Taxes, Technology & Innovation in Argentina

Despite its many otherwise amazing attributes, Argentina is not a particularly tech friendly country.

For tech-geeks, early adopters and innovators, Argentina can be a frustrating place to live because it constantly lags behind developed countries – and even some developing nations – in terms of innovation and the adoption of new technologies.

This isn’t to say, of course, that Argentina has no innovators.

Indeed, quite the opposite is true. Just look at what Santiago Siri is doing over at Popego and at Meaningtool. He’s not only adopting new technologies, he’s creating them.

And yet, as Malcolm Gladwell elegantly noted in his book Outliers, geniuses and innovators aren’t born into a vacuum. They’re most often raised in social contexts that nurture their talents, and provide them with the means necessary to stand out.

Given this basic axiom (let’s assume it’s true just for argument’s sake), you’d think the government, which recently asked Congress to raise taxes on tech products, might consider doing exactly the opposite. You’d think it might consider doing everything possible to lower barriers to the acquisition of new technologies.

Argentina’s human capital can be stunningly impressive. As badly as the nation’s educational system has declined in recent years, it still turns out some remarkable geniuses.

But not all of those geniuses will become “outliers” – that is, people whose creative genius so stands out that they lie statistically far away from merely average mortals.

There are many possible reasons for this, but it’s not a stretch to think that one of these could be the lack of access to new technologies.

Sure, upper income kids living in Capital Federal, Zona Norte and gated communities near Pilar have no trouble acquiring the latest tech products. But most kids, and most school systems, aren’t that lucky.

High taxes, burdensome import barriers and bad business practices make the cost of electronic items here exceptionally expensive. There are few, if any, countries in the hemisphere where tech products cost more. This is true for everything from software (except when its pirated) to GPS units, digital cameras, computers and televisions.

Argentina has long lagged behind developed countries when it comes to the adoption of new technologies. Of course, this isn’t because of a lack of desire. In some ways, the technological lag seems to make people even more covetous of things that can’t be found in local stores. And even some of Argentina’s leading government officials eagerly purchase products in Miami or New York that aren’t sold locally.

But the technological gap has broadened in recent years, and especially in recent months, as the government has increased trade barriers and stymied imports. Walking into consumer electronics stores in Argentina these days can be a bit like stepping back in time. Not only are prices high, but in some cases product models are years behind.

I got to thinking about all of this on a trip to Colombia last month.

There, despite years of civil war, terrorism, narco-violence and kidnappings, tech products often cost half of what they do in Argentina. Colombian stores display many of the same items as do U.S. stores, and often Colombia’s prices are inline with those in the U.S. This is true even though Colombia’s market is roughly the same size as Argentina’s.

On the way into Colombia, I had to fill out a customs form and declare the value of the goods I was bringing into the country.

I had nothing to declare, but I was struck by the limits Colombia places on its visitors. They are far more liberal than are Argentina’s, which seem troglodytic and repressive by comparison.

Argentina allows travelers to bring up to US $300 worth of goods into the country. After that, you have to pay a 50% customs tax on the value of your goods.

This low limit is virtually an invitation to contraband. It provides Argentines with little incentive to declare the true value of their goods and gives them a big incentive to hide any purchases that could be taxed.

In Colombia, in contrast, the limit is US $1,500 (for 5-day trips) and US $2,500 for longer trips (see the photo above). After that, the government applies a 15% tax on imported items. Colombia’s limits seem sensible. They’re hardly an invitation to break or skirt the law.

Argentina’s taxes, in comparison, lead to the kind of contraband and bribery that have become common at the EZE airport and at ports and other entry points around the country.

If all of this seems to boil down to a minor travel anecdote, it shouldn’t.

Argentina’s customs tax is indicative of much broader political and economic strategy that intentionally stifles imports.

Such a policy may have its advantages. Indeed, one reason the government impedes imports is because it wants to encourage the domestic production of high-value items. This is an admirable goal.

But it seems clear, so far at least, that this strategy alone has done little to spur investment in production or catch Argentina up to the rest of the developed world in terms of technology and innovation.

Even decades ago, we knew from the research of people like Everett Rogers, an American sociologist and expert on the Diffusion of Innovations and its impact on development, that access to innovation and technology spurs further innovation and development. Meanwhile, we’ve known for much longer that barriers to technology and trade tend to delay development. Some of this is simply common sense. The history of development is the history of trade and the exchange of ideas and technologies.

As Gladwell notes in his book, Bill Gates became Bill Gates in part because his high school had a computer lab that was unmatched almost anywhere in the world. He had access to the tools and the technology that allowed him to become one of the greatest innovators of the 20th century. Steve Jobs would never have created Apple or the iPhone if he hadn’t had easy access to computer parts as a kid.

As I filled out the customs form at the El Dorado airport in Bogotá, and then again here at EZE on my return, I wondered how many potential Bill Gates or Steve Jobs there might be in Argentina’s high schools today. And I wondered if it’s possible that something as seemingly trivial as import taxes might affect their future and that of the country.

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