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Nintendo's Unbeatable Level: Brazil

Nintendo of America President Reggie Fils-Aime demonstrates the Wii U in New York on Sept. 14, 2012. Phototgrapher: Jin Lee/Bloomberg

For Nintendo, the Brazilian market is turning out to be harder to win than the pirate-ship level in "Super Mario Bros. 3."

Reggie Fils-Aime, president of the Japanese company's American unit, singled out Brazil as a potentially important growth area for Nintendo's business in the future. While Mexico is the game maker's biggest market in Latin America, "Brazil has huge potential," Fils-Aime said in an interview at Bloomberg's office in San Francisco yesterday.

But Nintendo keeps stumbling over the same hurdle as many other consumer-electronics companies trying to crack the world's second-biggest emerging economy. Brazilian import fees are very expensive, and that drives the prices way up. For example, Brazil is the most expensive country in the world to buy an iPhone 5 at 2,299 real ($1,045), according to Bloomberg Rankings. Nintendo's consoles, too, typically sell for more than $1,000 each in Brazil, which is more than three times the price in the U.S.

The high duties in Brazil don't exist to discourage global tech companies from selling their products there. The fees are designed to encourage local fabrication. Nintendo uses the Taiwan-based Foxconn Technology Group to put together its game consoles. (The pair came under fire a year ago for using underage assembly-line workers.) Nintendo has explored the prospect of manufacturing some of its hardware in Brazil, Fils-Aime said.

"For complicated products, that's not always easy to do," he said. "We've looked at it a number of times."

According to Fils-Aime, Brazil's manufacturing industry lacks the technical capabilities to produce a Nintendo game system. The other issue is piracy. In a submission to the U.S. Trade Representative earlier this year, Nintendo listed Brazil as a country to watch for distribution of counterfeit goods.

There's no power-up to solve these challenges.

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