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Latin American E-Commerce Showing Signs of Growth

Although Latin America is constrained by its telecommunications infrastructure and limited Internet access, Forrester Research predicts that e-commerce in the region will grow to $82 billion in 2004.

According to Forrester, the Latin American Internet economy will be principally powered by business-to-business (B2B) trade. B2B online in Latin America will account for $76 billion in 2004, or 93 percent of the total.

"E-commerce in Latin America today faces significant challenges, but there are clear signs that the economic climate is dramatically improving," said Stuart Woodring, VP of research for emerging Internet economies. "The combination of aggressive efforts to stabilize currencies with liberalized trade policies will make Latin America -- especially Brazil and Argentina -- fertile ground for rapid adoption of global e-commerce."

In addition to public policy support, full engagement in e-commerce requires a critical mass of technology linkages: phone lines, PCs, Internet hosts, and cell phones. Latin America's current limited access to hosting and phone lines will stunt this region's e-commerce growth. Even though the region lags behind its northern neighbors, partnerships and newly established corporate bases in Latin America are the first signs of growth.

"E-commerce in Latin America will thrive in the coming years thanks to a rollback of protectionist policies, innovative uses of mobile technology, and pressure from Internet-sophisticated global trading partners," said Matthew Sanders, associate analyst. "Brazil will lead this region by trading $64 billion online by 2004. MERCOSUR neighbor and principal trading partner Argentina will follow with more than $10 billion in online sales."

E-Commerce Sales in 2004 by Region
United States $3.2 trillion
Asia-Pacific $1.6 trillion
Western Europe $1.5 trillion
Eastern Europe,
Africa, Middle East
$68.6 trillion
Latin America $82 billion
Source: Forrester Research

According to research done in 1999 by International Data Corp. (IDC), nearly 85 percent of companies in Latin America are using or are willing to evaluate e-commerce within the next two years. IDC also found that Latin America Internet users spend an average of $53 per month on service fees and local phone charges, twice the amount spent by US users. These charges reduce the time Latin America users spend online, thus reducing their likelihood to shop online. The high costs are also the main reason only 20 percent of the region's computers are on the Internet. In 1998, IDC reported that 74 percent of the money spent online by Latin American users went to firms outside of Latin America, mostly in the US.

Forrester estimates that e-commerce will account for 8.6 percent of worldwide sales of goods and services in 2004. The expansion of online trade, however, will be highly concentrated, with 12 countries representing nearly 85 percent of worldwide Net sales. The US will continue to be the global e-commerce leader, with online sales reaching $3.2 trillion in 2004. The Asia-Pacific region will see a total of $1.6 trillion in e-commerce in 2004, closely followed by Western Europe, which will hit $1.5 trillion. Eastern Europe, Africa, and the Middle East will contribute a combined $68.6 billion in 2004.