Taiwan based manufacturer Foxconn’s much hyped plans worth $12 billion for shifting iPad’s production to Brazil appears to be very doubtful now as the negotiations over tax breaks are now stagnant and Brazil suffers its own structural problems like the severe shortage of skilled labor, according to sources from the government.
The plans of manufacturing the very popular Apple iPad tablets in Brazil first came to light this April when President Dilma Rousseff announced them during a visit to China. The deal was hailed by the senior officials as it signifies increasing economic ties of the Latin American country with Asia, and is a proof of Brazil’s ascent in the manufacturing chain of value added commodities with its growing economy.
However, the plans to manufacture the iPads in Brazil gained skepticism from the people in the country, as for years Brazil has seen factories struggle under heavy taxation coupled with an overhauled currency and dearth of workers with qualifications which stems from a poor education system and a labor market which is very tight. The production was earlier expected to be started in July; however it was subsequently delayed to November.
Now, it looks quite unlikely that the project will ever get started as it was initially meant to be, said the government officials who preferred to remain anonymous. One source said that the talks keep breaking down and the plan for iPads manufactured in Brazil looks doubtful. He added that the demands being made by Foxconn, which include tax breaks and other favors, are very unreasonable. Representatives from Foxconn did not reply to comment on the issue.
According to a report in a Brazilian local newspaper, the funding which the Foxconn project was expected to receive from the state development bank BNDES, which was crucial for the project to go through, is now in a danger of being withdrawn. A spokesperson from the bank did not comment. The falling through of this project will be another sign of the struggle which is underway in Brazil to meet its slightly unrealistic expectations for growth which had been set for this year.
After it expanded by 7.5 during the last year, the country’s economy is now expected to grow just 3.5% in the present year, which is one of the lowest growth rates of any of South America’s emerging markets.