You may recall awhile back that a huge $12 billion plan was put into place in Brazil for Taiwanese manufacturer Foxconn to help meet iPad demand. According to government sources though, that deal may be "in doubt" because of faltering negotiations over tax breaks, as well as Brazil's lack of skilled labor.
The deal was originally hailed as a chance for Brazil to gain notoriety in the value-added manufacturing chain as its economy saw growth.
However, factories have had difficulties with high taxes for years, an overvalued currency, and a lack of qualified workers because of a poor education as well as a tight labor market.
Production was originally to begin in July, but then was pushed back to November. It's now unclear whether or not the project will even see the light of day, at least in the form factor that was originally thought.
"The talks have been very difficult, and the project for a Brazilian iPad is in doubt," said one official. "(Foxconn) is making crazy demands" for tax breaks and other special treatment," they added.
Folha de S.Paulo newspaper had reported today that the funding for the Foxconn project from the BNDES state development bank -- which the initiative would need, or face collapse -- could be withdrawn.
Issues like high taxes, bad infrastructure and a thin labor pool are all routinely cited by business leaders as the largest obstacles in trying to achieve higher growth. However, all is not lost, and there are still plenty of concessions that both parties could make in an effort to reach a deal.
Foxconn has called for the construction of a new industrial complex outside of Sao Paulo, and would be an "intelligent city," complete with its own energy facility, roads and other infrastructure. Brazil though, is already in the midst of large projects related to the World Cup in 2014 and Summer Games in 2016, which experts think only about half of the $1 trillion in planned infrastructure investments would be completed on time in the next decade.
"We're dealing with a lot of issues, like the (Taiwanese) trying to figure out how to do business in Brazil…and Brazil figuring out how to produce these complicated products," said a second government official.
"Maybe we will end up starting with something smaller."
via Reuters
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(Image courtesy of nextiphonenews.com)
