Before Wisconsin, Foxconn vowed big spending in Brazil. Few jobs have come.

  • broken promises
- DAVID BARBOZA, SAO PAULO (BRAZIL)

Sep 21, 2017-Before the Taiwanese manufacturing giant Foxconn pledged to spend $10 billion and create 13,000 jobs in Wisconsin, the company made a similar promise in Brazil.

At a news conference in Brazil, Foxconn officials unveiled plans to invest billions of dollars and build one of the world’s biggest manufacturing hubs in the state of São Paulo. The government had high expectations that the project would yield 100,000 jobs.

Six years later, Brazil is still waiting for most of those jobs to materialise. “The area where Foxconn said it would build a plant is totally abandoned,” said Guilherme Gazzola, the mayor of Itu, one of the cities that hoped to benefit from the project. “They haven’t even expressed an interest in meeting us.”

Foxconn’s experience in Brazil and other parts of the world illustrates how difficult it has been for it to replicate its enormously successful Chinese manufacturing model elsewhere.

In China, Foxconn has built vast factories backed by large government subsidies. Its operations—assembling iPhones for Apple, Kindles for Amazon and PlayStations for Sony—employ legions of young assembly-line workers who often toil 60 hours a week for about $2.50 an hour. Labor protests in China are rare, or quashed swiftly.

But the model does not translate easily to other countries, where Foxconn must navigate different social, political and labor conditions.

In Brazil, Foxconn’s plans unraveled quickly. The administration that had wooed the company was soon swept from power amid corruption allegations and an impeachment vote. Some of the tax breaks that had been promised were reduced or abandoned, as economic growth and consumer spending slumped.

Today, Foxconn employs only about 2,800 workers in Brazil.

Foxconn does the “big song and dance, bringing out the Chinese dragon dancers, ribbon cuttings, toasts and signature of the usual boilerplate agreements,” said Alberto Moel, an investor and adviser to early-stage tech companies who until recently was a technology analyst at the research firm Sanford C Bernstein. “Then, when it gets down to brass tacks, something way smaller materialises.”

Foxconn said in a statement that it was committed to investing billions of dollars in building facilities outside China. But the company also said it had been forced to adapt to changing conditions in markets like Brazil, where the economy had stagnated. “This and the changing needs of our customers that our proposed investments were designed to serve have resulted in scaled down operations in the country at this time,” the company said in its statement. With regard to the Wisconsin project, Foxconn has said it plans to build one of the world’s largest manufacturing campuses in the southeastern part of the state. The company expects the buildings that will make up the campus to total 20 million square feet—about three times the size of the Pentagon—and to help transform the region into a major production centre for flat-panel display screens.

Speaker Paul D Ryan, Republican of Wisconsin, called the Foxconn deal a “game changer” that could help spur a manufacturing revival in the Midwest. At the White House in July, President Trump hailed the agreement as a great one for American manufacturing, American workers and “everybody who believes in the concept, in the label, Made in the USA.” Governor Scott Walker of Wisconsin officially approved the deal on Monday.

Foxconn has good reason to diversify its manufacturing operations. About 95 percent of the company’s 1.1 million employees work in China. Building a large work force elsewhere could reduce the company’s reliance on a single locale, lowering its risk if countries imposed tariffs or other trade barriers on Chinese exports. “The closer they get to big markets like the US or Brazil, the less they have to worry about import taxes or other barriers,” said Gary Gereffi, director of the Centre on Globalisation, Governance, & Competitiveness at Duke University. “Getting outside of China to supply these markets is like jumping over any potential tariff wall.”

 

— © 2017 THE NEW YORK TIMES

Published: 21-09-2017 09:34

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