An appraisal of capital goods policy in Argentina

Abstract

This article makes both a theoretical and an empirical analysis of the new policies applied in Argentina since 1992 with regard to the treatment accorded to capital goods: exemption from import duties, with drawback facilities for domestic producers in respect of their local sales. The new system is evaluated through a detailed analysis of its effects on demand for capital goods (section II);; on the domestic supply of such goods (section III);; and on some macroeconomic variables such as the fiscal balance (section IV); and the external balance (section V);. Some aspects relating to the management and control of the new system are then dealt with (section VI);, the main results of an empirical analysis of its effects are outlined (section VII);, and finally a global appraisal is made of it (section VIII);. It is concluded that the new system regarding capital goods has had both favourable and unfavourable effects. Among the former are an increase in the investment rate and general productivity of the economy and a reduction in costs made possible by cheaper capital goods, while the unfavourable effects include the unsatisfactory evolution of the domestic supply of capital goods (except transport equipment);, the macroeconomic impact on the fiscal sector, the external sector and unemployment, and the higher management costs, both public and private, of the new system compared with the previous one.