Brazil's $12 billion iPad manufacturing deal in trouble

By Lee Kaelin on

The reported $12 billion deal between Brazil and Foxconn to produce iPads in the South American country is in doubt, according to government officials. Apparently the two can't come to terms over tax breaks and other special treatment, while the lack of qualified workers in Brazil is also cited as one of the main causes.

"The talks have been very difficult, and the project for a Brazilian iPad is in doubt," one official said, speaking to Reuters on the condition of anonymity. "(Foxconn) is making crazy demands" for tax breaks and other special treatment, the official further added.

The original proposal to build the iPad in Brazil was announced in April by President Dilma Rousseff during an official visit to China. Many saw the deal as a sign of the growing economic ties with Asia, and evidence that the South American country's manufacturing economy was growing. Production was meant to start in July, but then was delayed until November. Now it looks more unlikely as each day passes that it will ever start on the scale once envisioned

The Folha de S.Paulo newspaper reported yesterday that funding for the entire project from the BNDES state development bank was in danger of being withdrawn. Without this funding, the deal is almost certainly expected to collapse.

Another big obstacle appears to be Foxconn's wishes to have a new industrial complex built outside of Sao Paulo, a so-called "intelligent city" with the option of possibly having its own energy facilities, roads and other infrastructure. Brazil is already struggling with the $1 trillion investment required in order to host the World Cup in 2014, and the Olympics in 2016, with current estimates envisaging only half of the planned infrastructure to be in place by then.

One option under consideration is the possibility to "bolt together" the iPad using pre-manufactured parts, as opposed locally manufacturing all the parts that make the iPad.

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