Apple’s IPhone Void Leaves a Nation Begging: Alexandre Marinis
It would be hard to find a country where Apple Inc. products are more coveted and more difficult to buy than Brazil.
Brazil is the world’s eighth-largest economy and one of its fastest-growing; it has more mobile phones per inhabitant than the U.S.; its people spend more time on the Internet than they do watching TV; they are passionate about social networks; and they love hearing music on digital devices. Even so, Apple, heralded as one of the most astute and revolutionary technology companies on the planet, all but ignores Brazil.
Apple has its own brand stores in the 10-largest economies in the world, except Brazil. Brazil’s 190 million consumers are so far off Apple’s map that they can’t even buy music on Apple’s online iTunes store. Worse, Apple doesn’t export enough products to Brazil to meet local demand. Inventories of the iPhone 4 disappeared almost instantly from Brazil’s mobile-phone stores. Local operators set up long waiting lists, but gave up after they realized Apple wouldn’t be sending more devices soon.
Lacking alternatives, better-off Brazilians who hunger for iPhones, iPods or iPads buy them outside Brazil -- or on the local black market, where they can cost two to three times the manufacturer’s suggested price. Even when they pay inflated prices, Apple doesn’t provide Brazilians with adequate technical assistance. It’s hard to imagine an international brand that treats a huge group of potential customers with such casual neglect.
Rio Invitation
In March, Brazil’s O Globo newspaper reported that Apple Chief Executive Officer Steve Jobs was invited by the city of Rio de Janeiro, which will host the 2016 Olympics, to open the company’s first store in Brazil. Jobs replied: “We cannot even export our products, with Brazil’s crazy policy of super-high taxation. This makes it very unattractive to invest in Brazil. Many high-tech companies feel this way.”
It is true that the Brazilian tax burden borders on the obscene; it also makes imported electronics sold in Brazil among the world’s most expensive. But this didn’t prevent Apple’s main competitors from opening plenty of stores in Brazil, and transferring part of their manufacturing to the country in recognition of the great market potential -- not to mention the ample tax incentives offered by local governments.
An example is Samsung Electronics Co., of South Korea, which has just begun selling its new Galaxy Tab in Brazil. While the iPad has yet to be introduced in Brazil, Samsung’s tablet already is being manufactured in Campinas, a town in the interior of Sao Paulo state.
Already in Brazil
Another is Nokia Oyj, the world’s biggest maker of mobile phones, which has been manufacturing in the Manaus Free Trade Zone in the Amazon for 12 years. Sao Paulo and Manaus also host production lines of Motorola Inc., Sony Ericsson Mobile Communications, LG Display Co., Siemens AG and Vitelcom Mobile Technology SA among others.
In almost all these cases, it was the high cost of importing that motivated these companies to take advantage of the tax benefits offered by the Brazilian government for producing locally.
When citing high taxation to justify Apple’s sub-minimal presence in Brazil, Jobs shows that he still sees the country as merely a consumer of imported products, while his competitors see Latin America’s largest economy as a producing and exporting center, as well as a big consumer market.
Other economic arguments shoot holes in Jobs’s justification. In recent years, the increase in the minimum wage and greater availability of credit has increased Brazilians’ purchasing power.
Buying Power
Today, a Brazilian needs 9.6 times the minimum wage to buy a basket of digital products -- including a smartphone, a notebook computer, an LCD TV with home theater and Blu-ray player, a video game, and a digital camera -- versus 10.1 times a year ago. The Argentinean consumer, by comparison, needs 14.7 times his minimum wage to buy this basket of products, according to a study by Marco Marketing Consultants, which specializes in developing economies.
Along with the economic evidence, Apple also seems to leave out of account, or doesn’t know, the profile of the Brazilian consumer.
A survey by consultants Deloitte Touche Tohmatsu Ltd. in early 2010, in seven countries including the U.S., Germany, Japan and India, found that Brazilian consumers were among those most committed to getting their hands on new technology products the moment they are introduced. Brazilians also ranked as the biggest users of digital audio players, even though they still can’t buy music from iTunes.
Meanwhile, Nokia offers purchasers of some of its cell phones free unlimited music downloads from its online store.
Computer Affair
Brazilians who have access to computers already spend more time -- 30 hours a week -- on the Internet than watching TV (17 hours). And it’s hard to imagine a people with a greater penchant for social networking through Facebook, Twitter and Orkut, a Google-owned site run out of Brazil.
All of this makes you wonder why Apple has waited so long to make a bigger splash in such a welcoming market.
A hint of an answer may have come earlier this month when Brazilian entrepreneur Eike Batista, ranked No. 8 on Forbes magazine’s list of the world’s richest people, said that he is negotiating to set up an Apple assembly plant in Brazil. When he uses an iPhone 4 -- bought outside Brazil -- to phone Steve Jobs I hope Apple’s CEO takes the call. I have a feeling his shareholders, and Brazilian consumers, will thank him.
(Alexandre Marinis, political economist and founding partner of Mosaico Economia Politica, is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Alexandre Marinis in Sao Paulo at amarinis1@bloomberg.net
To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net
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