Why does iPhone 4S cost $2K in Brazil, and what does Apple plan to do about it?

9to5 Staff | Dec 16 2011 - 6:42 am PT

Apple’s iPhone 4S hit Chile and Brazil this evening, and boy is it overpriced. The company’s online store has the R$ 2,599 price tag attached to the 16 GB SIM-free version. The 32 GB/64GB versions of the popular smartphone sell for R$ 2,999/R$ 3,399. The exchange rate of Brazilian dollar is approximately R$ 1.71 to USD 1.00… so you get the picture.

Just to give you a little feel, the unlocked 64 GB iPhone 4S in Brazil sells for three times its $849 United States asking price, or a whopping $2,000. This slideshow cleverly depicts what this amount of money can buy folks in Brazil. Turns out you can get a decent fridge, a big screen Sony Bravia TV or even an entry-level Ford car for the price of an unlocked 64 GB iPhone 4S.

So, why those exorbitant price points?

A comparison of approximately two times higher iPhone prices in Brazil compared to the U.S. The chart is courtesy of The Next Web.

The handsets are most likely made in China and imported into Brazil, and the country applies very high taxes to imported electronics (the full breakdown illustrated below); thus, the unavoidable price hikes.

Once the iPhones “Made in Brazil” begin to ship, Brazilians should see those sky-high price points drop.

Foxconn allegedly negotiated favorable tax breaks to open a plant in Brazil, and the first iPhones reportedly rolled from the assembly line in November. The Brazilian prices even beat those in India (44,500/50,900/57,500 Indian Rupees – or approximately $865/$990/$1,120 – for the 16/32/64 GB iPhone 4S). This is interesting because in India, the 1.2 billion people market, a whopping 41.6-percent people live below the World Bank’s international poverty line of $1.25 a day.

Brazilian carrier Vivo is offering the device for R$ 1,249 (approximately $672) with a pricey plan. The 64 GB unlocked iPhone 4S with a pre-paid plan sells for R$2,650, or about $1425. Shipping time on the online Brazil Apple Store is an estimated 1 to 2 weeks, same as in the United States at post time. Orders are limited to two per customer.

Apple is also offering the popular iPhone 3GS that sells for R$ 1,199, or about $705, while the 8GB iPhone 4 retails for R$1,799 (approximately $1,060), both unsubsidized.

This is why iPhone 4S made in China and imported into Brazil is overpriced: Taxes. Infographic by iG Economia.

As for Chile, iPhone 4S is now available via local retailers because Apple does not operate the official online store in the 16 million people market. According to Oh My Geek, an iPhone 4S with a plan costs about 409,990 Chilean pesos, or approximately $790 (opting for a pricier service helps bring the upfront payment down). Apple began offering the Apple TV in Brazil and iTunes Store with iTunes Match in Brazil this week, Chile, Latin America and other territories (lacking the Games section in Brazil). Brazil became the first BRIC nation (BRIC : Brazil, Russia, India, China) to get Apple’s set-top box. With population of over 192 million people, Brazil is a large market and the largest lusophone country in the world. With per-capita income of $12,422, Brazilians enjoy substantially higher income than their Indian counterparts who earn on average $3,703 a year.