How U.S. Companies Can Play a Role in Latin America’s Growing Cyber Economy

03.23.17
Pixabay
Business /23 Mar 2017
03.23.17

How U.S. Companies Can Play a Role in Latin America’s Growing Cyber Economy

The transformation of Latin America’s economy towards knowledge and technology dependence begs American businesses to engage more in the region than ever before. The “pink tide” of economic orthodoxy and integration in Latin America has led to an unprecedented boom in innovation and entrepreneurship. More importantly, these orthodox economic policies have lifted millions of people out of poverty and into the middle class.

Critical to the success of these policies is a technological revolution which places consumers and businesses at the forefront of progress and prosperity. Despite the hesitancy by the current U.S administration towards investment in Latin America, the U.S private sector must lead the charge in the hemisphere’s changing economy. Failure to do so can result in missed economic opportunities and geopolitical concessions to America’s competitors.

Across the globe, the “Uberization” of economies is empowering people and small businesses to create growth using little more than their mobile phones. Mobilizing underutilized capital in the region has created tremendous growth opportunities in the Latin American cyber economy, the most important of which is people. According to the Inter-American Development Bank (IDB), only 43.5% of Mexicans are internet users and only 30.7% of Mexican households have access to the internet. However, this number is rapidly growing.

The increasing number of connected consumers in Latin America presents a unique opportunity for small and medium sized companies to sell direct to consumers. Retail sales through online sales channels, for instance, are expected to grow to $85 billion in the next two years. Given these trends, large U.S companies such as Walmart and Amazon are already seizing the opportunity to expand and invest in their online sales. Incredibly, the growth in Latin America’s e-commerce industry is occurring while more than half of the region’s largest economies still don’t have access to the internet.

This is particularly true in the area of cash transfers, where peer to peer technology is changing the way people send and receive money. The success of programs such as M-Pesa in Kenya has opened the door for similar technologies that promote financial inclusion and economic growth.

In Ecuador, for instance, the government launched a peer to peer money transfer platform and bill payment system using prepaid mobile phone accounts. The application of similar technologies has an immense impact on unbanked and underbanked communities, giving purchasing power back to the middle class.

Despite the growth of e-commerce and technology platforms, regulatory standards and legislation have not caught up. Political uncertainty and a lack of cyber and e-commerce standards create a high-risk environment for local and foreign companies. This is yet another opportunity for U.S firms to create a more favorable investment environment in the region. While these sorts of risks have traditionally been a repellant for investment in otherwise lucrative and burgeoning markets, companies must see risk as an opportunity. Comprehensive financial instruments which safeguard investment such as political risk insurance and standalone cyber liability insurance can become instruments for growth in the region, as opposed to a cost. Moreover, U.S firms have the opportunity to introduce cyber governance and education opportunities to reduce risk, increase revenues, and shape policy.

The failure of businesses to engage in the future of Latin America’s economy will effectively cede market share to America’s competitors. China’s continued investment in Latin America presents a geopolitical and economic threat to the United States given the Chinese government’s traditionally “lax” views on cyber accountability. In Brazil, Chinese telecom giant Huawei reportedly owns 40% of the telecommunication equipment market and has made significant investments in Mexico. It is undoubtedly in the best interest of American companies and American national security to invest and shape the future of commerce in the Western hemisphere.

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