Foxconn Brazil iPad deal facing barriers: Reports

Taiwanese electronics giant Foxconn wants to begin assembling iPads in Brazil by July, but it is still seeking tax breaks and other government concessions as part of an investment plan that could be worth up to USD 12 billion, Brazilian media reported on Friday.

Foxconn Technology Group, maker of Apple Inc's iPhone and iPad, announced its intention to dramatically ramp up production in Brazil last month during a visit to China by Brazilian President Dilma Rousseff.

Foxconn has moved up its desired start date for assembling iPads in Brazil to July from November, seeking to tap massive demand for the device in Brazil's booming consumer market, according to newspapers Estado de S Paulo and Folha de S Paulo. Their reports quoted government officials.

"It's a daring timeline. Whatever is within our reach, we're going to work on making that viable," Science and Technology Minister Aloizio Mercadante told Folha.

Foxconn's plans have generated excitement among Brazilian officials, who are hoping their country can move up the value-added manufacturing chain despite extremely high labor costs, taxes and an overvalued currency that have made business difficult for other factories in recent months.

The project could also give Foxconn and Apple a better foothold in Brazil, where high-tech gadgets are often priced out of the market because of import tariffs and production costs. Apple's cheapest iPad currently retails for about USD 860 in Brazil, versus USD 400 in the United States.

Several obstacles remain to the deal's full implementation. Rousseff recently received a long letter from Foxconn chief Terry Tou detailing several conditions for both short-term and long-term investments, the reports said, quoting Mercadante.

The company is negotiating tax incentives for production and other measures that would make it easier to import components for local assembly, the reports said. Foxconn also wants government assistance in dispatching 200 Brazilian engineers to China for training as soon as possible.

Foxconn intends to first begin assembling iPads in Brazil using imported parts, and then start producing screens and other parts locally in coming years, the reports said.

Skilled labor shortages and the likely need for a local partner in the venture have caused some Brazilian economic officials to privately question whether the total investment will reach anywhere near USD 12 billion, the amount cited by Rousseff last month.

The deal will also require funding from Brazil's BNDES state development bank, Mercadante said, which is under pressure to slow loan growth amid a rise in inflation.