Shoppers, bargain hunters and antique collectors always find much to love about Argentina’s quality leather items, arts and crafts, jewelry, and outstanding services such as tango lessons and music classes, among other things.
But if you happen to want something, say, like a big HDTV, you’re out of luck.
For decades successive Argentine governments have stymied imports and heavily taxed novel or hi-end consumer goods like cutting-edge TVs based on the supposition that doing so will a) raise revenue and b) induce manufacturers to produce such items here instead of in Brazil, China or South Korea.
Such policies have had limited success, inspiring some companies to assemble similar items here. But for the most part, the effort to keep hi-end products out has done just that. It has kept Argentina’s lower and middle-class families from easily accessing the kind of hi-tech products that have become common in the U.S., Europe and Asia.
In this sense, Argentina has fallen well behind the curve.
Argentina has been debating for more than a decade what kind of digital television standard to adopt. While it’s twiddled it’s thumbs, digital TV and HDTV have become common in developed countries, allowing residents there to take full advantage of the latest developments.
Only the wealthiest Argentines are able to circumvent the limits that prevent most middle class consumers from getting the latest TVs, computers, video cameras or GPS units.
Now, Congress is considering increasing taxes on such items – in yet another bid to spur local production and discourage imports.
Economists familiar with concepts such as “loss-aversion” know that raising prices, even by just a little, and even on cheap items like eggs, can cause disproportionate and unexpected reactions from consumers. Indeed, while most people think that raising or cutting prices by just a little leads consumers to either buy just a little more or less, they’d be surprised to learn that, in some cases, raising prices by just a little can lead consumers to radically reduce consumption.
The authors of Sway: The Irresistible Pull of Irrational Behavior described this idea succinctly in their bestselling book:
“Now, traditional economic theory holds that people should react to price fluctuations with equal intensity whether the price moves up or down. If the price goes down a bit, we buy a little more. If the price goes up a bit, we buy a little less. In other words, economists wouldn’t expect people to be more sensitive to price increases than to price decreases. But what (researcher Daniel) Putler found was that shoppers completely overreacted when prices rose.
It turns out that, when it comes to price increases, egg buyers are a sensitive bunch. If you reduce the price of eggs, consumers buy a little more. But when the price of eggs rises, they cut back their consumption by two and a half times.
Anyone who’s made a shopping list with a budget in mind can tell you how this plays out. If the price drops, we’re mildly pleased. But if we see that the price has gone up since last week, we get an oh no feeling in the pit of our stomachs and decide it’s cereal for breakfast that week instead of scrambled eggs. This feeling of dread over a price increase is disproportionate–or asymmetric–to the satisfaction we feel when we get a good deal.”
Of course, there’s a lot more research on consumer behavior and the psychology behind it. And price changes don’t affect all products and services in the same way. Nor do they affect all consumers equally. Moreover, it’s unclear how Argentines, who are unusually accustomed to inflation, might react differently to prices hikes than would, say, egg buyers in California.
Still, even this short look at the issue makes you wonder how much thought the government has given to the topic, especially given that tech products are already more expensive in Argentina than almost anywhere else in the Americas.
While Argentine electronics showrooms still display old-school tube-style TVs, such anachronistic electronic artifacts (which often consume more energy) are scarcely to be found these days in similar stores in developed countries.
For tech geeks and early adapters, of which there are many in Argentina, the government’s reticence to facilitate imports has merely driven prices up and made such items hard to acquire. It’s also increased prices for poorer Argentines, who are perhaps most in need of access to essential educational tools such as modern desktop computers.
Walk into any major electronics store today and chances are that the salesmen will tell you that they have little to offer because “everything is stuck in customs.”
It could be argued that some of these limits are both inspired by, and are a derivative of, Argentina’s decision not to emulate the kind of over-zealous consumer culture that has put so many U.S. citizens in heavy debt. But that’s really not the real motivation behind the limits on imports.
Meanwhile, there’s at least some sense in which the resistance to technology has helped sustain Argentina’s exceptionally admirable social culture. Almost no living-room in a typical U.S. home lacks a major television in the middle of it.
Social activity in the U.S. all too often revolves around the TV. But in Argentina, few families have succumbed to the devilish temptation to make a big-screen TV the centerpiece of family gatherings and social events.
Even so, it’s striking to compare the costs of products like HDTVs here and abroad.
Take the new Sony BRAVIA Edge LED 40″ HDTV (pictured above), for example.
In Argentina the TV costs 26,999 pesos, or about US $7,050. The same Sony Style store in the U.S. sells the same TV for US $2,999, plus tax (which varies by state). Meanwhile, the TV can be found online (and tax-free) in the U.S. for as little as US $2,095 (and that’s delivered free to your doorstep).
In other words, in Argentina the exact same product costs anywhere from 120% to 237% more than in the U.S. That means it would be cheaper to fly to Miami, buy the TV, fly back to Argentina, and pay full over-sized baggage fees and full airport customs taxes, than it would be to buy the TV in Buenos Aires.
Look at the costs:
OPTION 1: Buy Sony TV in Buenos Aires
Cost: TV US $7,050 (21% VAT and a local warranty included)
Total Cost: US $7,050
OPTION 2: Fly to Miami, buy Sony TV, return to Buenos Aires
Costs: (assuming the most expensive U.S. option)
R/T Airline ticket BA/Miami: US $1,000
TV: US $2,999 (no local warranty)
Taxes: (In Miami: 7%) US $209.93
Typical airline baggage fee for over-sized item like an HDTV: US $200
Customs taxes at EZEIZA airport (50% of the purchase value): US $1604.46
Total Cost: US $6,013.39
So even if you fly to the U.S., and pay all the relevant taxes, fees and customs duties, you’d still save more than US $1,000 by buying the TV in the U.S. than by purchasing it in Belgrano.
Of course, if you wanted to, while in Miami you could rent a car and visit Orlando, spend a few days at Disney World, then fly back to Argentina, and still pay less than it would cost to buy the TV in Buenos Aires.
And that’s at current Argentine prices, which likely will rise if Argentina’s Senate passes a bill already approved by the Lower House to raise taxes on imports and double the VAT on items produced in all provinces except Tierra del Fuego.