Why black market iPhones are a hot commodity in Argentina

Argentina has a serious trafficking issue. And it’s not just drugs — but iPhones.

Buenos Aires, the nation’s capital, is rife with stores sporting Apple signs and images of the late Steve Jobs. Walk into any of these unaffiliated shops, and you’ll find white walls covered with iPhone accessories. But to purchase an iPhone, you’ll have to inquire discreetly.

Apple’s smartphones are still unauthorized for sale in Argentina. In 2009, under President Cristina Fernandez de Kirchner, the government passed a law to promote local industry and prevent the flow of dollars out of Argentina. Electronics companies had to manufacture in Argentina’s Tierra del Fuego region in order to be able to sell their products in the country. While Samsung and LG complied, Apple (AAPL, Tech30) left.

The Kirchner administration restricted the exchange of pesos for dollars and implemented a 50% import tax on electronics and other foreign goods, essentially designed to block iPhones from entering the country.

Under current president Mauricio Macri, the government lifted the exchange restrictions, but the high import tax remains. A 64GB iPhone 6S Plus that costs $950 in the United States would have a 50% import tax and at least in $100 shipping charges — amounting to around $1,575.

It’s actually cheaper to fly from Argentina to Miami and buy an iPhone in the United States, than to just buy an iPhone in Argentina.

A mural in Buenos Aires

Argentinians aren’t ones to wait around for policy, and have instead found their own way to obtain iPhones. Many consumers take vacations to countries like the United States to make their purchases, said Agustin Garzon, executive manager of the National Agency of Communications (ENACOM).

For those who can’t travel, there are an abundant supply of iPhones that have been smuggled into the country. Approximately 12 million smartphones — mostly domestically produced — were bought in Argentina last year. At least 1.8 million of those devices were obtained through the black market, according to ENACOM data.

Argentinian iPhone resellers either have connections in customs or pay off people to smuggle them in from Chile or Colombia, where iPhones sell for similar prices as in the U.S.

The Apple contraband movement even uses pilots and flight attendants to bring as many iPhones as they can fit in their luggage, according to Emiliano Gufre, who owns an independent Apple repair shop. Once in Argentina, unlocked phones are sold to direct resellers who then attach their own price tag.

Store owners like Gufre buy from the resellers, but the devices are most commonly sold on Mercado Libre, Latin America’s eBay. They go for a few hundred dollars over the U.S. price, but they’re still cheaper than market value.

“It’s the same process to import an iPhone as it is to move a kilo of cocaine,” said Gufre. “We don’t like that it’s done illegally, but there’s no other way.”

Customs officers attempt to strictly monitor and enforce what’s brought into the country, but once the phones are there, it’s highly unlikely that police would crack down on illegal sellers. Some customs agents have even been customers of these iPhone vendors themselves.