Latin American E-Commerce To Reach $82B by 2004

Electronic commerce in Latin America is poised to grow to $82 billion (US$) by 2004, according to a new report by Cambridge, Massachusetts-based Forrester Research.

The research projects that the business-to-business (B2B) sector, accounting for 93 percent of the total growth, will be instrumental in helping the region quickly overcome infrastructure deficiencies and poor Internet access.

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

According to the report, Brazil and Argentina will see online sales of $64 billion and $10 billion, respectively.

Thin Strand in the Net

The report studied only the largest Latin American markets, including Brazil, Argentina, Venezuela, Chile, Peru and Colombia, with the $82 billion figure accounting for 1.2 percent of the total e-commerce sales worldwide.

By comparison, North American sales — consisting of the U.S., Canada and Mexico — will account for approximately 50 percent of worldwide sales.

The U.S. is expected to reach $3.2 trillion in online sales by 2004, and Mexico’s e-commerce trading will reach $107 billion by 2004 — more than all of the Latin American countries in the study combined. Because of its close ties to the U.S. supply chain, Mexico will make its strong showing in such industries as automotive, electronics and petrochemicals.

The growth of Latin America’s e-commerce market will be contingent upon improvements in phone lines and simultaneous development of the linkage of PCs, Internet hosts and cell phones. Forrester says North America’s recent partnerships with newly established corporate bases in Latin America are the first signs of growth.

Investors See Potential

The potential for growth of electronic commerce in Latin America is not lost upon investors, who have already started to infuse the area with much needed capital for expansion. Since the middle of last year, more than 30 investments in Latin American companies have been announced.

The rush has been fueled partly by an explosion in Internet use. International Data Corporation (IDC) expects the number of Internet users to grow from this year’s projected 13.3 million to 29.6 million by 2003. The prediction is based on increasing availability and popularity of free ISP services in the region, but other factors include lower PC costs and lower call charges.

A gradual change in trade policies will also foster the expected growth, according to Forrester.

“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 Forrester analyst Matthew R. Sanders.