LATIN AMERICA.COM
By
Raul Gouvea
FIT Department
Anderson Schools of Management
University of New Mexico
Albuquerque, New Mexico (87131)
I - INTRODUCTION
•The Internet is drastically transforming the nature, geographic
boundaries, timing, and scope of global competition.
•The Internet is changing the “mental geography” of international
business.
•The numbers are staggering: global Business-to Business (B2B)
E-commerce is expected to skyrocket to US$ 7.29 trillion by
2003. Global business-to-consumer (B2C) E-commerce is also
expected to reach US$ 1.3 trillion.
•The demographics of the Web are changing fast: English is still
the lingua franca of the Internet, where 96% of all E-commerce
transactions are conducted in English.
•By 2003, most Net users will not have English as their first
language, it is expected that 50% of Internet users will live
outside the U.S.
•The U.S. currently contains 70% of all websites. However, by
2003, it is expected that the U.S. share will decrease to 35%. It is
clear that the days of focusing on the U.S. market are over.
II – THE DIGITAL ECONOMY
•At the onset of a new millennium the globalization process is
permeating all segments of business transactions.
•The Internet is launching a global re-mapping process. A process
that is redefining space, mass, and time barriers. It is modifying
the fabric of global business, boosting competition at the global
level and forcing companies to redesign their domestic and global
strategies, business models, and corporate structures.
•It is also creating new industries and modifying existing ones.
These transformations are making the global economy look like a
cluster of digital metropolis’. These digital metropolis’ are
erasing national boundaries and rewriting business strategies in
many industries across the globe.
•The New Economy, or the digital economy, is creating an
explosion of economic growth and productivity never seen
before.
•The diffusion of technology, fostered by the Internet, is taking
place in Internet time, leading to an acceleration in the rate of
innovation.
•The Internet has had a substantial impact on the international
business environment. It has forced companies to rewrite
business strategies in many industries across the globe, by
shrinking business response times, and by shortening service and
product life cycles.
•The Internet has also boosted trade across boundaries by making
more and better information available. This has leveled the
playing field for companies of different sizes. Small and medium
size companies don’t face the same capital constraints they did in
order to reach a global market.
•In the Internet age, core competencies like speed, quality, and
quality service will be key to a company’s success in the global
E-marketplace.
•The nature of the Internet also makes it easier to expand the
share of services in global trade, such as banking, gambling,
consulting, retailing, and education.
•On the investment side, the Internet facilitates the integration of
companies’ activities at the global level, fostering the integration
of the supply chain, cutting costs, and fostering innovations.
•This global electronic shopping center is open 24 hours – 7 days
a week. The E-consumer is an interactive consumer.
•These E-consumers are clustered in digital communities across
the globe, bringing a new meaning to the global segmentation of
markets, developing E-commerce trends, and bringing together
like-minded consumers across the globe.
III – GLOBAL DIGITAL DIVIDE
•The Internet holds the promise of narrowing the gap between the
haves and have-nots, or between developed and less developed
countries.
•Despite all of this promising talk of globalization, there are 2
billion people that have never made a phone call.
Table 1. Outposts on the Net-Projected Number of Regular
Internet Users by Year-End 2000.
Economic Region
Millions of People
North America
Western Europe
Asia-Pacific
South/Central America
Eastern Europe
Middle East/Africa
148.7
86.6
57.6
10.8
9.5
7.5
Source: Mandel, 1999, p.77.
Per 1,000 People
479.1
217.5
16.6
21.1
32.7
7.2
Table 2. Percentage of Countries Population Connected to the
Web, 1999.
Iceland 45%
USA
39.9%
Finland 32%
Switzerland 16.2%
Ireland 13.5%
S. Africa 3.74%
Chile
1%
Mexico 0.6%
Colombia 0.24%
Angola
0.0001%
Canada 42.3%
Sweden
Norway 36.3%
Denmark
Australia 30.5%
England
Japan
14.4%
Holland
France
12.9%
Italy
Venezuela 3.3%
Brazil
Russia
0.8%
Argentina
India
0.5%
China
Peru
0.08% Egypt
Argelia
0.000025%
40.9%
34.0%
18.0%
13.7%
7.9%
3.0%
0.6%
0.26%
0.06%
Source: Nua Internet Surveys (www.nua.org)
•This superconcentration of users defies the idea of globalization
as a universal concept.
Table 3. Projected Number of Online Users by Region
(millions of users)
Region
1998
2003
North America
Western Europe
Asia Pacific
Middle East
Latin America
Eastern Europe
Africa
90.4
38.9
31.7
0.8
5.4
3.1
0.9
171.0
112.0
138.8
8.5
37.6
24.1
6.1
Source: Weyer, 2000, p.69.
IV - WESTERN EUROPE AND ASIA
•The European economy enters the new millennium with a
renewed economic confidence. The “eurosclerosis” days are
apparently over. Inflexible labor markets, lackluster economic
growth, and anti-business government policies are no longer
permeating the European economy.
•The launch of a common currency is unifying fragmented
markets, and is facilitating the emergence of venture capitalists,
an essential feature of the New Economy.
•For all the excitement, Europe still lags behind the U.S. when it
comes to the Internet age. Only 10% of Europeans are connected
to the World Wide Web. When it comes to E-commerce,
Europeans are grossing US$ 19 billion for 1999, or 20% of the
U.S. volume.
Table 4. The New Old World - 1999
Country
France
Germany
Italy
Sweden
Britain
USA
Cell Phones
28%
21%
50%
55%
32%
25%
Internet Access
10%
15%
8%
48%
23%
43%
Source: Baker and Echikson, 2000; p.eb44.
1
Online Sales
(US$ billions)
9.20
16.3
5.40
86.00
26.00
12.00
•Across Europe however, one finds different levels of Internet
penetration.
•Despite their relative lag, European companies are quickly
developing new technologies and new product technologies. For
instance, mobile mini portals are the new challenge. Phones are
being developed to carry Internet services.
•By 2003 it is expected that 248 million Europeans will carry cell
phones, up from 141 million in 1999.
The growth of the Web in Europe still faces a number of
challenges:
1) The increasing unification of European markets, making Europe more European,
may have a negative impact on the goal of building a global village.
2) In many countries phone calls are charged by the minute, discouraging the use of the
Internet.
3) Despite the creation of the Euro, companies are still dealing with fragmented
markets, several languages, and a different set of laws.
4) The extensive use of English in the past has discouraged Europeans from using the
Web.
5) In order for Europe to act as an electronic shopping center, import regulations have
to be standardized.
6) Europeans are more willing to impose governmental control over the Web than
Americans. Issues such as consumer protection and privacy are becoming the focus of
many lawmakers in Europe.
ASIA
•Asian countries are also rapidly narrowing the Internet Gap. The
convergence of PCs, cellular phones, and E-business is sending
waves throughout Asia.
•The Asians have woken up to the potential impacts of
information technology on productivity and consumer spending.
Asia’s immense untapped markets could turn into an “Eldorado”
for E-commerce companies.
•Asia, with 2.7 billion people, close to half the world’s
population, and a young population with a rising disposable
income, points to a booming E-commerce.
•According to some estimates, by 2003 Asian E-commerce could
amount to US$ 32 billion.
•For instance, in China E-commerce is expected to increase from
US$ 8 million in 1999 to about US$ 3.8 billion by 2003.
•The Asian E-race is leading a number of countries to build
technological parks, such as the Malaysia Multimedia Super
Corridor. Singapore is planning to build a Science Hub and
intending to build a fully wired society.
Table 5. Technology Tigers
Country
Singapore
Hong Kong
Taiwan
30.5
28.4
23.2
14.4
Internet Technology
(spending per capita) 1.2
0.6
0.3
0.1
Internet Technology
(spending/% of GDP) 4.2%
2.2%
1.3%
1.0%
Internet Users as a
% of PCs
55%
55%
42%
42%
Internet Users as a
% of population
23%
17%
11%
5%
GDP per capita
USA
Source: International Data Corporation
•Like the Europeans, Asians are looking for alternative Web
designs. In Japan the advent of the smart-phones, or Internetready cellular phones, is dramatically changing the status of the
Internet. Japan is emerging as the technological leader in wireless
Net communications.
•Japan is also leading the global wireless industry by being the
first country to jump into the third generation of mobile
telephony or 3G. This new technology will allow for videoconferencing, web surfing, and a number of other applications.
Table 6. Breaking Down the Barriers to the New Economy,
1999
Country
Japan
South Korea
Taiwan
India
China
Citizens
20.0 million
7.8 million
4.2 million
2.1 million
10.0 million
PC Penetration
30.0% of households
23.0% of households
35.0% of households
2.5% of households
1.7% of households
Source: Bremmer and Ihlwan, (2000); p.91.
E-Asia faces a number of challenges:
1) Credit cards are not widely used in Asia.
2) The vastness of Asia and the heterogeneous nature of its
infrastructure imposes limitations on the distribution side.
3) The lack of vast and liquid capital markets hampers the
emergence of venture capitalists.
4) Asia is not a homogeneous business environment, regulation
intensity varies from country to country.
5) Foreign direct investment restrictions in some countries, like
China, will hinder the Web’s progress in Asia.
6) A lack of research-leader universities.
7) The lack of a risk-loving corporate culture makes the Internet
less attractive to traditional Asian industries.
8) The anarchic nature of the Internet affects the foundations of
many authoritarian regimes in Asia.
V - LATIN AMERICA
•Latin American countries are jumping at the Web at different
speeds and different intensities.
•Web users are expected to increase from 2 million in 1997 to 19
million users by 2003, reaching 7% of the Latin American
population.
•E-commerce should increase from US$ 36.2 million in 1997 to
an expected US$ 8.0 billion by 2003.
•Latin American online users should increase from 10.6 million
in 2000 to an expected 66.6 million in 2005 (www.nua.com).
• Latin American countries such as Brazil, Mexico, and Argentina
are the most aggressive countries in the Latin American E-race.
Brazil accounts for 85% of Latin American E-commerce,
followed by Mexico with 10%, and all the other markets
accounting for 5%.
•The region’s business-to-business and business-to-consumers
commerce is expected to reach US$ 8 billion by 2003. Brazilian
E-commerce will increase from US$ 121 million in 2000 to US$
4.3 billion by 2003. Mexican E-commerce will increase from
US$ 25 million to US$ 1.5 billion and Argentina’s E-commerce
will expand from US$ 15 million to US$ 1.1 billion in the same
period.
•3/4 of this E-commerce is still heavily directed at U.S. Web sites,
which makes the development of Latin American E-commerce
even more appealing to U.S. investors and companies.
Table 7. E-Commerce Spending in Latin America (in US$
million)
Year
1997
1998
1999
2000
2001
2002
2003
Volume
36.2
166.8
458.7
1,058.8
2,390.3
4,694.4
8,021.2
Source: Latin Trade (1999), p.54.
Table 8. Internet Subscribers, Users (millions), and Number
of Sites (units), 1998 - 1999
Country
Brazil
Mexico
Argentina
Users(1999) Subscribers (1998)
3.42
0.79
0.50
1.20
0.33
0.22
Source: Brazil em Exame 1999, p 62.
No. of Sites
215
113
30
•Multinationals like Spain’s Telefonica and U.S.’s Microsoft are
racing to connect Latin American customers.
•BellSouth, for instance, is expanding its involvement in Latin
America, going beyond wireless services.
•The company is planning to offer Internet services in ten Latin
American countries.
•Latin American and E-multinational companies are also rushing
to consolidate their position in the industry.
•The lack of state-of-the-art telecommunications infrastructure is
also leading to another race parallel to the evolution of the
Internet.
•Several multinationals are rushing to wire the region with highspeed broadband cables.
•Brazil has 4 PC’s per 100 inhabitants and Argentina has 5 PCs
per 100 inhabitants.
The Latin American Web industry still faces a number of
challenges:
1) Low credit card ownership hampers E-commerce. In addition,
Latin Americans fear of credit card fraud keeps possible Ecustomers from shopping on the Web.
2) Shipping costs are high and crossing customs can be
cumbersome and lengthy.
3) Phone calls are charged by the minute.
4) The integration of shipping services, inventory management,
and customer service are still in its infancy.
5) Low computer penetration limits the impact of the Internet.
VI – MERCOSUR: Brazil
•Brazil is Latin America’s largest Web user.
•Brazil accounts for 85% of Latin American E-commerce.
•In the major cities of Brazil, like Sao Paulo and Rio de Janeiro,
9% of the population (on average) are connected to the Web, well
above the 3% national average.
•In terms of demographics, classes A and B account for 84% of
Internet users.
Table 9. Brazilians on the Web, 1995-2003
Year
Number
1995
1996
1997
1998
1999
2000
2001
2002
2003
158,959
463,508
1,191,84
2,737.24
3,825,386
4,993,992
6,520,549
7,793,202
9,031,771
Source: Vargas et al, 2000.
Growth Rate
192%
157%
130%
40%
31%
31%
20%
16%
16%
•By 2003, Brazilian E-commerce should total US$ 2.7 billion,
compared to US$ 1.47 trillion for the U.S.
•It is expected that by 2003, 1.1 million E-consumers will be
shopping on the Web in Brazil, compared to 46 million in the
U.S.
Table 10. Electronic Commerce in the US and Brazil
(Billions of Dollars)
USA
1999
2003
Business
43
to Business
109
1,331
0.06
0.13
2
Business
8
to Consumers
20
144
0.03
0.07
0.7
129
1,475
0.09
0.2
2.7
1998
Total
51
Source: Paduan, 1999, p 75.
BRAZIL
1998
1999 2003
•A consolidation process coupled with increasing foreign direct
investment is changing the profile of the Brazilian industry.
•From 500 Web providers in the mid 1990s, the Brazilian
Association of Web Providers estimates that only 50 will be in
business by the year 2002.
•In 1999, of the five largest Web providers, only one is controlled
by a Brazilian group, Universo Online. ISPs such as ZAZ,
Matrix, and Mandic were acquired by foreign groups.
•The American company PSINet is among the newcomers that
bought several smaller providers throughout Brazil. America
Online (AOL) landed in Brazil in November of 1999.
•The arrival of foreign E-commerce companies is being
reciprocated by the internationalization of Brazilian E-commerce
companies.
•For instance, six out of 10 taxpayers now file their taxes over the
Web, an increase from 706,000 tax forms in 1997 to 11.2 million
tax forms in 1999.
The Brazilian Internet faces some challenges:
1) 86% of Brazilians living in Brazil’s largest metropolis’ are still
alienated from the Web as a result of lack of access to computers,
phones, low income levels, low educational levels, or all of these
factors together (Porto, 2000).
2) The low access to personal computers and phone line ratios are
creating a bottleneck for further growth of the Internet industry.
3) In the first trimester of 2000, Brazil had 8.2 million computers, or
one computer per 19 people. In the USA, the ratio is one computer per
two people.
4) Brazil only has 28 million phone lines, or six times fewer phones per
capita than a country like Canada.
5) The future of the Brazilian Internet is closely related to its
penetration in Brazilian schools.
6) Only 10% of computers in public schools are connected to the Web.
7) Of the 188,700 schools, 116,000 do not have access to a phone line.
Table 11. Who is Connected – Schools
Canada
USA
England
Brazil
Public Schools
Elementary Education
High School Education
88.0%
97.0%
88.0%
94.0%
17.0%
83.0%
3.2%
10.0%
Source: Schwartz, 1999, p 43-45.
•It is time to start developing other less expensive outlets such as
pagers and smart phones, following the Asian and European
experiences.
Argentina
•The Argentine market is still in its infancy.
•Argentina has only 350,000 Net users.
VII – DRAWING LESSONS
•It is clear that the global evolution of the Internet is taking place
at different rates and shapes across the globe.
•The Europeans, Asians, and Latin Americans are not fully
replicating the American experience. All three players are
developing their own regional Internet strategies and regional
Internet flavors.
•One lesson is being understood by many nations around the
globe: nations must become Internet nations if they are to survive
in the new digital global economy.
•Latin America countries are not yet working as a single unified
market.
FINAL REMARKS
•The New digital economy is forcing companies and nations
across the globe to become Internet companies and nations.
•In order to globalize, E-companies have to localize the content
of their offering.
•Digital metropolis’ are being organized along the social and
racial fabric of these virtual communities, paying heed to their
own native languages and cultures.
•The Internet is fostering, more than any other industry, the
development of north-south and east-west strategic alliances.
•The E-commerce environment is going through a period of
intense competition.
•American and European E-MNCs are waging their battles
around the world.
•The American dominance and leadership of E-commerce is not
so clear.
•E-MNCs from Europe and Asia are starting to globalize their
operations, using in some instances superior technology to the
ones used in the American market.
•E-MNCs are also coming from emerging Web frontiers.