Home to the world's most expensive iPhone, Brazil has long been considered one of the priciest countries. The high taxes paid by Brazilians (about 36% of the country's GDP, considerably more than the 21% average for upper-middle-income countries and really a joke if the woeful public services provided to Brazilians are taken into account), Draconian import duties (Brazil applies a 60% flat import tax on most manufactured retail goods), harsh labor laws that make it hard to use workers efficiently and currency exchange fluctuations are some of the reasons behind the so-called "custo Brasil" -- or simply the "Brazil cost."
Just to keep things fresh, both Ikea and H&M, two of the biggest names in retailing, have recently given up on plans to open stores in Brazil due to the country's import tax.
Last year Brazil topped a list compiled by Bloomberg of the most expensive countries to buy an iPhone. Keeping in mind that the list was released months before the launch of the new iPhone 6, the South American nation led the pack of "iPriciest countries" thanks to its tag price of $1,196 for an iPhone 5S. The same model could be bought at the time in the United States for $815.
The new iPhone 6 is being sold in Brazil for $1,254 (R$ 3,200) -- or about twice the price practiced in the U.S. No wonder the huge difference was the subject of mockery on Brazil's top rated late-night talk-show last week, as host Danilo Gentili read a list of 5 things to do in Brazil with the money that can be used to buy an iPhone 6. The list included topics such as to help cover the losses from Petrobras' corruption scheme, in reference to the bribery scandal that is being probed in Brazil's state-controlled oil giant; and to use an iPhone 5 to call a girl, take her to Miami, and come back to Brazil with two iPhones 6.
(By the way, Gentili told FORBES he has no plans of buying an iPhone 6 anytime soon. "I haven't bought an iPhone 6 yet and if I ever buy one, it won't be in Brazil. The less money I give to this corrupt government the better. Ever since I was poor I used to pay loads in taxes and got nothing in return. If I ever buy an iPhone 6 it will be abroad, during one of my trips. But I really didn't like the new iPhone, it's too big and I am happy with my 5S," he said.)
In reality, though, the expensive price of a mere iPhone in Brazil symbolizes one of the country's biggest bottlenecks, which are the huge operational costs that create several difficulties for anyone hoping to be doing business there. Recently re-elected President Dilma Rousseff will have to tackle those issues in order to continue expanding the social and economic achievements of her predecessor, Luiz Inacio Lula da Silva.
Poorer Brazilians voted for Rousseff in the October elections mostly because of her party's track record in lifting millions out of poverty, but her government has been marked by interventionist policies that stifle confidence and trade and an apathy to act in the promotion of much needed reforms to win back investor and consumer confidence and get Brazil growing once again.
Rousseff's stubbornness in dealing with certain sectors of society, like industry, has weakened the policy used by the Workers' Party in Brazil's recent prosperity boom: inflation under control, a floating exchange rate and steady reductions in the national debt.
Change was the word of the presidential campaign this year, but the word for Rousseff's new government should be reform. Now is the time for comprehensive tax reform that will reduce the tax burden and create a simpler, pro-growth tax code. Brazilians deserve tax reform. Higher taxes are not the solution to the debt problem. Instead, Rousseff must focus on keeping taxes low so individuals and businesses will be able to keep more of their hard-earned income. When we lower the tax burden, we encourage investment, job creation, and economic growth. More certainty and simplicity in the tax code would send a clear message to job creators that Brazil is a good place for business.
Plus it would allow Brazilian taxpayers to spend their own money thus stimulating the economy by buying consumer goods, like an iPhone, but for a fairer price.
