Why Apple’s first retail store in Brazil is actually a really big deal

In Latin America, the sky is the limit for Apple.
In Latin America, the sky is the limit for Apple.
Image: Reuters/Aly Song
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Apple is about to take its much-awaited leap into Latin America.

According to Apple news site 9to5Mac, Apple is aiming to launch its first retail store in Brazil by March 2014. The store, which has been under construction since last year, will be located in Rio de Janeiro. 

The move into Brazil is a big deal. Smartphone sales, for one, have been booming in the region—sales jumped by  53% in the first quarter of 2013 alone, and grew more than in any other region in the second quarter—and Brazil, Latin America’s largest economy, has a lot to do with it. Customers in the country are so enamored with iPhones that many are willing to pay upwards of $1,000 for Apple’s new 5c, which retails for about $550 in the US. Furthermore, Latin America is quickly becoming a digital-age goldmine. Internet penetration currently hovers around 45% in the region, and more than 250 million people are now connected to the internet. Very soon, Latin America will have more internet users than the US and Canada. Sales of laptops and tablets in particular are set to skyrocket as more and more people move away from desktop computers in the region.

The timing also appears to be well coordinated. The opening of Apple’s first store in Rio de Janeiro will come just in time for the 2014 FIFA World Cup, which promises millions of tourists. Apple opened its first store in China in 2008 just ahead of the 2008 Beijing Olympics.

Winning over Latin America, however, won’t prove as simple as opening up shop. Several South American countries, including the two largest economies—Argentina and Brazil—heavily tax electronics that aren’t at least partially manufactured locally. The hope is that such taxes will coerce companies to set up local factories, but so far few have obliged. Apple has perhaps been the most stubborn of the lot; it makes no components of its products in the region. The result is that its devices suffer an enormous mark-up, between 60% and 70%. iPhones sell for as much as $3,500 in Argentina, and iPad prices are scarcely any more reasonable; South America is the worst place to buy an iPad.

So far, surprisingly many people in supposedly poor countries have been willing to shell out for Apple’s gadgets even at a premium. And the emerging middle classes that can afford them in those countries are growing. But perhaps not as fast as Apple needs its sales to grow. As the company continues to build more stores—and it still has them in only 14 countries worldwide—it might start to feel the pressure to bend to protectionist regulations and manufacture more components locally.