Argentina’s Industrial Specialization Regime: New-generation industrial policy, or merely a transfer of resources?

The combination of rapidly increasing trade openness with sharp exchange-rate appreciation formed the context in which Argentine industry had to carry out its production restructuring process from 1991 on. The inability of the spontaneous market forces to spark off this process led the Argentine government to adopt a number of measures designed to correct the problem of relative prices and further the restructuring process through fiscal means. In this context, the Industrial Specialization Regime (ISR) was established with the main objective of promoting export specialization by industrial firms. This regime was based on a subsidy for incremental exports which took the form of access at preferential tariff rates to the importation of goods similar to those exported or forming part of a given production chain of complex goods. The aim of the present article is to make a theoretical and empirical analysis of this policy instrument (in its dual dimension of restructuring policy and export subsidy), examining its underlying theoretical bases, questions relating to its design, application and control, and finally, its effects on the industrial sector.