Mobile is crucial to Latin America's economies says GSMA

Latin America's mobile industry generates almost US$20 billion of economic activity each year: nearly 1.3% of regional GDP and 2.5% of the region's capital investment. Last year, moreover, mobile operators invested more than US$7 billion in Latin America.

These are the key findings from research commissioned by the GSM Association (GSMA), GSM Latin America and the Hispanic-American Association of Research Centers and Telecommunication Companies (AHCIET).

Six countries were singled out for investigation: Brazil, Chile, Colombia, Mexico, Peru and Venezuela. Using Ovum (www.ovum.com) and Indepen (www.indepen.co.uk) to conduct the research, the three organisations are keen to demonstrate that the mobile industry makes a large contribution to the Latin American economy, creating jobs and making mobile communications widely available to people across the region. The research suggests that mobile services are also improving worker productivity and boosting GDP. In addition, the industry generates a total of US$10 billion in tax income for the six governments in question and has created 2.3 million jobs in these countries.

 

"Although many mobile operators in Latin America are not yet profitable, the industry is mak ing a huge contribution to the region's economy," said Tom Phillips, the GSMA's Chief Government and Regulatory Affairs Officer. "Mobile operators are investing heavily in network infrastructure, giving the Latin American economy a major boost by making telecommunications widely available to the region's people."

 

The study found Latin American mobile operators have invested about 23% of their revenues in capital expenditure over the past three years - a much higher proportion of revenue than most other industries. Foreign companies are contributing much of this investment, boosting the supply of capital available for investment in infrastructure and ultimately aiding economic growth in the region.

"This well-researched study confirms that mobile services are one of the economic growth motors in Latin American countries and a powerful tool for development and social inclusion", said Carlos Hirsch, President of the AHCIET Mobile Commission.

 

The report notes the pressing need to reverse the decline in productivity observed in Latin America over the past few years and highlights that there is growing evidence that use of mobile services boosts labour productivity and therefore GDP. The study estimates that in middle-income countries, such as those of Latin America, an increase in mobile penetration of 10 percentage points can increase economic growth by 0.3 percentage points per year. Mobile usage reduces unnecessary travelling time, improves logistics, empowers small businesses, provides increased flexibility and helps people find jobs, enabling the development of non-agricultural economic activities. While it is difficult to evaluate the precise impact of these productivity gains in Latin America, the study's authors estimate that mobile services generated the equivalent of US$30 billion in value to the people living in Brazil, Chile, Colombia, Mexico, Peru and Venezuela last year alone.

 

For all this, mobile usage in Latin America is relatively low compared with other emerging economies - even accounting for differences in income levels. The average minutes of use per month across the whole population of Latin America is just 31 compared with 76 in Eastern Europe, according to the study.

"As Latin America looks to put the economic turmoil of the recent past behind it, governments need to look at how they can better tune one of the region's main growth engines - mobile communications," said Oliver Alexander Flögel, chairman of GSM Latin America. "This study shows the mobile industry has the potential to double its already-impressive contribution to Latin America's economy, but only if mobile usage rises much, much further."

 

Mobile usage in Latin America is low compared to other emerging economic areas. However, the GSMA is quick to stress that governments in Latin America can boost mobile uptake and also encourage further investment by cutting back on widespread and restrictive taxes on the mobile industry and improving their regulation of the sector.

The study then fine-tunes its recommendations, suggesting that Latin American governments could help boost mobile usage by eliminating industry-specific taxes (widespread in the region) while supporting universal service requirements out of general taxation rather than taxation on the telecommunications industry. The study emphasises the importance of bringing down the cost of mobile handsets and services for individuals and businesses.

 

Governments could also streamline authorisation procedures for the deployment of mobile base stations by setting up a national disputes settlement body, rather than allow local authorities to delay or prevent the deployment of new base stations. Such a body could also deal with complaints about existing base stations.

The study's authors also believe that Latin American governments should encourage further investment in the mobile industry by maintaining their current infrastructure-based competition policy, lifting restrictions on the repatriation of profits by foreign investors, and providing clear and consistent regulation, while allowing competition between operators to determine price levels.

 

* GSM LA represents all the operators that work with wireless technology in the Latin American region, with more than 80 mobile operators in 25 countries and more than 115 million users.

** AHCIET is a private, non-profit organisation, with more than 50 telecommunications operator companies from 21 countries in Latin America and Spain.

*** GSM Association is the global trade association that exists to promote, protect and enhance the interests of GSM mobile operators throughout the world.

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