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Latin America: Leaning on Mobile Tech in 2014

Mobile technology and communications appear to offer some bright prospects for Latin America in 2014, helping the region to accelerate its business infrastructure capacity as well as serving to improve education, healthcare and other services.

Unsurprisingly for what is perhaps the world’s most geographically and socially diverse region, the modern picture is mixed. In 2009 for example, Latin American countries were some of the lowest-ranked performers in the OECD’s Programme for International Student Assessment (PISA), a survey of learning systems all over the world. The effect on output, argued Stanford University senior fellow Eric Hanushek, was that Latin America was bumping along the bottom of the economic growth rankings along with Sub-Saharan Africa.

But Latin America is already a growing market that is attracting more attention from the traditional giants and others.

"Increased activity in the Latin American market has continued throughout 2013,” says analyst Jeff Paschke of analyst firm 451Research. “Technology providers such as IBM and Uruguayan Antel will continue to expand their datacentre footprints in the region to address a clear supply/demand imbalance."

One fast track to improvement will be mobile. In November 2013, mobile industry trade body the GSMA revealed that 3.7% of Latin America’s GDP is generated through mobile technology, contributing $211bn to the region’s economy. 

The problem is that mobile telcos are facing 2014 with a disincentive to invest. The voice services market is near saturation in some Latin American countries, limiting the scope for market growth, according to analysts. One of the steady sources of income for Latin American operators, the termination charges made for carrying calls from other networks, was recently stifled. When regulators recently slashed mobile termination rates, they took away up to a quarter of the revenue of some telcos, limiting the amount of money they have to invest in growth.

“Regulatory delays in new spectrum auctions and restrictions on convergence and multi-play offers are also a cause of concern in some Latin American countries,” says technologies research analyst Georgia Jordan at Frost & Sullivan.  

Mobile penetration is high in this region and it is the primary source of internet access, especially in rural regions. In June 2013, GSMA recorded 632 million connections and 319 million unique subscribers. This is why mobile technology provides the best impetus for social change, by spreading knowledge and deepening the reach of trading systems. Many workers obtained their first bank accounts through owning a mobile phone and mobile banking in turn paved the way for their entrance into mobile commerce as well as providing all kinds of efficiencies through business automation. Mobile could take these developing countries to a more prosperous place but first the handbrake of regulation and protectionism needs to be released.

Latin American mobile operator Claro Brazil and mobile marketing and advertising firm Velti, for example, partnered on the Claro Linguas Muda sua Vida language course that teaches users English via their mobile phones. It attracted over two million participants in less than three months to take up studies, with the course costing the equivalent of US$1.60 a week.

Education is vital to the region’s development, says the GSMA, whose joint study with management consultant McKinsey & Co predicts that the LatAm mobile education market could be worth US$2bn by 2020. That represents a compound annual growth rate of 54% from 2011 and, if sustained, would be the highest growth potential of any region in the world for the technology.

Meanwhile, other mobile applications promise similar dramatic improvements. Type II diabetes is the main cause of death for women and the second biggest killer of men in Mexico. Both Brazil and Mexico are in the world’s top 10 for incidences of a condition which is manageable via mobile healthcare programmes. Handheld devices connected to wireless devices can be used to disseminate vital intelligence and improve patient-doctor consultation in rural and remote areas.

Mobile could even be used to prevent the next flu epidemic by sending out warnings based on outbreak details. The economic cost of the 2009 outbreak in South America was billions of dollars lost to the Mexican economy alone, not to mention hundreds of thousands of lives. From 2014, the mobilisation of data analytics could prevent many deaths through preventative medicine, predicted Nuria Oliver, scientific director of the user and media intelligence research team at Telefonica Digital in a Wired conference speech. “For first time in human history, thanks to big data, we can shed light on the problem," she said.

Meanwhile, mobile banking is still in its infancy in Latin America, with 60% of adults remaining unbanked. The percentage of adult workers with a bank account often matches the relative prosperity of a country in the region, with 86% of adults in Nicaragua and El Salvador having no account, while in the more prosperous Brazil (the world’s fifth largest economy) the figure for ‘the unbanked’ stands at 44%. There is a lot more potential for mobile banking growth and the region is relatively undeveloped compared to Africa and Asia.

Given the relatively high urbanisation rates in Latin America, this region stands to gain more than, say, Europe from the organisational improvements that smart city technology will provide. Latin America has four out of the world’s 15 largest urban conglomerates. Mexico City, Sao Paulo, Rio de Janeiro and Buenos Aires all contribute to the region’s urban population, which will reach a combined 585 million by 2030.

Through automated machine-to-machine communication, smart cities will be able to provide better transport, cleaner water, better sanitation and cheaper power. All of which will be provided by various generations of mobile technology. But therein lies the bottleneck. The mobile industries of this region are being limited by a combination of lack of investment, technical wrangles and uncertainty over licence renewals. They will not grow with the current regulatory environment across Latin American nations, warns the GSMA’s report on mobile’s impact on South American economies. A lack of transparency and consultation in decision making, unclear or non-existent development plans and ambiguous foreign ownership rules are neutralising any positive impetus for growth.

There are four key problem areas that need to be addressed. The allocation of spectrum, especially for the creation of fourth-generation (4G) broadband networks using LTE, needs to be ratified. “Spectrum provision is substantially behind the 1300MHZ per country that was benchmarked for 2015, despite increasing uptake of data intensive services,” says the GSMA.

Meanwhile, licence renewals – for running 2G services – have been clumsily handled, leading to a suffocating atmosphere of uncertainty in Bolivia, Chile, Columbia, Costa Rica, the Dominican Republic, Panama and Uruguay. More supportive relationships between the mobile industry, regulators and government institutions would also help.

“Competition rather than regulatory intervention,” was the GSMA’s plea for an environment that would attract more investment, leading to high numbers of base stations, better infrastructure and quality of service.

As for devices, tablet sales seem finally to be picking up the momentum seen in the US and Europe.

“Tablets only two years ago cost double what they cost in the USA,” says Walker Rowe, a Chile-based contributor to IDG Connect. “Computers here of any kind are still far more expensive than in developed nations because of the high VAT tax and the lack of retail competition. Now you are starting to see people of all classes (poor, middle class) carry tablets made by low-cost manufacturers.”

Latin America could show the world the way in using mobile for positive change – but perhaps it needs first to heal some of its own maladies.

 

A journalist for over 20 years, London, England-based Nick Booth previously worked in IT in the UK’s National Health Service, in financial services and London’s Metropolitan Police, witnessing at first hand the disruptive effects of new technology.

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Nick Booth

Nick Booth worked in IT in the UK’s National Health Service, financial services and The Met Police, witnessing at first hand the disruptive effects of new technology. As a journalist and analyst, his mission is to stop history repeating itself.

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