The Mobile Ecosystem & Latin America's Economy

Guest blog post from Latinoamerica21*

Mobile technologies and services generated 5% of Latin America's GDP in 2015 and nearly 2 million jobs, direct and indirect. In addition, the mobile ecosystem has contributed USD 40 billion to the public coffers for tax purposes, according to the report, The Mobile Economy Latin America and the Caribbean 2016, from the GSMA which represents the interests of mobile operators around the world.

Click the image above to open a full-size version

With 414 million unique subscribers, the region had an average penetration rate of 65% in 2015, with an additional 100 million expected by 2020, making the region one of the fastest growing in the world. In fact, many of the largest countries in the region still have low penetration, such as Brazil with only 57%, Colombia and Peru at 66% and Mexico at 69%. At the opposite extreme, the countries with the highest penetration are Argentina, Chile and Uruguay, all with penetration greater than 92%. By the end of the decade, the regional penetration rate is expected to reach 77%.

In addition to the increase in mobile penetration, adoption of smartphones has skyrocketed in recent years, from less than 15% of connections in 2012 to more than 50% in mid-2015, and growth is expected to remain constant in the next years. In fact, about 70% of the new connections will be via smartphones, and Brazil will continue to lead this trend. The expansion of 4G coverage is also accelerating and is expected to reach 80% of the region’s population this year, which will boost migration to 4G services, which is expected to account for almost 40% of the total population by 2020. Despite the progress, the region will continue to lag behind the global average and, above all, developed countries.

“With almost 150 million new mobile internet subscribers by 2020, up 50% from 2015, the Latin America and Caribbean mobile ecosystem is creating new opportunities for growth and innovation, and a flourishing start-up environment.”

Nevertheless, the mobile ecosystem in Latin America and the Caribbean is creating new opportunities, especially for small- and medium-sized local companies that, “can benefit from increased connectivity to develop content, applications and solutions to add value in new areas.” The use of mobile devices is driving a significant increase in trade and advertising in the mobile sector, and digital commerce in Latin America is forecast to reach USD 80 billion by 2020. This growth is reflected in regional players, such as MercadoLibre, one of Latin America’s six "unicorn" companies, as start-ups valued at USD 1 billion or more are called.

Although the number mobile Internet subscribers in Latin America is expected to reach 450 million by 2020, at that time there will still be more than 200 million people excluded from digital services. This is basically due to the lack of digital skills and locally relevant content, and the lack of accessibility to services. To address this problem, according to the GSMA report, "will require collaboration and action from players across the mobile ecosystem, with important roles for both mobile operators and governments." In this sense, the GSMA says that, “removing barriers to infrastructure deployment and investment is key to enabling future growth of the industry in Latin America.”

Jeronimo Giorgi, a Uruguayan journalist dedicated to international issues, is pursuing a master's degree in Latin American Studies. He has collaborated with various media outlets in Latin America and Europe, and has received distinctions such as the Premio Rey de España for Journalism.

Latinoamerica21 is a blog about current economic, political and social topics in Latin America that is currently published within the newspaper El Observador de Uruguay and will soon be published in other media outlets within the region. The original version of this blog post is available in Spanish: El ecosistema de la telefonía móvil genera el 5% del PIB de América Latina

Follow Latinoamerica21 on Facebook and Twitter.

*Guest blog posts do not reflect the views of FocusEconomics. 

Date: June 28, 2017