One of the benefits of having a Third World currency is that high-tech firms looking for cheap labor come from far away to build factories.
The latest chapter in the migration of jobs to wherever labor is cheapest? Embraer is coming up from the rural outskirts of Sao Paolo to build a factory in Florida. Details at aero-news.net.
Gross Per Capita Income, Brazil: $ 4,730. Salary stated in that article – $50 k. I don’t think that argument will hold up. Much more likely that this is so they can say that some portion of their fleet is “American-made.”
I once visited a bus factory in Winnipeg, Canada – most of the components were actually built there, but the unassembled parts were shipped a few hundred miles to Minneapolis for final assembly in order to meet US buyers’ requirements for local content.
Is it possible that they’re simply saving on shipping? Perhaps they are assembling the jets closer to where the components originate, and where the jets will eventually be used. I’d imagine that could wind up making the process much faster and cheaper, even if labor were more expensive.
I find it hard to believe that *wages* would be lower in the USA but it’s a real possiblity that the total cost of retaining a trained and skilled employee in the USA is less than in Brazil, because of availability, taxes, cost of insurance, etc. If the wages they pay to US workers are fair (and that’s a big “if”) then I don’t necessarily see this as a bad sign.
Then again, maybe it is a sign USA is screwed. I’m also sure people in Brazil are none too happy to see this as they’ve got people who could use those jobs too.
Owen: per capita income cannot be compared to wages. Per capita income is divided by the total number of people in the country, including 3-year-old children (of whom there are a lot more in Brazil, as a percentage of the population, than in the U.S.). A 3-year-old is unlikely to command a high wage. Per capita income also doesn’t make sense when you are talking about specific skills such as aircraft assembly. It would be more interesting to know the average wage of a government-certified aircraft mechanic in Brazil.
As for the “american-made” argument. The buses you saw in Winnipeg were being sold to U.S. governmental buyers, such as cities. The planes Embraer is building have only 6-8 seats and will be sold to private customers whose only requirement for buying is that the plane meets their needs and desires.
Norman: A lot of components in those jets are made in North America, e.g., the engines (Canada, about 175 lbs. each) and the avionics (Garmin, Kansas). The total weight of everything in the plane is only a few thousand pounds, however, so I doubt that container shipping would be significant.
The real answer is probably that when things are semi-custom it is easier to make them closer to the customer and there are a lot of buyers in the U.S. Still, if labor costs in the long run were going to be ridiculously cheaper in Brazil they would probably continue to finish them in Brazil.
TechTribe is a San Francisco social networking startup. You haven’t heard of them because the site is aimed at Indian IT people in India. The programmers? Based on the US! (I’m not affiliated, I just like telling that story.)
PS lest you think I approve of this situation, I should also note that the weak dollar is pushing many bright Indian CS grads (at Berkeley for example) to go back home and earn rupees instead of worthless American dollars. 20 years ago they would have stayed and maybe started some companies.
I was in Orlando this week when the announcement made front page local news. It makes sense for Embraer to have a final delivery and demo center in the US. They have a major competitive disadvantage vis-a-vis Cessna for the delivery experience today. (Think a week of visas and vaccinations vs. a four-hour flight to Kansas from anywhere in the US). The Aero-News article doesn’t mention that Space Shuttle flights are scheduled to end in 2010 and there will be many NASA layoffs. So Florida had incentives to pass along to Embraer to make the deal financially attractive. It’s not as simple as cost of labor of US vs. Brazil, but there are other marketing and financial incentives for Embraer to make this investment.
Wihl, I agree with you!
Philg, a good 10years experienced engineer costs something like R$140k =~ US$85k/year in Sao Paulo; I don’t think it’s so far from another in Florida.