Apple’s $12bn Investment into the Amazon isn’t What You Think

Welcome to Manaus, Brazil, the capitol city of the state of Amazonas situated between the Negro and Solimoes rivers. Manaus, a former center of rubber production in Brazil, has grown into a large city with a population of nearly two million in an area roughly twice the size of Delaware. Manaus is a popular destination for travelers and has long been a jumping-off point for eco-tourists, researchers and adventurers into the rugged Amazon rainforest. Travelling to Manaus is extremely difficult by car; the dense forest surrounding the area makes it feasible to only have two highways into and out of the region. Rather, most visitors travel by boat up the Amazon and eventually into the Negro river, or they fly into the city. When looking on the surface, it is hard to imagine why a technology giant like Apple would invest $12bn into Brazil, much of it in the area surrounding Manaus, and they aren’t the only company to do so. Just about every major corporation and manufacturer in the world is trying to play some kind of hand in the Manaus area; the big question is, why?

From Rubber Boom to Modern Economic Boom

In the 17th century, Christopher Columbus became famous for his trip across the Atlantic. Among the many treasures that he brought back with him was “tree gum”, a strange gooey black substance that could be extracted from a specific type of tree. Similar substances had been brought back from India where it had been made into a waterproof material. “Tree gum” would later be renamed to rubber and to this day it remains an incredibly useful substance to people. Back to 19th century, the boom from the industrial revolution was about to be felt all around the world and the thirst for natural resources, particularly rubber, was about to become as intense as ever. With limited sources in which to harvest natural rubber, land that already contained the rubber trees became incredibly valuable and Portuguese colonizers were eager to take advantage of their newly acquired territories. What followed was known as the “Amazon Rubber Boom” which lasted from the mid-19th Century to the 1920s. Manaus became an economic hub for the development and shipment of raw rubber materials – until the seeds of the valuable rubber trees were smuggled out of Brazil and competitors were able to uproot the businesses that once controlled the Manaus area. A deep recession in the Manaus area soon followed as the city and its residents fell into poverty. In an effort to stimulate the economy with foreign investments, manufacturing and shipping, government officials in Manaus declared a certain section of the city along with a shipping port “The Free Economic Zone of Manaus”. Tax incentives and subsequent complementary laws enacted within the region have created financial and administrative advantages for business investments into the area.

Free-Trade Zone to Manufacturing Hub

As The Free Economic Zone of Manaus developed a world-class infrastructure over the last 15 years, interest by some of the largest manufacturers in the world has peaked. Several years ago, Apple’s manufacturer, Foxconn announced that it would be investing over $12bn into setting up their entire company facilities for all of South America in Brazil. Most of this investment occurred in the Manaus area, taking advantage of the economic liberties in the area and creating over 100,000 jobs. A couple of the benefits currently enacted for distributors in Manaus:

  1. The President of Brazil, Dilma Rousseff signed tax exempt status for the area for social security taxes (9.25%) and industrial production tax (15%).
  2. Infrastructure advancements such as logistics centers, warehouses and buildings for assembly lines.
  3. Export Priority for shipping.
  4. Government support for local investors.
  5. Benefits in logistics and shipping.
  6. Low rate financing from Brazilian governmental bank groups.

Foxconn is responsible for manufacturing a number of mobile devices and tablets including iPads, iPhones, Kindles, PlayStation 3 and certain Wii products from Nintendo. In fact, if you’ve bought electronics like the MacBook air, televisions, microwaves, DVD players and stereos it is very likely that at least a component of that device was manufactured in the Manaus area.

“Revolution of Manufacturing”

According to Apple’s Senior Vice President of Design, Jony Ive, the MacBook is a “quite remarkable engineering achievement, it represents a complete revolution in the way that notebooks are made.” Notebooks and laptops are generally made up of multiple moving parts, scaled down versions of desktop components. With the advent of smartphones, tablets, iPads and similar devices, the pieces are already available to make a sleeker machine, and that is exactly what Apple did. Not necessarily known for re-inventing the wheel, but certainly for making it sleeker, Apple has made a version of their new MacBook that is essentially one large piece. No hard-drive, processor, motherboard configuration, just a single unit they call the “Unibody”. Within this single part, the memory and processing are all done without the conventional parts of the laptop. While Apple is certainly not giving away any secrets about their manufacturing processes in Manaus, we do know that the end product of the new MacBook’s are lighter, thinner, faster, and, relatively, cheaper than previous models. With advances in the production of high-tech products, it is becoming apparent that areas like Manaus are invaluable to the world economy.

Growth and Future Projections for Manaus

Much like the rest of Brazil, Manaus is being seen as more of an international player in the world economy. Manaus is also scheduled to be a host city for the 2014 World Cup hosted in Brazil. Further updates to the civil infrastructure have made this city more attractive to professionals and help to legitimize Brazil and Manaus as a major economic hub.

Jason Hill is a blogger and internet marketing specialist from Las Vegas, Nevada. He enjoys travelling, writing for blogs and learning.