12/09/2010

The cost of protectionism

Brazil is much poorer than they have to be. Just think of a country where they can't use computers used in the rest of the world.

On the night of Dec. 2, almost 500 gadget-crazy Brazilians in São Paulo lined up outside electronics retailer FNAC's big store in Morumbi Shopping complex south of the city. They waited until midnight to buy the Apple (AAPL) iPad, which finally went on sale in Brazil months after its international launch. First in line was Joao Teofilo Ribeiro, who was so excited he brought his entire family to wait with him.

They weren't looking for a bargain. The iPad lists at FNAC and other Brazilian stores for $985, almost twice as much as in the U.S. and one of the highest official prices for an iPad anywhere, according to Macworld Brazil, a Brazilian newsletter run by U.S.-based International Data Group.

The iPad is one example of the many price distortions caused by Brazil's elaborate industrial policy. Companies that don't manufacture goods in Brazil have to pay stiff tariffs if they want to sell to the nation's consumers. Brazil levies a 60 percent tax on the iPad and as much as 90 percent on imported cars. A blouse that retails for $49.50 at The Gap in the U.S. goes for $82 in Brazil at non-Gap outlets. "Brazilians sometimes pay luxury-good prices for second-rate items," says tax specialist André Mendes Moreira, who writes a widely read financial column and tracks the impact of import taxes on everything from cars to champagne. "The consumer is at a clear disadvantage." . . .

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