Foxconn's Apple Seeds Likely to Flourish in Brazil's Climate
Apr 22, 2011 5:00 AM PT
My three months in Brazil last year reaffirmed something I already knew: Brazilians love American stuff. If you go to a sporting goods store, you will see Nike shoes selling for US$140 (or 220 Brazilian reals) that would sell for $50 in the United States. Go to a beach shop, and you will see U.S. surfboards selling for double.
Shop for anything else with a U.S. company brand -- most especially Apple products -- and you will notice the same. Many of these products are tough to afford and even find in Brazil.
My iPhone was a hot topic whenever I pulled it out. I saw a couple of people using "Hiphone" knockoffs that look and function the same -- but are not the same. I was told I could sell a new iPhone 4 for around $1,000. The idea of hauling a few with me on my next trip, like some Apple camel, definitely crossed my mind. Bring a few iPhones, and pay for more of my next extended stay.
Import tariffs are to blame, of course, driving the prices up unless vistors are able to stuff their pockets without getting caught.
Brazil has one of the fastest-rising middle classes in the world. Its economy is currently eighth in the world, and in the next dozen years it's likely to reach the top five. It is massive, it is growing -- and Foxconn knows this.
Seeds of Prosperity
Foxconn plans to invest $12 billion there in a new plant that will make digital displays, according to Brazilian officials. Specifically, it will be pumping out iPad 2 displays -- and one can guess the business will only grow.
Like Foxconn operations in other parts of the world, the common folk employed to actually make the products should not expect to get rich, by any stretch of the imagination. The production will be heavily concentrated in the Amazon high-tech free trade zone, where unions don't have much power to help workers get higher wages. It is safe to say this is a big reason why the deal was done to begin with.
As with everything related to Apple, it can be anticipated that iPad copycat manufacturers will follow suit, opening their shops in Brazil. The labor is cheap and the economic climate is booming, so it is a match made in iPad 2 heaven.
Although American culture is openly copied all over the country -- with Brazilian flair -- it is trade with China that is truly taking over. Besides its tech investments, China is pouring $10 billion into agriculture -- specifically soy production. China has also invested in Brazil's third-largest power generation facility, which is seriously amping up the country's power grid system.
Seeds of Discord
While the distribution of wealth in Brazil still has a long way to go, trade with China and other countries certainly is bringing wealth to somebody. In fact, the government is adding new language training facilities to the Federal University of Porto Alegre.
Further stirring interest is the fact that other governments are becoming increasingly uneasy about the growing relationship between China and Brazil. There are fears that it will cause instability for a global economy that is not looking so great overall. There are also concerns that it could spur currency wars. Like the U.S. dollar, Brazil's currency is inflation-prone.
When the dust settles, one can only guess how Brazil's cozying up to China will affect the global technology market, exports and imports.
For a repair commoner like me, the staggering amounts of money involved in this international wheeling and dealing can be tough to wrap your head around. At the end of the day, though, it appears China has found a new friend, and the two countries are discovering that when it comes to business, they have a lot in common.