[IAEP] Brazil deployment

[Jecel Assumpcao Jr]

Edward Cherlin wrote:
> Thank you. Clearly the reports we got lost something in translation. %-[

I am better informed than most (but not all, but those with better
information tend not to speak publicly, unfortunately) about these
issues. My adventures in computers for schools in Brazil started in
1983.

> > Not at all - the two lowest bids were for making the machines locally
> > which would avoid the 60% import tariff (plus a few others).
> 
> I believe that the correct description would be "assembling" the
> machines locally.

To qualify for the tax breaks you have to actually solder the components
in Brazil to boards that are made here. Without any semiconductor
plants, this is as close to fully manufacturing computers as we can get.
This doesn't mean that people don't try to merely assemble stuff (or not
even that) while claiming to be complying with the requirements for the
tax break. But this would be hard to pull off in the volumes we are
talking about.

> Right now that would _increase_ the cost of XOs, if
> it were possible at all, due to the favorable terms OLPC got from
> Quanta for the first five million units in return for other contract
> provisions, such as exclusive rights to manufacture.

The main cost increase would be due to the invisible local taxes. Every
item sold in Brazil includes an amazing amount of taxes hidden in its
price. Most poor people are convinced that they don't pay any taxes at
all while in truth if they make the minimum wage (about US$2400 per
year) then the government will keep 48% of that. If they make ten times
more then the government's share will only be 36%.

Since this would make its way into the laptop's cost though the water
that is used, the electricity, the fuel to transport them and so on,
there is no easy way to waive these taxes like you can the import duty.
Some people argue that this doesn't matter if the government is the one
buying the machines, but it does make a difference since everyone else's
share is proportional.

> But this illustrates my main point, below. The cost calculation is
> being done on the initial order, not on the planned deployment to the
> whole country. I believe that Quanta could be induced to build an
> assembly plant in Brazil to fulfill an order of thirty million or more
> units over several years.

I have been told that such negotiations have been attempted (with OLPC,
not Quanta) and failed. But in any case, note that this purchase must
legally be separate from anything that came before or that might come
later. The exception is that the requirements were based on the
experience with the pilot program. So you would expect OLPC, Intel and
Encore to have an inside track. But if someone else had a compatible
proposal at a lower cost then they would win. In the same way, whoever
wins this round would have absolutely no assurance that they will sell
any more machines in the future.

-- Jecel