Digital Latin America

A region accelerating the market’s digital transition

by Samuel BELTRAN

Latin America has been adopting new digital technologies over the past several years, to meet the needs of its population and stimulate its economic development. After having remained on the sidelines, governments are now stepping up to invest in local and regional digital ecosystem players, to provide a counterweight to US Big Tech.

A market with a growing range of IT, Internet and digital content services

Latin America’s digital tech markets are forecast to reach 176 billion EUR in 2019, which marks a 39% increase from 2013. IDATE DigiWorld estimates that this figure will increase by a further 26% between now and 2023. Growth is being spurred largely by digital content which represents 22% of the market, and Internet services, which account for 8.5% of market revenue. Telecom services remain the chief driving force in the region (47% of total revenue) but their share of the digital market is decreasing steadily, as it is in most parts of the globe. IDATE DigiWorld estimates that they will represent 41% of total market in 2023, with its losses translating into gains for IT services in particular.

Brazil and Mexico are the two locomotives of the region’s digital market, and we are seeing rapid growth as well in Chile, Argentina and Colombia.

Average 6% annual growth

Progression of digital services revenue in Latin America

Source : IDATE DigiWorld

New regional players competing locally with global heavyweights

Latin America relies on an ecosystem populated by local players – most of which have a national footprint, especially in Brazil and Mexico, but regional for some corporations that have deployed operations in several countries. The Brazilian market is also somewhat isolated, as content and language are key to market building. This explains why local content providers, such as Globoplay, have acquired a larger market share than a company like Netflix. In the e-commerce sector too we find local players, such as B2W, which boasts an over 50% market share in Brazil, even when going head to head with Amazon and MercadoLibre.

Local telecom operators are equally pivotal to digital development in the region. Telefónica has built a strong presence in Latin America, as have America Móvil (Claro) and Millicom (Tigo), which have consolidated a regional market that is open to technological progress, and so to investment in digital tech.

Telecom services still predominant

Progression of Latin America's digital services market, by segment

Source : IDATE DigiWorld

Governments now supporting development digital

Latin America is a region where private investment has been almost solely responsible for driving digital development, with very little government involvement. But digital services have become vital to the region’s future and governments have begun to take a more active role in enabling these initiatives.

Creating digital agendas and programmes has become a priority for Latin American countries. They are building ecosystems with private sector players, offering them tax breaks and subsidies, in a bid to bolster the local digital economy. These schemes are, however, aimed more at increasing the adoption of technologies to improve productivity.

A market shifting towards online services and digital content

Change in the breakdown of Latin America's digital services market, by segment

Source : IDATE DigiWorld

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