When Argentina Elected A Populist President, Some Companies Left The Country
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Ten years ago, Argentina was in a situation that may sound a bit familiar. The country had just elected a populist president, Cristina Kirchner, with big plans for their economy. Kirchner wanted to control imports and exports and bring manufacturing to Argentina, so she placed huge tariffs on items made overseas. For some products, she said, if you want to sell this in Argentina, you'll have to make it in Argentina. One of those items was the cell phone. Stacey Vanek Smith from our Planet Money podcast has the story.
STACEY VANEK SMITH, BYLINE: Cristina Kirchner's made-in-Argentina rule drove some companies away. Apple stopped selling iPhones in Argentina, but other companies played ball, including the company that made Blackberry phones.
HUGO BONOFACCINI: In Argentina, everybody was crazy for BlackBerry.
SMITH: Hugo Bonofaccini (ph) was a systems engineer for a small manufacturing company. And one day, huge shipping containers full of BlackBerry parts started showing up outside his office.
BONOFACCINI: We don't have warehouse to store this.
SMITH: So all the parts would arrive, and you didn't have anywhere to put them.
BONOFACCINI: Yes, yes. They're right on - right on - some people ask, in your house, you have a space (laughter).
SMITH: BlackBerrys were assembled in Mexico, but Argentina was a really important market for BlackBerry. So it partnered up with Hugo's company, and suddenly this little town was responsible for making all of the BlackBerrys in Argentina.
BONOFACCINI: All production explode - exploded, Stacy. It was amazing.
SMITH: Especially amazing given where Hugo's company was based. Wes Nickel (ph) ran BlackBerry's South America operations.
WES NICKEL: The law was that you had to manufacture it down at the very southern tip of Argentina.
SMITH: Tierra del Fuego - it's where boats leave for Antarctica, and it's one of the most remote places on Earth. It cost BlackBerry 20 times more to make phones in Tierra del Fuego than in Mexico. The move made no business sense, but business was not calling the shots. The president was, and Tierra del Fuego had been a big supporter of President Kirchner. So two years and $23 million later, Hugo Bonofaccini watched the first Argentine BlackBerry roll off the line.
BONOFACCINI: Everybody was in the line to see the first BlackBerry (laughter).
SMITH: Really? Everybody was crowded around to see it?
BONOFACCINI: Yeah, everybody.
SMITH: President Kirchner had a big press conference. She held the BlackBerry up for the crowd to see.
(SOUNDBITE OF PRESS CONFERENCE)
CRISTINA FERNANDEZ DE KIRCHNER: (Speaking Spanish).
SMITH: This was a triumphant moment for Kirchner. Tierra del Fuego was booming and so was the rest of Argentina. There were new factories starting up all over the country, and it seemed like her economic plan had worked. But there were problems. By the time the first Blackberry rolled off the line, the model was two years old, and it was twice as expensive as the Mexico-made version. A massive black market was born. I talked to one guy who smuggled BlackBerrys through customs in his socks.
UNIDENTIFIED MAN: Soccer socks or baseball socks - you know, those that are quite tight.
SMITH: Oh, the knee socks - yeah. So you just, like, kind of put them - they'd be, like, against your leg?
UNIDENTIFIED MAN: Yeah.
SMITH: Sales of the Argentine BlackBerry fell. The factory started making less and less sense, says Wes Nickel.
NICKEL: It just came to a point where the business case wasn't justified. We just couldn't afford to do it.
SMITH: Less than two years after President Kirchner held the first Argentine BlackBerry up to the roaring crowd, Hugo Bonofaccini watched the last Argentine BlackBerry roll off the line.
BONOFACCINI: Was not easy for us. (Speaking Spanish).
SMITH: Oh, it left a bad taste in your mouth.
BONOFACCINI: Yes, yes.
SMITH: Hugo lost his job, along with most of his coworkers, and this started happening in factories all over Argentina. The country fell into a terrible recession, but undoing Kirchner's protectionism won't be easy. Argentina's new president wants to open up trade, but if he does that, places like Tierra del Fuego would be devastated. Meanwhile, a cell phone in Argentina costs more than a thousand dollars, and you still can't get a new iPhone. Stacey Vanek Smith, NPR News.
(SOUNDBITE OF BALMORHEA SONG, "MASOLLAN") Transcript provided by NPR, Copyright NPR.