Episode 755: The Phone At The End Of The World : Planet Money A charismatic populist president wanted to boost manufacturing and create jobs. She told companies, 'if you want to sell your stuff here, you have to build it here.' This is what happened.
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Episode 755: The Phone At The End Of The World

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Episode 755: The Phone At The End Of The World

Episode 755: The Phone At The End Of The World

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STACEY VANEK SMITH, HOST:

A few years ago, Argentina was in this situation that might sound a little bit familiar. The country had just elected this charismatic, populist president who said she was going to fix the Argentine economy. Her name was Cristina Kirchner.

JACOB GOLDSTEIN, HOST:

She said, Argentina isn't making things. We need to make things. And so she had this idea. She was going to bring manufacturing from Asia and Mexico to Argentina.

(SOUNDBITE OF ARCHIVED RECORDING)

CRISTINA FERNANDEZ DE KIRCHNER: (Speaking Spanish).

(APPLAUSE)

VANEK SMITH: Kirchner started pressuring companies to make things in Argentina. She put huge taxes on things that were manufactured overseas - taxes of, like, 30 and 40 percent.

GOLDSTEIN: And for some other things, including certain kinds of electronics, say, Kirchner went even further. She said you cannot import these at all. If you want to sell them in Argentina, you have to make them in Argentina.

VANEK SMITH: Hugo Bonifacini saw this firsthand.

HUGO BONIFACINI: OK. Sorry for my English, Stacey.

VANEK SMITH: No, your English sounds great.

BONIFACINI: No, no (laughter) - it's not true.

VANEK SMITH: Hugo was a systems engineer at a manufacturing company in a remote part of Argentina. It was a pretty small operation, about 60 employees.

GOLDSTEIN: And then right around 2010, give or take, the president of Argentina makes this law that says all these things have to be made in Argentina. And suddenly, Hugo's world is, like, completely transformed. Like, overnight, these giant shipping containers full of parts and machinery for all this new manufacturing start showing up outside his office.

BONIFACINI: We don't have warehouse to storage.

VANEK SMITH: So all the parts would arrive and you didn't have anywhere to put them?

BONIFACINI: Yes, yes. They arrived and arrived, and - some people are say - hey, in your house, you have space (laughter)?

GOLDSTEIN: So did he put machinery in his house?

VANEK SMITH: He said - no, he was joking. It never actually came to that. But close - he said it came close.

GOLDSTEIN: A lot of those containers full of equipment had cellphone parts, smartphone parts, because one of those things that Kirchner said you cannot import at all, has to be made in Argentina, was cellphones.

VANEK SMITH: And some companies, like Apple and the iPhone for example, would not play ball.

GOLDSTEIN: Meaning you just - they're - Apple doesn't sell iPhones in Argentina?

VANEK SMITH: You could not get an iPhone in Argentina.

GOLDSTEIN: OK.

VANEK SMITH: But other companies said OK, we will give it a try, including the company that made BlackBerrys.

GOLDSTEIN: Honestly, I didn't even know BlackBerrys still existed in 2010.

VANEK SMITH: I know, I know. OK, yes. You're thinking BlackBerry - that company's dead. Do people still use BlackBerrys anymore?

GOLDSTEIN: Yes.

VANEK SMITH: But this was back in 2011. And BlackBerry was a hot phone.

GOLDSTEIN: Really?

VANEK SMITH: In fact, it was the most popular phone in Argentina at the time.

GOLDSTEIN: OK.

VANEK SMITH: Argentine celebrities and politicians were all carrying BlackBerrys around.

GOLDSTEIN: OK.

VANEK SMITH: It was kind of like the it phone.

BONIFACINI: Here in Argentina, everybody was crazy for BlackBerry. BlackBerry was an icon.

VANEK SMITH: At the time, BlackBerrys were assembled in Mexico and Hungary. A lot of the parts were made in Asia. But Argentina was a really important market for BlackBerry. They sold a lot of phones there. And Kirchner's cellphone ban was costing them more than $100 million a year. So BlackBerry agreed to try and make phones in Argentina. It partnered up with Hugo's company, and suddenly, this company in this little town was responsible for making all of the BlackBerrys for all of Argentina - millions of phones.

BONIFACINI: All production explode. Exploded, Stacey. It was amazing.

(SOUNDBITE OF MARC FERRARI AND MICHAEL MCGREGOR'S "CALL MY NUMBER")

VANEK SMITH: Hello, and welcome to PLANET MONEY. I'm Stacey Vanek Smith.

GOLDSTEIN: And I'm Jacob Goldstein. Today on the show, making Argentina great again.

VANEK SMITH: What happens when a country tries to undo globalization and bring in manufacturing from overseas? We followed the Argentine BlackBerry through an ocean of logistical hurdles, political posturing and free market forces to, quite literally, the ends of the Earth.

(SOUNDBITE OF MARC FERRARI AND MICHAEL MCGREGOR'S "CALL MY NUMBER")

GOLDSTEIN: The BlackBerry story is really part of a much, much bigger story about President Cristina Kirchner and how she came into office with this plan to really control the entire Argentine economy - like, turn all the dials on the economy. She wanted exports to change and imports to change, and she started making all these rules. Like, there was one that said, like, OK - if you're a company and you want to import stuff, you also have to export something. Right?

She's like, we got to export stuff. So you wound up with these ridiculous things. Like, there was actually a Porsche dealer in Argentina. If you're a Porsche dealer, you got to import Porsches. So what this guy did was, like - he's like well, my family has a vineyard, so I guess I'll get into the wine business. And he starts shipping wine overseas just so he can import Porsches.

VANEK SMITH: Mitsubishi got into peanuts, and Subaru started exporting tons and tons of chicken feed.

GOLDSTEIN: Sure.

VANEK SMITH: Now when Kirchner would tell companies, you have to make stuff in Argentina, it didn't always stop there. She would sometimes get very specific. In the case of BlackBerry, she had a very particular part of Argentina in mind. Wes Nicol ran BlackBerry's South America operations.

WES NICOL: The law was that you had to manufacture it down at the very southern tip of Argentina.

GOLDSTEIN: Tierra del Fuego. (Whispering) Land of fire.

(LAUGHTER)

VANEK SMITH: Just makes you want to set up shop there (laughter).

GOLDSTEIN: Nothing says manufacturing hub...

VANEK SMITH: (Laughter) Like the land of fire.

Tierra del Fuego is an island in the south of Argentina. It is actually where boats leave for Antarctica. It is one...

GOLDSTEIN: Also a promising sign...

VANEK SMITH: (Laughter).

GOLDSTEIN: ...For a manufacturing hub.

VANEK SMITH: (Laughter) It's one of the most remote places on earth, and it has a really harsh environment. It's cloudy all the time. Apparently, the wind is always ripping through, and it's hard to get to. The roads are terrible. There aren't many flights in or out. Argentines call it the end of the Earth.

NICOL: There's some colorful language I won't use (laughter) in this interview on it, but that - just talking about how far away Tierra del Fuego is from the rest of the world. It is really in the middle of nowhere.

VANEK SMITH: It would be like if Apple suddenly had to make iPhones on a little island off the coast of Alaska.

GOLDSTEIN: But Wes Nicol says there was a logic to this. It wasn't an economic logic. It was political logic.

NICOL: That was one of the population bases that was really supportive of Cristina Fernandez de Kirchner, helped her get elected. And so she was - she wanted to pay back those constituents and provide jobs for them, and so she was really forcing this issue.

GOLDSTEIN: And so they wound up setting up shop in Tierra del Fuego and working with Hugo's company.

VANEK SMITH: And even though Hugo had spent his entire career working in manufacturing, he says BlackBerry's operations were just on another level. The factory, he said, was like a work of art. There was a clean room with all these very sophisticated monitors that would, like, keep track of tiny particles of dust. There was state-of-the-art machinery. There was really high security. And all the stuff, getting it all set up, took, like, a year.

GOLDSTEIN: And even once they had the factory, they were missing another key thing, another key element - people. They needed, like, 2,000 workers to come in and make all these phones. So they started having to recruit people from halfway across the country to come move to this town to work in the factory.

VANEK SMITH: Hugo says that was not easy.

BONIFACINI: You know, the weather conditions here are very, very hard.

VANEK SMITH: OK.

BONIFACINI: So the attractive for the people notice the salary. Yes?

VANEK SMITH: Oh, so in order to get people to come to Tierra del Fuego to fill all these jobs, they had to offer a - really high salaries.

BONIFACINI: Claro. Very higher salary, yes.

VANEK SMITH: Three times what that job would pay in another part of the country, not to mention really great pension benefits.

BONIFACINI: They make all these changes. They recruit all these workers. And within a year, Hugo says, the manufacturing company he's working for goes from 60 workers to more than 2,000 workers.

VANEK SMITH: And two years after Argentina's cellphone ban, the first Argentine BlackBerry rolls off the line. Hugo still remembers the moment.

BONIFACINI: Yes, yes, sure, sure. Everybody watching the line, see the first BlackBerry (laughter).

VANEK SMITH: Really? Everybody was crowded around to see it?

BONIFACINI: Yes, everybody.

GOLDSTEIN: This was a moment of triumph for President Kirchner. She had created thousands of jobs. And these are, you know, good, high-end manufacturing jobs. They're creating this product that everybody loved, and it's super high-tech. So the moment this comes off the line, like, all of the politicians come out to see it happen.

BONIFACINI: Senators, deputados - many, many politics say, OK, we want to see the BlackBerry, want to take a picture with the operators and the first BlackBerry. Everybody want to catch this picture to use in the politics campaigns.

VANEK SMITH: Including the president herself - Cristina Kirchner made a big announcement about the first Argentine BlackBerry, and people went crazy. In the news clip we found of her speech, there is just four full minutes of just cheering. Everybody's waving Argentine flags and jumping up and down and dancing.

(SOUNDBITE OF ARCHIVED RECORDING)

KIRCHNER: (Speaking Spanish).

VANEK SMITH: Kirchner starts delivering this really impassioned speech about how Argentina is going to become a great center for manufacturing, about bringing jobs in from overseas. And then, there is this amazing moment. Kirchner holds the BlackBerry up for the crowd to see. And she says - look, do you know what this is? This is the first Argentine BlackBerry, made in Tierra del Fuego.

KIRCHNER: (Speaking Spanish).

GOLDSTEIN: This is an incredibly exciting moment for Hugo and for all of his thousands of co-workers, right? They have done this miraculous thing. In Tierra del Fuego, they have made this state-of-the-art phone.

VANEK SMITH: Hugo says he got a little carried away at one point. He was giving a press tour, and he was so proud of this phone that he told one of the reporters, if you can find any difference between this phone that we've made in Argentina and a BlackBerry made anywhere else, I will give you this phone as a gift.

BONIFACINI: After that, my boss say - Hugo, I'll kill you.

VANEK SMITH: (Laughter) Luckily, no one was able to find a difference.

GOLDSTEIN: BlackBerry Argentina was doing great. And it - you know, it wasn't just BlackBerry. Right? These new rules that the president had put in place drove all kinds of manufacturing to Tierra del Fuego.

KIRCHNER: Yep - laptops, flat-screen TVs, microwaves, air conditioners - pretty much everything you can think of was being manufactured in Tierra del Fuego.

GOLDSTEIN: The population's growing. Stores are opening. Money is flowing in. You know, people are driving around in Range Rovers.

VANEK SMITH: And the rest of Argentina was doing pretty well too. In fact, The New York Times and The Guardian published editorials about what a great job Kirchner was doing. One headline called it the turnaround tango.

GOLDSTEIN: That's a terrible headline.

VANEK SMITH: (Laughter) Well...

GOLDSTEIN: Do you think in Argentina they're like - every time? It's got to be the tango?

VANEK SMITH: It's got to be the - the point though, Jacob, is that Kirchner's plan of, like, strong-arming companies to start producing things in this remote part of Argentina - it was working.

GOLDSTEIN: My Spidey (ph) sense is tingling.

VANEK SMITH: Well...

GOLDSTEIN: I feel like it's not going to keep working.

VANEK SMITH: There were a couple of problems. So first of all, all the setting up took a long time. And so by the time the first BlackBerry rolled off the line, the model was two years old, which, in the world of cellphones, as you know, is, like, totally outdated. And in addition to that, it was expensive. In fact, the BlackBerry in Argentina was twice as expensive as newer BlackBerry models in the U.S.

GOLDSTEIN: So now, President Kirchner who set up this, you know, manufacturing miracle, has a new problem. Right? She's made companies manufacture phones in Argentina, but she cannot make people in Argentina buy those phones.

VANEK SMITH: And this created a very interesting business opportunity for some enterprising Argentines. I talked to one guy who smuggled BlackBerrys into Argentina. He would hide them in pairs of shoes in his suitcase or stuff them into his socks before he walked through Argentine customs.

UNIDENTIFIED MAN: Well, you know, you have, like, soccer socks or baseball socks, you know, those that are quite tight.

VANEK SMITH: Oh, the knee socks, yeah. So you just, like, kind of put them - they'd be, like, against your leg?

UNIDENTIFIED MAN: Yeah.

VANEK SMITH: Like, how many can you carry in your sock?

UNIDENTIFIED MAN: Well, how many do you think you can carry in your sock? It'd be the same.

VANEK SMITH: Well, I've never tried. But like - I don't know - like, four in each sock? Is that too much?

UNIDENTIFIED MAN: No. You could probably do four.

VANEK SMITH: So, like, you'd have eight phones in your socks?

UNIDENTIFIED MAN: Yeah.

GOLDSTEIN: I don't trust this guy one bit.

VANEK SMITH: (Laughter) He saw a little business going, Jacob. He would buy BlackBerrys for $200 apiece in the U.S., and he would sell them on a website in Argentina for $400. And that was still cheaper than the Argentine BlackBerry.

GOLDSTEIN: It was also a better phone - cheaper and better.

VANEK SMITH: How many phones overall did you sell, do you think?

UNIDENTIFIED MAN: Quite a lot. Probably more than 50.

VANEK SMITH: Profit? $10,000. You can't afford to not smuggle phones...

(LAUGHTER)

VANEK SMITH: ...At this point.

GOLDSTEIN: And not surprising, with enterprising Argentines walking through customs with their socks full of phones, sales of the original Argentine BlackBerry started to drop. Why would you get a worse phone for more money?

VANEK SMITH: And Wes Nicol, the guy who worked for BlackBerry, said the Tierra del Fuego manufacturing plant just started making less and less economic sense.

NICOL: It just came to a point where the business case wasn't justified. We just couldn't afford to do it.

GOLDSTEIN: Less than two years after Cristina Kirchner held that first Argentine BlackBerry up to the cheering crowd, the last Argentine BlackBerry rolled off the line.

VANEK SMITH: Hugo Bonifacini remembers it well.

How did you feel when BlackBerry left?

BONIFACINI: Was not easy for us. (Speaking Spanish).

VANEK SMITH: Oh, it left a bad taste in your mouth?

BONIFACINI: Yes, yes. That's right. (Speaking Spanish).

GOLDSTEIN: Bitter.

VANEK SMITH: Bitter taste.

GOLDSTEIN: Bitter taste.

VANEK SMITH: Kirchner's government had invested $23 million in the BlackBerry project, not to mention $6,000 per worker per month. That was all up in smoke. And Hugo watched his company go from 2,000 workers down to 600 workers. And last year, he got called into the boss's office and was told, your job is going away.

BONIFACINI: It's was very strange, my feeling, because the atmosphere in this company is not good to work, Stacey.

VANEK SMITH: Yeah.

BONIFACINI: Very bad atmosphere - but the people is very angry every day. The people is very worried. Every day, you are thinking about who will be the next.

GOLDSTEIN: This is happening at factories all over Argentina. Sales are going down. People are getting laid off. And more broadly, the Argentine economy is starting to fall apart.

VANEK SMITH: All of Kirchner's economic controls unraveled kind of all at once. It got really bad. Inflation hit 40 percent.

GOLDSTEIN: Forty percent in a year.

VANEK SMITH: Yeah. And prices rose for everything. Food prices more than doubled. And a lot of companies that have been strong-armed into setting up shop in Argentina started pulling out.

To get a sense of where the story about Argentina falls in sort of a greater economic context, we talked to Eduardo Levy Yeyati. He's an economist in Argentina. And he says the biggest problem with Kirchner's protectionism - with protectionism in general - is that while the government was spending money and energy propping up Argentine manufacturing, it wasn't investing that money in areas where Argentina could compete on a global scale. It would be kind of like if Mozart started spending all of his time and money on ice hockey lessons.

GOLDSTEIN: Yeyati says this set the whole country back.

EDUARDO LEVY YEYATI: So we're losing time. We're losing badly needed time. Sooner or later, we'll need to leave the protection. But by the time we do that, we have lost 10 years in which we could have developed alternative sectors where we have a chance.

GOLDSTEIN: And, you know, there are sectors where Argentina is a competitive exporter, where they make stuff the rest of the world wants. You know, beef and wine and biofuels - these are all strong industries in the country.

So this is like problem A - right? They've been putting all their money in the wrong industries. And then you have problem B. Now you have created all these jobs that are economically not sustainable. So at some point, you know, that protectionism is going to go away. And all of these people who got these new jobs are going to be screwed.

VANEK SMITH: Exactly. And Argentina elected a new president who ran on this platform of wanting to get rid of a lot of this protectionism, to open up trade with the rest of the world. But if he does that, places like Tierra del Fuego, places where the whole economy has been built around these protectionist policies, could collapse.

Hugo Bonifacini did manage to get a new job about a month after he was laid off from his old one. But he says he has been luckier than most. And he's really worried about a lot of his friends. In Tierra del Fuego, there have been huge strikes and some workers' pensions haven't been paid in months.

GOLDSTEIN: Manufactured things, stuff is still really expensive in Argentina. A basic car costs, like, $50,000. A middle-of-the-road phone costs more than $1,000.

VANEK SMITH: And, in Argentina, you still cannot buy an iPhone.

(SOUNDBITE OF HARRY VALENTINE, KAYNE HARRISON AND NICOLAS DAGNALL'S "THIS IS LIFE")

GOLDSTEIN: What other stories should we do on PLANET MONEY? Tell us by emailing us at planetmoney@npr.org, or you can reach us on Facebook or Twitter.

VANEK SMITH: Our show today was edited by Bryant Urstadt and produced by Sally Helm, Nick Fountain and our intern Daniela Vidal. And we are looking for our next intern.

GOLDSTEIN: Planet Money intern Daniela Vidal, tell the people why they should apply.

DANIELA VIDAL, BYLINE: You should apply because you get to work with all of these wonderful, smart people - which is true.

GOLDSTEIN: (Booing).

VIDAL: It's true. What do I say?

VANEK SMITH: (Laughter).

VIDAL: I don't know. Apply because you get to see the Empire State Building out of a conference room. Do it.

GOLDSTEIN: Our internship is paid. It's a few months long. It's a great way to come hang out and figure out what we do.

VANEK SMITH: We have a couple of people we'd like to thank. Special thanks to Alexandra Starr, Jasmine Garsd and Matthew (ph) Vanek, my cousin.

GOLDSTEIN: If you're looking for something else to listen to, check out Ask Me Another. It's a quiz show with puzzles and word games and trivia. You can play along on the NPR One app at npr.org/podcasts or wherever you get your podcasts.

I'm Jacob Goldstein.

VANEK SMITH: And I'm Stacey Vanek Smith. Thanks for listening.

(SOUNDBITE OF HARRY VALENTINE, KAYNE HARRISON AND NICOLAS DAGNALL'S "THIS IS LIFE")

VANEK SMITH: One headline called it the turnaround tango. Kirchner's...

GOLDSTEIN: We got wine. Why don't...

VANEK SMITH: We got wine. We got beef.

GOLDSTEIN: Why don't you call it the Malbec miracle?

VANEK SMITH: (Laughter).

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