Managing Director & Founder of the Biz Latin Hub Group.
The most significant technological advancements that currently shape our society and economy have emerged from challenging times. The internet, for example — without which our daily life as we know it would be possible — emerged in light of the Cold War, after the United States Advanced Research Projects Agency (ARPA) and MIT scientists invented a method to prevent communications from being affected in the event of an attack.
According to the UN, a report from the Economic Commission for Latin America and the Caribbean found that the Covid-19 pandemic is expected to result in the loss of 8.5 million jobs in Latin America and the Caribbean. It has produced new realities through which life and business have managed to get ahead. Digital technology has proven to be the great ally of humanity, facilitating the adaptation of economies and businesses to the “new normal,” a term that is commonly overused and yet mostly still unknown.
Currently, I expect the technology sector in Latin America to grow considerably, as it appears to be a key solution for businesses to evolve with changing social and economic contexts brought about by this pandemic. Technology stands as an industry that could lead the region’s “new business normal.”
The digital revolution is a call for Latin American business resilience.
After governments in the region announced measures to counteract the contagion of the virus, companies of all sizes have reportedly started realizing the importance of digital technology for applications like e-commerce. Technology enables them to adapt to a new business ecosystem in which interacting with clients can no longer be the same.
As I expected, the industries of e-commerce, streaming services, online education and health, food delivery and technological financial services (fintech) have grown considerably in 2019 and 2020 or are projected to continue growing. These sectors could not only manage to mitigate the economic consequences of Covid-19 in the region but have also proved to me that even in challenging times, it is possible to continue doing business in Latin America in a different way.
Even though there may be differences at a socioeconomic and geographical level, Chile has an 82% internet penetration rate and Mexico has a 69% internet penetration rate. In addition, during the first part of the Covid-19 outbreak, there was an increase in internet traffic in parts of the region, which highlights the demand for internet operators and telecommunications companies to satisfy an overwhelming demand.
In the same way, as businesses in Latin America are adjusting to a new way of life, e-commerce sales have increased in many countries. In April of 2020, e-commerce revenues increased by 230% in selected Latin American countries. Brazil, Mexico, Argentina, Colombia and Peru have the highest number of internet users in Latin America. I expect the e-commerce industry to experience the most growth in these countries.
Online education or “edtech” has also been one of the leading sectors to influence the “new normal” in Latin America and elsewhere, which could generate new business opportunities in the region. Schools and universities across the continent turned to channels like YouTube, TV and radio to educate their students. Companies such as Google (with its virtual platform, Google Classroom) or Microsoft with its Microsoft Teams application, offer schools, teachers and students digital solutions for education in the face of the pandemic.
Furthermore, the digital entertainment, streaming and OTT services industry also achieved considerable growth in 2019, which has likely been further encouraged by the lockdowns that were decreed throughout the region to prevent the spread of the virus. Although this sector had already shown a growing trend in previous years, I expect it to continue developing as more people in Latin America recognize it as a new type of home entertainment. Netflix, for example, doubled its growth expectation in the early part of 2020, reaching a total of 15.77 million new subscribers.
The food delivery industry is also positioned as a technological solution with the growth of on-demand food delivery services like Rappi and iFood, a trend that could continue as a result of the measures imposed on restaurants in the region to avoid crowds. Likewise, the health sector has evolved to explore telemedicine, and it’s now innovating with the use of remote platforms and online tools that could forever change doctor-patient relationships.
Multinational companies can do business in Latin America through digital distance solutions.
More companies and individuals are turning to fintech services (paywall) to do business in Latin America. Companies operating in Latin America are now able to make national or international payments or obtain loans through a faster and simpler process.
Currently, countries like Brazil and Mexico are working on providing a clear legal framework to regulate and stimulate their promising fintech ecosystem. Likewise, traditional banks can implement entirely online procedures for opening corporate bank accounts, which is a key step to take before incorporating a company in the region. Also, banks can accept digital copies of required documents and digital signatures.
Is your company ready to meet the digital demand in Latin America?
A look at the current business environment in Latin America reveals the multiple business opportunities the region offers to executives willing to act and strengthen the economy with the help of virtual technological developments. I believe the demand for virtual services will continue to grow in the region, and sometimes it seems that it outstrips supply.
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