By Ben Tavener, Contributing Reporter
RIO DE JANEIRO, BRAZIL – President Dilma Rousseff was certainly smiling after her official visit to China in April this year: in part because of a deal developing for an iPad factory. The excitement was soon palpable as technology giant Foxconn, which produces Apple’s popular tablet, announced plans to open an iPad assembly plant in Brazil, providing 100,000 direct and indirect jobs – and making Brazil the first country other than China to produce the tablet.
Soon however, concerns over the rate of taxes paid by the company in Brazil (particularly the IPI tax levied on industrialized products), and also issues with logistics, infrastructure and a lack of skilled workers within Brazil were reportedly hampering negotiations, with some saying the deal was in trouble.
Recently Foxconn chairman Terry Gou has allayed fears after confirming that the new iPad factory in Jundiaí, São Paulo state, will be officially opened in December this year – although later than many had expected.
Brazil’s Science and Technology Minister Aloizio Mercadante announced that the new iPad assembly facility was up-and-running, with iPads expected to hit shelves in December – in time for Christmas.
However, the minister was less clear about the US$12 billion of new investments promised by Foxconn, said to include at least two new factories in Brazil for making touch screens, saying only that negotiations “hadn’t yet been finished”.
Foxconn already has a number of facilities operating in Brazil, including cell phone assembly lines. However President Rousseff’s government has had to counter the view taken by some foreign investors that Brazil is a difficult or overly expensive place to do business.
This has included a willingness to provide some tax breaks, particularly in terms of IPI, to convince companies to sign off on deals to assemble or produce their gadgets in Brazil.
For example, the rate of IPI has already been reduced from fifteen to three percent on specific tablet products for big-name companies producing in Brazil – such as Motorola and Samsung – and has also helped Brazilian companies such as Positivo – which released its own tablet, the Ypy, in September.
Those buying electronic products in Brazil will be hoping that the tax breaks and subsequent new investments will translate into a drop in prices, after years of having to swallow eye-watering prices for imported electronics goods.
In the same way, Brazil’s Apple fans will be hoping that producing iPads locally will close the vast difference in the price paid in Brazil, as compared with the U.S. for example.
Some say the price could fall by up to forty percent, which would be welcome as the cheapest iPad 2 on Apple’s Brazil-facing online store was retailing at US$932 (at the time of writing) with the same model in the U.S. store costing just US$499 – almost half the price. At US$829, the highest-spec iPad 2 is still cheaper in the U.S. than the lowest-spec model bought from Apple in Brazil.
Following an interview request, Apple said to the The Rio Times: “We have no comment to make on the production of iPads in Brazil, but they are proving popular worldwide, including in South America. Apple sold 11.12 million iPads during the [fourth quarter of 2011], a 166 percent unit increase on the year-ago quarter.”