is a widespread consensus that something is not right with this regime… We are talking about the most onerous industrial promotion regime in Argentina

 

The study that we have been analyzing at no time manages to incorporate the strategic value of Fuegian spaces, as we have explained in the previous section. It is impossible to dissociate the industrial subregime from the general regime of Law 19,640. This industrial promotion subsystem is a piece of economic and territorial development for the exercise of sovereignty in the peripheral and strategic Fuegian territories. It also does not answer important questions such as how much added value do Argentina's 13 Antarctic bases mean? How could we measure in terms of added value? the entire budget of Defense, Culture or that which consumes the foreign policy of our country?

The appointment of Dante Sica and Matías Kulfas as “authority figures” (both former production ministers, one from Macri and the other from Alberto Fernández) represents a misleading image for the current electoral year that could translate into whoever governs should govern. repeal the subregime , instead of considering that having been more than 50 years old, Fuegian territorial economic promotion is a State policy that has a high degree of political consensus.

In this sense, we could mention again Ernesto M. Campos, General Perón, Raúl Alfonsín, Néstor Kirchner, Cristina Fernández de Kirchner and Alberto Fernández, who maintained the validity of the industrial promotion subregime.

What is the cost of national sovereignty?

“For us to take into account the magnitude of the amount, it is enough to say that it is equivalent to 40% of what Argentina invests in AUH and AUE, policies aimed at the most vulnerable children”

 

Both on social networks and in the media, the figure of what “the industrial promotion subregime costs the State” in Tierra del Fuego is equated with the amount equivalent to “twice the 2021 CONICET budget,” or “ 2 million AUH” or “40% of what Argentina invests in Universal Child Allowance (AUH) and Pregnancy Allowance (AUE), policies aimed at the most vulnerable children.”

These (unhappy) comparisons suggest that the subregime of industrial promotion could be the cause of the lack of investment in scientific research or the insufficiency of social security policies to contain the economic reality of Argentina. Even under the same logic we could become a protectorate in order to renounce the total defense budget or, as it was proposed in the nineties, that public universities had to be taxed because it was not fair that “the poor (with their taxes) pay for the education of the rich.” ”.

These premises could lead us to absurd conclusions such as finding the subregime the main cause of the fiscal deficit at the national level, or that the province of Tierra del Fuego, Antarctica and the South Atlantic Islands has an economic and fiscal benefit that is based on detriment of the others.This immediately stops making sense when we contemplate, for example, that the demographic growth of Ushuaia or Río Grande is not due to an exponential increase in the birth rate of Fuegian families but, mainly, to the immigration of families from other provinces. .

By Agenda Malvinas

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