 | Issue: | Latin America II 2000 |
| Article no.: | 5 | |
| Topic: | Sizing Up E-Business in Latin America | |
| Author: | David Bunce | |
| Title: | Chairman | |
| Organisation: | KPMG | |
| PDF size: | 16KB |
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Article abstract
Historically, one of the advantages accruing to businesses in Latin America has been the possibility to observe and assess trends in the European and North American markets prior to effecting local adoption. Obviously, this advantage has also carried undesirable consequences in aspects such as speed of innovation and the global competitiveness of Latin businesses.
Full Article
The nineties phenomena of “opening” of the Latin economies (demolition of regulatory and other barriers to foreign investment and trade) and of globalisation have ensured that the lead times available to Latin businesses to evaluate emerging global trends and product and service innovations is now much reduced. Now, with the increasingly widespread adoption of the Internet in the region, the possibility of simultaneous product or service launches in the developed markets and in Latin America can become a reality. With a few notable exceptions, this has not yet actually occurred in Latin America and indeed e-Business is still more of a promise than a reality in the region. The issue then is will this change and, if so, how quickly? Internet use is growing rapidly. IDC estimates 8.5 million users in the region as at December 1999. This is expected to rise dramatically to 20 (IDC), 25 (e-Marketer) or 37 (Jupiter Communications) million users by 2003. A broad overview of Internet “take-up” and of factors affecting it is given by the IDC statistics below. It is important to note the low level of PC penetration in the region. This will continue to hamper growth in Internet penetration in the wider population until non-PC Internet access becomes more widely available in the region. Brazil is in a key position within the overall region. It is estimated that Brazil has between 40% and 60% of the region’s total in terms of Internet users, PC penetration and e-Business potential. The statistical importance of Brazil means that trends arising in that geography will be relevant across the region. On the whole, this is a very positive feature with regard to the New Economy, both in the business and consumer areas. Brazilians have shown themselves to be very open to innovation and to be enthusiastic early adopters. Examples here include the very high levels of penetration of electronic banking, which became diffused and accepted within Brazil considerably earlier than in many developed markets; the record growth levels of take-up of mobile telephones registered in Brazil; and the quite phenomenal (by “first world” standards) percentage of Brazilian tax payers who deliver their annual tax declaration via Internet (90%). On the business side, Brazilian businessmen are, generally, highly entrepreneurial, an ideal approach and mindset for the New Economy. 1999 and early 2000 saw some businesses go beyond “early stage” and effect significant capture of funds. E-Business itself is truly a fledgling in Latin America. Total e-Commerce revenues in 1999 are estimated at US$ 194 million (Jupiter). Mexico, for instance, is estimated at a miniscule US$ 22 million. Revenues are, of course, expected to rise rapidly, albeit by how much is a very open question, as shown by the following disparate projections: Latin e-Commerce by 2003 in US$ millions: Boston Consulting Group (3,800); IDC (8,021); E-Marketer (84,200). Regarding my own firm, KPMG, we are convinced both globally and locally in Brazil as to the extent and permanency of the e-Business revolution. Accordingly, our consulting arm, KPMG Consulting has restructured itself over the last two years, so as to work with a primary focus on Web-enabled products and services. Another key factor here, and an essential for any company focused on e-Business, is alliances. We currently have around 50 alliances within our consulting business and one focus of our upcoming IPO of that business is raising capital to enable investment in alliance opportunities. One specific alliance which merits mention here is with Cisco, which recently acquired 19.9% of KPMG Consulting for around US$1 billion. As part of this alliance, a 5,000 strong workforce of e-Engineers is being assembled. Of this number, 250 are to be located in Latin America. In Latin America, our current primary focus is on service providers, appropriate in our view for a market where much of the infrastructure is yet to be built. The selection of announced infrastructure investments for the Brazilian market illustrated below gives some measure of potential: Certainly some upcoming infrastructure developments, such as those currently occurring in broadband and WAP, will serve to power the growth of e-Business in the region. Other elements of our business are also increasingly focussed on e-Business, which we are convinced will become an important and integral element of all business. As always with a new frontier, it is difficult to foresee the future, even the near future. Enough evidence already exists, however, to give reasonable confidence as to the ultimate success and permanency of the “e-Revolution” in Latin America. As to the speed of development, some of the factors I have highlighted above could lead the more optimistic of us to conclude that growth in the region in the next four years may not be so different to the last four in the United States. This would ratify the above IDC projection for the year 2003. Conclusion For this to occur, much of the growth will have to come in the B2B area. Whilst Internet penetration in Latin America is projected to grow faster over the next 6 years than in any other region (38% CAGR – Source: Ovum), per capita spending by “e-Commerce ready” consumers is still much below US or European levels.
