Latin America Still Trails in Internet Race

Total e-commerce revenue in the emerging market of Latin America will grow from $3.2 billion in 2000 to $15 billion by 2003, according to a report by eMarketer.

According to the “eLatin America Report,” the number of active adult Internet users in Latin America will total 8 million in 2000, more than double from the previous year. By 2003, eMarketer projects this number to increase to 19 million, when the number of active users in Latin America will equal 5 percent of the 372 million users worldwide.

Despite the predicted increase in e-commerce growth in the region, the report predicts that Latin America will not challenge either Europe or North America in the near future. Latin America will only amount to a mere 1 percent of the world’s $1.4 trillion in e-commerce revenue by 2003.

“In Latin America, only 10 to 15 percent of the population have the resources to actively use the Internet and shop online,” said Nevin Cohen, Senior Analyst at eMarketer. “We find these Latin American ‘Internet elite’ are educated, cosmopolitan, and technologically advanced users.”

The Internet capacity of the Latin American region is not evenly spread throughout the region. Brazil, Argentina, and Mexico comprise more than 80 percent of the region’s 8 million Internet users, while Brazil alone accounts for 60 percent of the region’s e-commerce revenue. The Internet infrastructure is also focused in a few areas. There are only 21 telephones per 100 people in Argentina; 11 per 100 in Brazil; and 10 per 100 in Mexico. Internet access costs remain a barrier to both Internet and e-commerce growth in Latin America. Residents of the region still dial in and pay for their telephone calls by the minute. Due to the high costs, eMarketer found that Internet users ration their online time and a large part of the population is unable to afford connecting at all.

Another factor holding back e-commerce in the region is a lack of credit cards. Only 18 percent of Brazilians and 22 percent of Mexicans hold credit cards, limiting business-to-consumer (B2C) e-commerce in Latin America. Moreover, tariffs and unreliable shipping logistics can make intra-Latin American purchases difficult and expensive, according to eMarketer. For that reason, 87 percent of Latin America’s e-commerce activity will come from business-to-business (B2B) transactions, not B2C sales.

The Internet is also overwhelmingly filled with English pages (75 percent of pages are in English), putting Latin American users at a disadvantage. Nearly 75 percent of Latin America’s online buyers shop at US-based Internet sites. According to the report, more local content is essential to widen Internet use in Latin America.

The good news for the Latin American market is that the region’s population is much younger than that of the US, Europe, or Japan. As they mature, eMarketer predicts Latin American youth will be more likely to seek out the Internet for information, entertainment, and shopping than their parents or grandparents.

Also encouraging is research by International Data Corp. (IDC) that found that nearly 85 percent of companies in Latin America are using or are willing to evaluate e-commerce within the next two years. Despite the interest in e-commerce, actual implementation rates remain low, with only 11 percent of companies currently making use of e-commerce. The most active industry segment in Latin America is the finance industry, and e-commerce activity is higher among Mexican and Brazilian companies than other nations in the region.