Latin America: most urbanised, least digitised
Latin America is the most urbanised region in the world, but its rate of digitisation is low. Cambridge Management Consultants’ Elisabeth Simão tells Alan Burkitt-Gray what challenges operators in the region are facing
Latin America is home to around 9% of the world’s population but its share of the telecoms market is just 5%, even when the Caribbean is included. That makes it a smaller market for telecoms than Africa and the Middle East, which accounts for about 8%, says Elisabeth Simão.
Simão is a specialist in carrier relations, a consultant for Cambridge Management Consultants in the UK and head of carrier relations for the Carrier Club.
There’s a lot of scope for growth, says Simão. “If you look at the largest 20 digital populations in the word, there are only Brazil at fifth position and Mexico at ninth,” she says. “That is where the region is.”
But Latin America is diverse, “with great disparities” across the region and inside individual countries. “There’s a large gap between urban and rural areas, and great disparities between Brazil and the Falklands Islands,” says Simão.
“Digital literacy is key,” she adds. “More education means more people will be looking to access the internet, and they will want more online resources. We know there are so many inequalities.”
Perhaps surprising to many observers, Latin America is the most urbanised region in the world, with 82.5% of its population living in towns and cities. “But it has the lowest level of digitisation,” Simão explains, “with only 60% of the region having access to the internet.”
Some of the blame can be put on the topography of many of the countries, says Simão. “It’s very difficult to bring connectivity to Peru, for example,” a country consisting of deserts, highlands and rainforests, “and the investment needed is huge.” And, while we’re talking about Peru, Simão says that recent political turmoil there means “there are so many other issues”.
Simão acknowledges that Peru’s political problems are common in Latin America, pointing to Nicaragua and Ecuador as other examples of, in her words, “a region that is very unsettled”.
But she acknowledges that there are areas of calm in the region. “Colombia has been more settled in the last few years,” she notes.
After the region’s diverse geography and chaotic politics, Simão goes onto point out another factor to Latin America’s limited digitisation: the cost to users of getting online. The key metric Simão uses to illustrate the low levels of digitisation in Latin America is the cost of data there. “One gigabyte on a data plan costs 2.7% of household income in the region,” she says, “but in some [of the region’s] countries it is 8% to 10%.” A month’s income or more.
There is also the cost of smartphones. In most of Latin America, these devices can cost 4%-12% of household income, but as with data, they can cost much more in some countries: 31%-34% in Guatemala and Nicaragua and a massive 84% in Haiti.
With such prices, “how can you have people using the internet?” asks Simão. “Even if you put the investment [in infrastructure], they don’t have the money.”
Even when digital infrastructure is present, and it’s affordable, there needs to be digital content there for people to access. And Simão suggests there is not enough regional content for Latin America’s residents. Part of this is due to the wide range of languages used in the region. The region’s main languages are European – Portuguese, Spanish, Dutch, English and French – but 561 indigenous languages are also in use there.
Another complication is that the 33 countries that make up the Latin American and Caribbean market have yet to harmonise their regulations. “Each country does its own little thing,” says Simão, and some countries’ frameworks date back to the last century. Although we chuckle over the US Federal Communications Commission still using the 1934 Communications Act.
Thankfully, things are not completely terrible when it comes to Latin America’s digital communications sector. “There are some important initiatives,” she tells me, including 5G rolling out in many parts of the region, and inward investment from Asia, Europe and the United States.
“China is showing a lot of interest. And Russia.” China’s Huawei is “in 20 countries in the region”, Simão estimates. People at Huawei confirm that since the company has had embargoes placed on it by many Western countries – the UK classes Huawei as a “high-risk vendor”, although Huawei would reject that term – it has shifted its focus to the emerging markets.
There is also inward investment, as Latin America’s power utilities and mining companies, which are some of the region’s biggest corporate players, are building their own private networks – a logical move, when you take quality of service and power outages that affect the area into account.
Nokia and Telefónica are building a private fibre network in northern Brazil. Simão sees this as “an interesting way of bringing the internet to the region,” and suggests that these services could be made available to the locals.
“If you invest in infrastructure, that will allow the internet to reach different areas, rural areas that are very isolated. They suffer from geography – they don’t have the means of communication and they need support.”
There are also the internet para todos (internet for all) schemes. In 2020, Capacity reported on one in Peru – a collaboration between IDB Invest, Telefónica, Meta and the Development Bank of Latin America (CAF) – that is still operating. “It’s an interesting way of deploying network,” she says, “and it’s great for locals to have access to the world”.
Despite the challenges Simão outlines, she expects “operators will invest US$70 billion in the region in the next five years”. This money will come from Europe, Asia and the United States – Simão clarifies that “It’s the hyperscalers we’re talking about” now – where businesses want to deliver their content to the millions of people across Latin America.