Javier Milei’s free-market reforms have put him on a collision course with Argentina’s icy, protectionist outpost near Antarctica, as the president rethinks a decades-old project to promote sovereignty in the south Atlantic through industry.
Tierra del Fuego province, on an island at the southern tip of the Americas that is split between Argentina and Chile, is the biggest beneficiary of elaborate trade barriers and subsidies that Argentine governments have used to shield local industry.
A special economic regime has drawn most of the country’s electronics manufacturing to the remote area, swelling its population from just 13,000 in the 1970s to 185,000.
Leftwing supporters of those measures say the settlers bolster Argentina’s claim to the Antarctic Peninsula and the UK-controlled Falkland islands. Images of the Malvinas, as Argentines call them, are posted around Ushuaia, the sleet-covered provincial capital of 80,000.
“We see industry as a tool for building sovereignty,” said Federico Greve, a legislator for the province’s left-leaning ruling party. “It’s one of the few Argentine public policies that has been sustained over time.”
However, Milei’s vision for Argentina is very different. The libertarian economist is slashing import tariffs to reduce high consumer prices, and wants to pivot the economy from manufacturing towards mining, energy and tech. At the same time, he is tentatively restarting defence co-operation with London as he seeks a grand Western alliance between “all countries who defend freedom”.
In May, Milei announced the end of Argentina’s 16 per cent tariffs on imported mobile phones. Politicians in Tierra del Fuego say that directly threatens a quarter of the island’s 11,000 industrial jobs, and could trigger a vicious economic cycle given 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,” said Martin Pérez, the mayor of Rio Grande, an industrial city of 100,000 people. “It’s not easy to live down here, and if many people lose their jobs they will leave.”
Tierra del Fuego’s rugged landscape of mountains and lakes is battered by cold wind from the Atlantic, and its remote location, 1,400 miles from Buenos Aires, makes its mostly imported food and other goods expensive.
Deregulation minister Federico Sturzenegger said on X last month that sectors such as tourism, fishing and energy could replace lost 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 said. “Instead, we blight the landscape with industrial sheds. It’s like the North Americans putting an industrial park in Yosemite or Yellowstone.”
Those comments angered Argentina’s powerful labour unions, which ran a nine-day strike in Tierra del Fuego in response to tariff reductions. Workers only returned after companies promised not to cut staff until January.
“There is no other activity on the island that can absorb all the industrial workers,” said Pablo Ibáñez, a Metal Workers 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 got its start as an industrial hub in 1972 when the government, aiming to lure Argentines to a region then dominated by Chileans, exempted its residents from income tax and VAT, and allowed companies to import parts tariff-free. Brazil runs a similar scheme in the isolated Amazonian city 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 top foreign policy priority for Argentina since its 1982 war with the UK.
Milei announced last year he would build a 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”.
However, Milei’s officials argue that protecting local industry offers little strategic benefit. “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 said.
The government predicts the tariff cut will reduce cell phone prices by 30 per cent, while separate tax reductions will lower television and air conditioner prices by 10 per cent. The expiry of several anti-dumping measures over the next two years may also reduce duties.
Milei has not touched Tierra del Fuego’s tax exemptions. But the IMF pinpointed the scheme as a top target for fiscal reform when it agreed to loan Argentina $20bn in April.
Leaders across the political spectrum have criticised the exemptions, with many seeing them as a handout to a few manufacturing companies, including Mirgor, which is part-owned by a cousin of economy minister Luis Caputo.
Fundar, a think-tank, estimates the lost tax revenue at more than $1bn a year. “It’s a big cost when you consider that Tierra del Fuego could develop other economic opportunities,” said researcher Leonardo Park.
Electronics businesses claim they could not generate profits in Argentina without the provincial exemptions and tariffs, because high taxes, labyrinthine bureaucracy and costly logistics make it impossible to compete with imports.
“I don’t have problems with competing, but first give me the same conditions as my competition,” said Pierre Iribarren, plant manager at Newsan, Ushuaia’s largest electronics manufacturer.
Tierra del Fuego’s location raises costs. Products must be flown or driven to the mainland via Chile because of a lack of ports. Critics say phones there are “assembled not made” because kits with all the parts are imported from Asia, though televisions and air conditioners undergo more complex manufacturing on the island.
Milei’s government is trying to improve competitiveness, including by cutting internal taxes on electronics and allowing manufacturers to sell directly to consumers.
Even so, Iribarren said “no country in the world” can compete with Chinese industry, citing recent 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 economy was launched under Milei’s predecessor in 2021, with manufacturers diverting around 3 per cent of sales revenue to develop new industries and infrastructure.
Mirgor is investing in a luxury hotel and cruise ship terminal in Ushuaia, and has proposed a plan to build Rio Grande’s first port. Newsan is growing its stake in local fishing. But both are also expanding their businesses outside Tierra del Fuego.
Juan Pablo Deluca, head of a food company owned by Rio Grande’s municipality, said Milei’s policies were 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 said. “We’re at a turning point, with a lot of eyes on Antarctica and on our resources. Things could move very fast.”
