The World Bank has questioned the industrial promotion regime of Tierra del Fuego, calling it a 'failed industrial policy' and stating that it generates a fiscal cost of US$1.070 billion annually. This questioning is part of the 'Economic Panorama of Latin America and the Caribbean' report, where the institution shared its growth forecasts for the region for 2026, highlighting the Argentine economy as 'the main exception to the rise' by projecting a 3.6% advance in GDP for this year and 3.7% for 2027. The report, accessed by the Argentine News Agency, states that while industrial policies require time for companies to accumulate capabilities, 'unlimited support without a procedure or schedule to reduce the assistance (expiration clauses) can provide perverse incentives, undermining the initial objective'. In this sense, it expressed that the Fuegian regime 'is widely considered a case of failed industrial policy, marred by political interference and fundamental design flaws that have persisted for decades'. Despite rescuing the original idea of the industrial policy, the credit institution stated that 'its poorly conceived incentive structure has generated a substantial fiscal cost for the Argentine government, estimated at US$1.070 billion annually, without achieving significant technological or productivity improvements'. The World Bank's technical analysis identifies two fundamental flaws in the regime's structure that distort the market. Firstly, it refers to tariff exemptions, pointing out that companies on the island import inputs without paying import duties, which gives them an artificial cost advantage over any producer on the continent. On the other hand, it points out the credits on the value-added tax (VAT) that fall on billing, indicating that the system seeks to reward the creation of local value, but in practice companies generate 'little or no real added value'. In this context, the report assured that 'the combination of these incentives encourages companies to import large volumes of duty-free inputs and resell them to the continent at higher prices, while claiming the associated fiscal benefits'. Likewise, it affirmed that 'the activity it supports is not self-sufficient', ensuring that 'the companies involved remain viable mainly thanks to significant fiscal transfers rather than increases in their productivity or technological capability'. In this regard, the institution added that 'this dynamic reinforces dependence on government support and increases the long-term economic costs of maintaining the regime, highlighting the challenges of reversing entrenched but ineffective industrial policies'.
