$12 billion Brazilian iPad 2 Production Plan Is Doomed

Taiwanese manufacturer Foxconn has been forced to reconsider its $12 billion plan to produce Apple's iPads in Brazil.

Initially, Foxconn intended to invest $12 billion in facilities near Sao Paulo. President Dilma Rousseff first announced the project in April, encouraging growing economic ties with Asia as long as the objective to encourage the domestic high-tech industry was maintained.

However, some major complaints from Brazilian business leaders, including: high taxation, poor infrastructure, and a tight labour market, are the main causes of stagnant negotiations with Foxconn.

The start date for the construction of an "intelligent city" with energy facilities, roads and other infrastructure was supposed to be in July, which was then delayed to November. Now there are serious doubts that the construction of the new industrial complex will ever start.

A Brazilian official declared, under anonymity, that Foxconn formulated some "crazy demands" during negotiations, related to tax breaks and special treatment at Brazilian customs.

The Brazilian consumer market, with 190 million people and a growing number of internet users, is still very appealing, mostly because it is considered well under-served by many analysts. One reason for the current situation is the high cost of imports. For instance, an American user can get a 16 GB iPad 2 for about $500, but this device reaches a Brazilian user for $900.

With these figures in mind, Motorola Mobility (now Google's property) and Samsung also expressed their intent to manufacture tablets in Brazil. However, Foxconn is not giving up entirely on its plans to produce Brazilian iPads, but the project could be significantly reduced.