Leonardo Gonzalez Dellan lays out the case for Latin America as a key high tech partner for the future
The latest report from Inter-American Development Bank (IDB) showed that the value of Latin American and Caribbean exports grew at an estimated year-on-year rate of 10.6 per cent in the first quarter of 2018, down from a yearly increase of 11.9 per cent in 2017. Export volumes continued to increase at a year-on-year rate of 4 per cent, but growth was concentrated in a few economies and the protectionist stance from the US and responses in kind from countries like Mexico will see this growth performance continue to deteriorate. UK companies, especially fintech and tech companies, should take a long hard look at Latin American as a source of exports and partnerships in the post-Brexit world.
One sector of the economy which has not yet witnessed even a partial slowdown is e-commerce and more broadly the Latin American Digital Economy. In Argentina and Brazil, the combined revenue in the “eCommerce” market is projected to be US$25,344m in 2018. This compares to US$584,002m in China, $474,353m in the US and $103,487m in the UK. The sector is expected to show an annual growth rate of 10.8% resulting in a market volume of US$38,242m in 2022. At the moment the market’s largest segment is the segment “Fashion” with a market volume of US$8,606m in 2018. At present e-commerce is accessing an estimated 35.4% of the populations of these countires in 2018 and is expected to hit 46.1% in 2022. The average revenue per user (ARPU) currently amounts to US$279.63. But Argentina and Brazil are at the top end of the digital pyramid. Of the 24 countries analyzed in State of Broadband report in 2016, three had household Internet penetration that was below 15%; fifteen were between 15% and 45%; another three were between 45% and 56%; and only Chile, Costa Rica and Uruguay reached 60%.
Even though the take up has been unequal and the regulatory environment uneven, Latin America has the potential to leap frog other regions in the adoption of the digital economy. There are two key drivers. Firstly, the volume of mobile technology compared to broadband, allows for quick steps forward in the adoption of new platforms and forms of digital payments. Mobile access to broadband connections increased from 7% to 58% of the population between 2010 and 2015. From 2010 to 2015, the number of mobile subscribers grew 802.5% while that of fixed connections rose 68.9%. The country with the greatest penetration of mobile broadband vis-à-vis the overall population is Costa Rica, at 95.5%. The second is the arrival of Web 3 based on block chain technology. Web 1.0 was information movement, viewing and download. Web 2.0 introduced social media and the e-economy mediated by a third party or trusted intermediary– a web site, a social media site, a bank or pay pal. Those intermediaries proved to be insecure and in many cases we have lost our trust in them. Blockchain makes possible Web 3.0: the Decentralised Global Computer. It removes the third party or trusted middle man and allows the global trade in bitcoin, the hiring of a uber, the booking of an Airbnb.
The basis of the new web is also security and the potential for moving government services to these systems could be a key anti-corruption tool. The way Web 3.0 is constructed it is much less open to be being hacked than Web 2.0 applications. Rather than holding data on a server in a location, which is what the cloud-based storage systems are, it will combine the computing power of the world to hold data is places that are virtually impossible to access. It also instantly and constantly validates the use of that data which means in effect it is like a notary of the moment you register a birth, pass an exam or indeed pay a tax on time. In turn, the internet of things will transform the way in which we consume and live. The IoT has the potential to cheapen and speed up the delivery of transportation and logistics, healthcare, and smart environments. The global IoTmarket is projected to be $7.1 trillion in 2020. The number of smartphones, tablets and PCs in use will reach about 7.3 billion units by 2020, and the overall number of IoT devices will reach about 26 billion, up from only 900 million in 2009. IoT has already been embraced by some countries, with substantial projects “Intelligent Earth” (US), “i2010” (EU) and “i-Japan”, and “To Feel China”.
Rather than focusing on trade wars, Latin American Telecommunications Congress 2018 should be the moment at which the region embraces the potential of Web 3.0 and establishes an initiative to harmonise regulation, invest in education and enable equal access to this technology of the future. As corruption still ranks as one of the core obstacles to the economic development of Latin America the embrace of Web 3.0 is also the route to sustained economic growth.