 | Issue: | Latin America III 2001 |
| Article no.: | 7 | |
| Topic: | The Impact of Telecommunications Convergence in the Latin American Region | |
| Author: | Ileana Boza | |
| Title: | Resident Representative – Argentina | |
| Organisation: | International Finance Corporation (IFC) | |
| PDF size: | 32KB |
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Article abstract
The technological convergence that spawned the Internet, cellphones and faxes created one more socio-economic divide. This ‘digital divide’ is being bridged with the help of the same technology that is changing the rules of the game. Wireless transmission, satellites and falling costs have helped connect the remotest communities, the smallest companies, farmers and artisans, to the world in a way not possible until recently. Governments of emerging economies need to provide their people with connectivity, training and relevant content.
Full Article
The world has evolved in such a way that, today, people from diverse social and economic backgrounds are able to interact on an equal footing. This is made possible through synergies derived from convergence in the use of technology and in telecommunication devices. These new technologies started the debate about the digital divide. However, these are the same technologies that are helping to bridge the social and economic divide that separates the emerging economies from the developed world. If we can bring access to the new technologies, especially telecommunications and the Internet to peasants, miners, workers, literate or not, we will help bridge the gap that has separated the world for so long. About four years ago, a candidate running in Guatemala’s presidential elections visited a remote, poor and isolated town in the highlands. He promised the Indians that inhabit this land, practising survival agriculture, that his government would bring water and electricity to improve their quality of life. To his surprise, the locals said that what they wanted the most was a phone. They could live without proper electricity and water, but a phone was vital for access to the outside world. The candidate was rather surprised. But the reality for the Indians was, that without a means of communicating with the outside world, they had no way of predicting or negotiating prices for their crops, of selling their produce, in advance, at a good price or to call for transportation to deliver their produce. Instead, they were at the mercy of unscrupulous traders who visited at their own convenience and offered very low prices, which they had to take, or risk not been able to sell their crops, which could rot before the next purchaser came by. Several years ago, a small mining company up in the highlands of Peru, close to the ‘Cordillera Negra’, far from any civilised town and without access to communications, took days getting help to continue its artisan-like production. The miners would use the tools they had until forced by some problem to halt production and seek help. If something broke down, a worker would ride a mule for six hours, get a truck and ride another two to three hours to the nearest village to find a public phone. He would then try to call to Lima. If lucky, he would get through to the right people and be able to explain the problem. Most often, though, the relevant person was out, so he would have to wait and call later or the next day. Finally, he would contact the person in charge, explain what he needed and request the replacement part. By the time the part was identified, purchased and sent to the mine several days had elapsed during which production had stopped. Several days of production were lost and additional costs were incurred. Bad luck, they would say. Nothing can be done. To make things worse, without any means of checking the market, their production was at its peak when the price of the mineral they produced was at its lowest for the year. The best month for production was the worst month for prices. They had no way of knowing when to slow production and when to speed up. Today, this small mine is connected to the developed world. It is now part of the global economy. Within seconds, by cellular phone, fax or e-mail it can report the problem and request replacement parts from the source. It co-ordinates increases in its workforce with market demand. It extracts more minerals when the price is right and, in this way, improves its yearly income. It can order the petroleum required to run the plant in advance, so that when the level of the river is low, and its mini-hydro-generator cannot generate enough electricity, it can keep the mine running by using the fuel to generate electricity. Major problems become minor problems through the use of technologies that are becoming more and more accessible to small entrepreneurs in emerging economies. Small companies, until recently, relied upon the ‘hand of God,’ good luck or government aid to get their products to market. Today, though differences remain, and it is still not easy for them to compete in global markets, they can bridge the gap slightly with their improved communications. In Argentina it is estimated that about 86 per cent of small and medium enterprises are doing business through the Internet, a tool that is now used extensively by small companies. Officenet estimates that close to 100 per cent of the companies with 5 to 50 employees are equipped with more than one computer. The virtual markets, or e-marketplaces, that connect companies with suppliers make the purchasing process far quicker and more effective, reduce errors and generate savings that range from 10 to 20 per cent. Most small and medium enterprises in Latin America are still not heavy users of e-marketplaces. The main users are multinationals, but use is expanding as supermarket chains start sourcing from small and medium companies through this mechanism. In Argentina Carrefour and Quilmes use their own portals to connect with suppliers, while Procter & Gamble is the first mass product company to launch an e-marketplace for its clients. The system has allowed them to reduce re-ordering time and inventory by 30 to 40 per cent and increase its sales through the reduction of errors, omissions and lost sales due to inadequate stocking of supermarket shelves. It is interesting to note, that Internet penetration can increase more in a country like Peru where there are fewer personal computers (PCs) per inhabitant than in Argentina, which has more PCs per capita. Peru, by end 2000, with a per capita income of US$2,509 and PC penetration of 2.6 per cent had an Internet penetration of 3.4 per cent, while countries like Argentina or Chile had a higher PC penetration (7.3 per cent and 5.8 per cent respectively) but had Internet penetration close to that of Peru. This relatively high penetration in Peru has occurred due to the Internet booths or cabins that are spreading throughout low income areas. One hour of Internet access is offered for less than US$0.30. These Internet booths are being standardised, and better access is spreading to other parts of Latin America. Conclusion In poor economies, such as the Andean countries, but also in lower income areas of Chile, Argentina and Brazil, this is the solution which will allow the population to participate in this new economy. It will provide them with access to markets in the developed world, help bridge the social and economic divide and, thus, foster growth and development.
