September 16, 2004 – In a blow to Brazil, Intel Corp. chief executive Craig Barrett all but ruled out building a chip manufacturing plant in Latin America’s largest country because of high labor costs.

“There are other areas of the world that are more competitive than Brazil,” Barrett told reporters at a news conference, citing China, India, and Russia as examples.

Brazil imports almost all of its semiconductors, and the government launched a drive in March to encourage chip manufacturers to set up shop in the country. Intel’s only existing manufacturing plants in Latin America are located in Costa Rica.

While Brazilian labor costs are much lower than those in rich nations, workers are paid more than their Asian counterparts and businesses often must pay 50% on top of salaries to meet government-mandated benefit and tax obligations.

Barrett encouraged Brazil to concentrate on becoming a source for new technology ideas and design ideas, rather than manufacturing. “Brazil is a leader in the implementation and use of technology,” he said.

Brazil isn’t known for its high-tech manufacturing sector, but the country has a booming software industry and is a making a strong push promoting the use of free open-source software.

Intel is joining forces with Brazil’s Labor Ministry to launch a program called “Technical Student” to teach high school students to assemble and maintain computers.

It will be started with a pilot program for 200 students in the impoverished northeastern state of Piaui. Barrett left Sao Paulo Thursday for Brasilia, the capital, to discuss the program with President Luiz Inacio Lula da Silva.