Contrasting cities of Manaus and Tierra del Fuego, representing economic development.

Free Trade Zones: A Tale of Two Cities and Their Economic Fortunes

Beau Callahan in Business & Economy August 2025 • 4 min read.

"Manaus vs. Tierra del Fuego: Unveiling the Secrets of Successful Regional Development"

In the world of economics, free trade zones (FTZs) are often hailed as engines of growth, designed to attract investment, spur industrialization, and create jobs. But what happens when two FTZs, established with similar objectives, follow drastically different paths? This is the intriguing case of the Manaus Free Trade Zone (ZFM) in Brazil and the Special Customs Area of Tierra del Fuego (TDF) in Argentina.

Established in the context of import substitution strategies that swept across Latin America in the 1960s and 70s, both Manaus and Tierra del Fuego aimed to boost regional development by offering tax incentives and attracting industries. However, as decades passed, their trajectories diverged significantly. Manaus emerged as a relatively successful industrial hub with strong ties to the Brazilian economy, while Tierra del Fuego faced challenges in diversifying its economy and integrating with Argentina's national production network.

This article delves into the comparative analysis of these two FTZs, exploring the key factors that shaped their divergent economic fortunes. By examining their regulatory frameworks, economic performance, and integration strategies, we aim to uncover valuable lessons for policymakers and regional development practitioners seeking to harness the potential of FTZs.

The Divergent Paths: Manaus Thrives, Tierra del Fuego Struggles

Contrasting cities of Manaus and Tierra del Fuego, representing economic development.

The Manaus Free Trade Zone, nestled in the heart of the Amazon rainforest, and the Area Aduanera Especial de Tierra del Fuego, at the southern tip of South America, offer a fascinating study in contrast. Both were conceived with similar ambitions: to populate remote regions, promote strategic industries, and substitute imports. Yet, their economic realities today paint a different picture. What accounts for this divergence?

Several key factors explain the contrasting experiences of Manaus and Tierra del Fuego. One crucial difference lies in their degree of integration with their respective national economies. The Manaus FTZ has achieved a greater level of integration, fostering stronger linkages with Brazilian industries and supply chains. This has resulted in a more diversified production structure and a less erratic investment path.

Regulation Matters: Differences in the regulatory frameworks governing the zones played a significant role. Manaus, with its stricter requirements for accessing tax benefits, incentivized local value addition and integration.
Strategic Focus: Manaus successfully diversified its industrial base, attracting investments in electronics, informatics, and other sectors. Tierra del Fuego, on the other hand, remained heavily reliant on electronics assembly.
Investment Climate: Manaus benefited from a more stable and consistent investment climate, fostering long-term growth. Tierra del Fuego experienced greater volatility in investment flows, hindering its development.

The Tierra del Fuego region reveals that a significant portion of the imports consisted of products used for the manufacturing of goods that were then sold in the domestic Argentinian market. The imports of TDF were considerably reliant on foreign markets for providing goods such as raw material, components, and equipment. Moreover, the rate of local value generation in TDF was relatively low. ZFM was able to foster a local value creation and have a higher rate of local productivity than TDF.

The Complexities of Development: Balancing Local Needs and Strategic Goals

The contrasting experiences of Manaus and Tierra del Fuego highlight the complexities of regional development and the challenges of simultaneously pursuing local development objectives and strategic sector promotion. While FTZs can be powerful tools for attracting investment and creating jobs, their success hinges on careful planning, effective regulation, and a commitment to fostering strong linkages with the broader economy. Striking the right balance between local needs and national priorities is essential for ensuring that FTZs contribute to sustainable and inclusive growth.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: 10.1590/1982-3533.2017v26n3art8, Alternate LINK

Title: Análisis Comparativo De La Zona Franca De Manaos Y El Área Aduanera Especial De Tierra Del Fuego *

Subject: Microbiology (medical)

Journal: Economia e Sociedade

Publisher: FapUNIFESP (SciELO)

Authors: Marta Bekerman, Federico Dulcich

Published: 2017-12-01

Everything You Need To Know

How did Manaus and Tierra del Fuego differ in their integration with their respective national economies, and what were the consequences?

The Manaus Free Trade Zone (ZFM) has successfully integrated with the Brazilian economy, creating strong links with national industries and supply chains. This has led to a more diverse production structure and stable investment. Tierra del Fuego (TDF), however, struggles with diversification and integration into Argentina's national production network, impacting its economic stability and growth potential.

What initial goals were Manaus and Tierra del Fuego established with, and how have their economic realities diverged over time?

Manaus Free Trade Zone (ZFM), situated in the Amazon rainforest, and the Area Aduanera Especial de Tierra del Fuego (TDF), located at the southern tip of South America, were both established to populate remote areas, promote strategic industries, and substitute imports. However, Manaus has thrived as an industrial hub, while Tierra del Fuego has encountered challenges in economic diversification and integration. Key differences include regulatory frameworks, strategic focus, and investment climate.

In what ways did the regulatory frameworks of Manaus and Tierra del Fuego impact local value creation and productivity within each zone?

The regulatory frameworks in Manaus Free Trade Zone (ZFM) incentivized local value addition and integration due to stricter requirements for accessing tax benefits. This contrasts with Tierra del Fuego (TDF), where the rate of local value generation was relatively low. The difference in regulation fostered higher local productivity in Manaus compared to Tierra del Fuego.

What does the contrasting experiences of Manaus and Tierra del Fuego suggest about the complexities of regional development and balancing local needs with strategic sector promotion within free trade zones?

The success of free trade zones like Manaus Free Trade Zone (ZFM) depends on carefully balancing local development objectives with strategic sector promotion. This involves effective regulation and fostering strong linkages with the broader economy. Striking the right balance between local needs and national priorities is essential for ensuring that FTZs contribute to sustainable and inclusive growth, which has been a challenge for Tierra del Fuego (TDF).

To what extent did Tierra del Fuego rely on foreign markets for inputs, and how did this reliance compare to the local value creation within the zone?

A significant portion of imports into the Area Aduanera Especial de Tierra del Fuego (TDF) consisted of products used for manufacturing goods sold in the Argentinian market. The imports in TDF rely heavily on foreign markets for raw materials, components, and equipment. This dependence, coupled with a relatively low rate of local value generation, highlights a key difference from the Manaus Free Trade Zone (ZFM), which fosters more local value creation.