Tablet made in Brazil: thousands of jobs
Development Minister Fernando Pimentel details the rules for government tax incentives; industries that establish themselves in the country, such as Foxconn, will have to give preference to national content in their components.
The start of tablet production (tablet-style computers, like Apple's iPad) in Brazil is being considered by the government as "the tip of the iceberg of a very ambitious industrial policy." In an interview, the Minister of Development, Industry and Foreign Trade (MDIC), Fernando Pimentel, said that the requirements that will be imposed on companies to receive the tax reductions provided for by law will bring a component and semiconductor industry to the country.
He predicted that Brazil could transform itself into an export platform for high-tech products for the entire continent within four or five years. This is because the Basic Production Process (PPB) will establish a percentage of national content used in the assembly of tablets that is more stringent than that required of the notebook industry. The PPB proposal was submitted to the Civil House yesterday. To compel companies to bring component factories to Brazil, the MDIC (Ministry of Development, Industry and Foreign Trade) will also create a PPB for high-tech cell phones (smartphones).
Pimentel also reported that, within the new industrial policy to be announced in June, the government will provide incentives for partnerships between foreign companies and national groups to establish factories in Brazil. These incentives may be in the form of tax breaks and government financing.
The minister anticipated that the PPB (Brazilian Production Process) will require that 50% of displays (screens) be made in Brazil starting in 2014. In the case of battery chargers used in these devices, half will have to be manufactured in Brazil by 2012, reaching 80% in 2013. The nationalization rate for wireless network cards will be 50% in 2013 and will have to reach 80% in 2014. Immediately, it will be required that half of the motherboards used in tablets be produced in the country, rising to 80% in 2012 and reaching 95% in 2013.
“It’s a heavy requirement for national content,” Pimentel assessed. Meeting these requirements guarantees companies exemption from PIS and Cofins taxes and a reduction in the Industrialized Products Tax (IPI) rate from 15% to 3%. Twelve companies have already expressed interest in producing tablets in Brazil.
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Companies have been temporarily exempted from using batteries and casings produced in Brazil. The government's decision responds to a request from the Taiwanese company Foxconn, which will produce Apple's iPads in Brazil. According to the minister, it would be impossible to produce these components in the country at this time, but this will be negotiated in the future.
Pimentel said that one of the most important points is that the PPB will require Foxconn to bring a display factory to Brazil. "We will be the first country in the world to receive a display factory outside of Asia," he said. Displays represent about half the cost of tablets.
“We are implementing the new fundamentals of the new industrial policy. We don't want companies to come here just to set up. Technology transfer will be very strong,” declared the minister. According to Pimentel, the Brazilian economic environment should guarantee the success of the policy to attract high-tech industries.
Despite having established a legal framework some years ago, Brazil has never managed to attract factories. The minister argued that the country has become reliable for investments. Furthermore, the social inclusion achieved in recent years, from a capital perspective, means the creation of a consumer market. "If we know how to balance things well, we will become a leading country," he declared. "Right now we don't have (available workforce), but we will. We will have localized difficulties, but we will be able to resolve them."