There is a common misconception that Extremadura should be translated as “extra hard”. It actually takes its name from the river Duera. Its financial currents began to shift in 2015, when Spain’s poorest region, bordering Portugal to the west, received a twin boost: the European Union’s Operational Programmes (OP) scheme began to funnel hundreds of millions of euros in direct investment, and a factory in Zafra started rolling out the first indigenous smart phones.
Zetta mobile phones hit shops in the middle of that year, selling 1,200 units in the first few weeks. The proposition was compelling: a locally manufactured phone – branded with an acorn with a bite out of it – that cost just €145. It was marketed as the region’s answer to the iPhone and seemed to embody the OP’s vision of innovation and R&D.
That was until a couple of weeks ago, when one of Zetta’s founders gave an interview to the El Espanol newspaper, which then went viral – with the revelation that the phones were allegedly made in China by Xiaomi.
The seeds of doubt grew when the company’s website went offline. It currently displays the message: “Under construction. We are applying some improvements, we’ll be back soon”. No one was available for comment.
There are seven Zetta stores in Extremadura and more than 80 sales points across Spain. A Zetta spokesperson, who was interviewed on Canal Extremadura Televisión recently, said that “this phone is innovative because there is nothing like it on the market”. El Pais newspaper quoted an anonymous salesperson as saying: “We’ve sold around 200 handsets across northern Extremadura. Nobody has been by to complain yet. It’s an Extremaduran handset with a guarantee, there’s no problem.”
The European Commission’s 2014-2020 OP plan set aside €849 million for Extremadura, with €679m coming from the European Regional Development Fund. At its launch, Corina Cretu, commissioner for regional policy, said: “These tailored investments are important for the Canarias and Extremadura, helping these regions to get back on the path to growth. I expect the programmes to make a real impact on economic prospects in these two regions, by creating new and high-skilled jobs and by boosting regional research and development”.
Among the scheme’s aims are a doubling of jobs linked to R&D, a full roll-out of high-speed broadband, and a 38 per cent rise in exports by SMEs. The fraud claims threaten to tarnish that technological vision.
Spain’s consumer watchdog, FACUA, has called for an investigation into the company by local authorities to establish conclusively if Zetta’s makers have been buying Xiaomi handsets and replacing the back cover and other components, then reselling them for a much higher price.
“If you’ve bought a Zetta cellphone, they have to give you a refund,” FACUA says on its Twitter feed. “Let’s hope that prosecutors and the government of Extremadura will take action.”
If the company is exposed as having re-branded Chinese goods as locally produced, it raises questions over the nature and amount of local subsidies directed at the operation – if any – and also whether punitive import tariffs were avoided because of the obscured nature of the smartphones’ origins.
The European Union has tightened “Made In” labelling rules after recent product safety scares, in some cases involving products from China. The deciding factor was once where the last process in the production took place, but the stipulation now is that the claim of origin must follow where at least 45 per cent of the value was created.
Zetta’s owners may claim that they merely modified a base device to add value – but consumers and local authorities may not agree that an acorn logo was worth the premium. These seeds of doubt may yet grow into a bigger scandal.
By James Fitzgerald
