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Brazil gives tax exemption to Foxconn, iPad production may follow

Not very long after Tim Cook said that Apple sees a "huge opportunity" in Brazil, it turns out the company's CEO may have had more than sales on his mind. Brazil has granted iPad assembler Foxconn special exemptions from Brazilian excise and other taxes, clearing the way for iPad production to begin in South American factories.

For several months in 2011 it looked as though iPad production might begin at Foxconn-owned factories in Brazil, but the proposed US$12 billion deal fell through in September when Brazil failed to meet Foxconn's expectations for tax breaks. Brazilian officials characterized Foxconn's demands as "crazy," but there appears to have been a change of mind. It remains to be seen how Foxconn's secondary worry of Brazil's lack of skilled labor will be addressed.

Mercado reports the tax exemption applies to "tablets with touch screens, no keyboard and weighing less than 750 grams" -- at 600 grams, the iPad 2 comes in comfortably below that limit, as do several competitors' products. "Accessories, cables, power supplies and manuals that are related to the tablets" also fall under the exemption rules.

Our Brazilian readers have said that high local prices for Apple's gear haven't stymied demand for the devices. If produced locally, Brazilian prices for the iPad could fall considerably since import duties will no longer be levied against them, and that could potentially send Brazilian demand for the iPad into the stratosphere.

With a population of 200 million, Brazil represents a great opportunity for Apple to expand its operations in an area of the globe that consumer electronics companies haven't traditionally viewed as a high priority market.

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