Yesterday, we started looking at mobile’s emergence in Latin America and how the growing mobile industry has positively affected total gross domestic product (GDP) throughout many parts of Latin America. Today, we take a look at some of the obstacles facing LatAm as it continues to catapult toward greater mobile penetration, and examine where the region may go next.
Several countries in Latin America suffer from crippling inflation and strict taxes on international trade, making it difficult for them to step into the global marketplaces. Argentina, for example, is almost completely handicapped due to its extremely weak currency. In many countries, complicated bureaucracy creates a slow and messy process for building business. Tax withholdings are also a common issue, and many forms of corruption plague the region.
Brazil and Mexico are often at the center of corruption scandals. The recent federal investigation into the Petrobas oil company may be the Brazil’s biggest corruption case so far, and the recent disappearance and probable massacre of 43 Mexican student teachers has pushed the government to crack down on corruption and violence. Brazil and Mexico ranked 72 and 106, respectively, among 175 countries in the 2014 Corruption Perceptions Index. Many other less-developed countries in the region are similarly plagued by corruption issues, such as government corruption in Venezuela (160/175), narco-politics in Paraguay (150/175), or police bribing in Haiti (163/175).
When corruption runs rampant, it becomes harder for countries to look towards the future. In part because of battles with corruption, some Latin American countries have been slow to invest in sustainable infrastructure. So it’s encouraging to see that the rise in mobile use contributed 4.1 percent to the region’s GDP in 2013, a figure that combines both direct contributions of the mobile ecosystem as well as indirect contributions in the form of increased business productivity and economic activity generated in the broader economy, according to GSMA. And by 2020, the role of mobile is only expected to increase, a potential boon for some struggling countries.
All these numbers show how much potential there is for digital growth Latin America. With an ever-increasing amount of mobile connections, Latin America has seen an acceleration in growth of data traffic. Almost 80 percent of the connections at the end of 2012 remained on 2G networks, but by September 2014 that proportion had fallen to two thirds. The World Cup in Brazil heavily pushed efforts for 3G and 4G networks both in and outside of the country, as the region welcomed an unprecedented amount of tourists and news coverage.
Though 4G is still in its infancy in the region, if the recent acceleration in mobile broadband usage and the growth of data traffic is any indication, 4G connections will continuously grow every year. GSMA estimates that the number of 4G connections will grow 85 percent on average every year until 2020; by then, 80 percent of mobile connections in LatAm will be running on 3G and 4G networks.
Additionally, now that US-Cuba relations are being restored, more Cubans will have access to the Internet, opening up a previously untapped mobile market. Only a fraction of Cubans are online and those only to an extremely censored, government-approved version of the Internet. According to Freedom House, the Cuban internet in its current form “consists of a national email system, a Cuban encyclopedia, a pool of educational materials and open-access journals, Cuban websites, and foreign websites that are supportive of the Cuban government.” This could potentially open up a brand new market as the US-Cuban deal will attempt to “literally bring Cuba up to speed.”
Although Brazil, Argentina and Mexico are the current LatAm leaders in number of mobile connections, high-speed networks and social media usage, other countries in the region like Chile and Peru are showing an increased interest in mobile technology. Mobile usage is growing in these countries, but more specifically, the region is seeing rapid adoption of advanced devices. Smartphone adoption is increasing at an extremely rapid pace as many smartphone adopters skipped directly from a feature phone to a smartphone without ever having broadband access at home. The uptake in data traffic in many countries comes not from broadband use but mobile connections, making the region very desirable to tech startups focusing on apps and mobile usage. The region has seen a surge in entrepreneurship as technology and innovation hubs have begun popping up in Brazil, Argentina, Chile, and Peru, among others.
By 2020, the GSMA reports that the region will have a total of 605 million smartphone connections, about 70 percent of total connections, soon making Latin America the second-largest base of smartphones in the world. Mobile networks are only just beginning to play an important role in bridging the digital divide by bringing Internet access to previously unconnected populations. There’s still a long way to go, but mobile has the potential to play a much more significant role in the future, so stay tuned for more mobile news from Latin America.