Apple contractor Foxconn’s $12B deal to produce iPads in Brazil is in doubt

Apple iPad manufacturer Foxconn has been negotiating a deal to produce $12 billion worth of Apple’s tablets in its new facility in Brazil, but now that deal is in doubt, reports Reuters.

The proposal was originally announced in April by Brazilian President Dilma Rousseff and was taken a great sign for the economic ties that Brazil has been nurturing with Asia.

Now the deal is reportedly in doubt because negotiations over tax breaks and Brazil’s infrastructure issues, including its lack of skilled labor to produce the devices. Foxconn was expected to begin production of the devices for July, but was then delayed until November. Officials involved in the negotiations are now saying that it is unlikely that it will ever happen.

Foxconn has reportedly been making “crazy demands” for tax breaks and special treatment, said an official. “The talks have been very difficult, and the project for a Brazilian iPad is in doubt.”

Foxconn has also been trying to get priority treatment at Brazilian customs, which has a reputation for being slow.

Brazil is currently in the throes of expanding its infrastructure and undertaking building projects to prep for the World Cup in 2014 and the Olympics in 2016, which have been contributing to its strain.

Among the problems plaguing the project are higher than average taxes and poor infrastructure. These issues are common to many developing countries, especially in Latin America. There is also doubt when it comes to funding as local publications have reported that the BNDES state development bank was planning on withdrawing its crucial funding for the project.

At this point other options are being considered, like scaling back the operation to a more achievable scale or producing the parts elsewhere and just assembling them in Brazil.