E-readiness is still poor

Country Briefing Latin America
The Economist Intelligence Unit/ Infoestrategica

The North American and European countries are generally highly rated in the Economist Intelligence Unit’s latest annual “e-readiness rankings”, but seven of the nine Latin American countries examined have fallen in their positions this year. The continuing digital divide between north and south is rooted in the same factors that constrain Latin America’s overall economic development: income inequality, lack of infrastructure and a still-nascent technological knowledge base. This year’s e-readiness model, heavier in its weighting of broadband connectivity, puts the region even further back.

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A country’s e-readiness is essentially a measure of its electronic-business environment, a collection of factors that indicate how able a market is to take advantage of Internet-based opportunities. The EIU’s ranking allows governments to gauge the success of their technology initiatives against those of other countries. And it provides companies that wish to invest in online operations with an overview of a variety of investment locations.

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Our ranking methodology and definitions are updated on an ongoing basis so that the rankings remain relevant. The 2005 ranking methodology has undergone significant modification: Criteria that no longer accurately reflect the condition of the digital economy have been removed, and many benchmarks have had their weighting adjusted to reflect their increasing importance in determining a country’s e-readiness.

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World - regions: EIU e-readiness rankings, 2005
2005 - rank Region e-readiness - score
- (out of 10)*
1 North - America 8.38
2 Western - Europe 7.87
3 Asia-Pacific 5.60
4 Central - & eastern Europe 4.85
5 Latin - America 4.74
6 Middle - East & Africa 4.42
* - Regions’ scores are based on the e-readiness scores for their respective - countries covered in our rankings. 10 is the highest score.
- Source: Economist Intelligence Unit.

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Fast and secure measures
The criteria include broadband access and Internet security, as fast, secure Internet connectivity is proving to be the key enabler for effective e-business. New metrics have been added, such as the penetration of public-access wireless “hotspots”. (For this and previous e-readiness rankings, the EIU has worked to build the rankings model in co-operation with the IBM Institute for Business Value.)

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As a result, the substantial differences between our 2005 and 2004 scores for the individual Latin American countries examined mainly reflect changes that have been introduced in the methodology. Of the nine countries considered, two—Mexico and Ecuador—achieved improved standings in the rankings during the comparative period.

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The Latin American countries are trying to close the e-readiness gap through higher spending on technology and implementation of government policies to promote greater information technology (IT) use. Countries like Chile, Brazil, Mexico and Argentina are adding Internet and mobile users at very high rates. Nevertheless, only in Chile—which continues to boast Latin America’s highest e-business score and ranking (31)—does broadband penetration surpass 3%. The average for Latin America as a whole was less than 1% at year-end 2004.

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Persistent hurdles to Information and Communication Technology (ICT) development—including a sparse telecommunications infrastructure, low personal computer ownership rates and limited access to credit—continue to restrain broadband connectivity in Latin America.

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Broadband connections in Chile did increase—by 51%—last year, but the cost of access remains high there and throughout the region. According to Pyramid Research, a US telecoms consultancy, no more than 4% of Latin America’s households will have a broadband connection by the end of 2005.

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Policy bolsters Mexico
More-focused government ICT policies have helped propel Mexico’s four-notch rise in the rankings (to 36) this year. The government’s so-called e-Mexico project has opened 3,200 community centres with public-access Internet kiosks throughout the country. A growing number of Internet cafes, broader access to bundled finance packages (PC plus Internet access) and aggressive prepaid Internet offerings from service providers have all served to improve national connectivity.

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Elsewhere, lawmakers in Argentina (rank 39) have passed legislation aimed at promoting their local software industry by promising a stable tax environment over the next ten years. A similar programme put into place in Uruguay has exempted software producers from paying income tax.

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Brazil: outsourcing partner
IT service companies in Brazil(rank 38) have emerged as a strong outsourcing force for multinationals in nearby areas, owing largely to the country’s burgeoning cadre of IT professionals. US-based IT service providers have been investing aggressively in the country as part of a regional expansion of their operations. Demand for such services comes largely from other multinationals that benefit by outsourcing their IT support operations regionally or globally.

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Moreover, Brazil’s growing reach in outsourcing may have knock-on effects in stimulating IT-enabled services elsewhere in the region as it becomes increasingly costly compared with others in the region and lacks the Spanish language skills needed to support regional operations.

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Jamaicajoins the ranks
Jamaica (rank 41), included in our rankings for the first time this year, is forging a path for growth in its e-business sector despite a big impediment: lack of previous ICT investment, resulting in a sparse base of installed Internet infrastructure. On the bright side, efforts in 2000 to liberalise the local telecoms industry have brought growth to the mobile phone market, which now boasts a penetration rate of 67%. Internet penetration has nearly trebled since 2000, although it still remains below 25%. But Internet growth has been slowed by high costs—broadband subscription fees average more than US$90 a month, according to Jamaica’s Office of Utilities Regulation, compared with a low of US$12 a month in Asia.

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To address these prohibitively high subscription rates, a group called Jamaica Network Access Point has been launched that will allow operators to share overhead and reduce the cost of interconnecting their networks. If enough companies embrace the scheme, telecoms service prices should fall.

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Economist Intelligence - Unit e-readiness rankings, 2005
- Select countries

2005 - e-readiness rank (out of 65) 2004 - rank Country 2005 - e-readiness score
- (out of 10)*
2004 - score
1 1 Denmark 8.74 8.28
2 6 US 8.73 8.04
5 2 UK 8.54 8.27
6 9 Hong - Kong 8.32 7.97
12 - (tie) 11 Canada 8.03 7.92
12 - (tie) 13 Germany 8.03 7.83
19 18 France 7.61 7.34
21 25 Japan 7.42 6.86
23 21 Spain 7.08 7.20
24 23 Italy 6.95 7.05
25 24 Portugal 6.90 7.01
31 29 Chile 5.97 6.35
36 39 Mexico 5.21 5.33
38 35 Brazil 5.07 5.56
39 37 Argentina 5.05 5.38
41 n/a Jamaica** 4.82 n/a
45 44 Venezuela 4.53 4.53
47 50 Romania 4.19 4.23
48 41 Colombia 4.18 4.76
49 46 India 4.17 4.45
50 47 Peru 4.07 4.44
52 55 Russia 3.98 3.74
54 52 China 3.85 3.96
55 56 Ecuador 3.83 3.70
57 54 Ukraine 3.51 3.79
60 59 Indonesia 3.07 3.39
65 64 Azerbaijan 2.72 2.43
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* The substantial - differences between the 2005 and 2004 scores mainly reflect changes - introduced in the survey’s methodology. 10 is the highest score.
- ** New to the annual rankings; not ranked in 2004.
- Methodology: Nearly 100 quantitative and qualitative criteria, organised - into six distinct categories, feed into the e-readiness rankings. The six - categories (and their weight in the model) are connectivity and technology - infrastructure (25%); business environment (20%), using the 70 indicators - covered by the EIU’s business environment rankings; consumer and - business adoption (20%); social and cultural environment (15%); legal and - policy environment (15%); and supporting e-services (5%).
- Source: Economist Intelligence Unit, 2005.

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SOURCE: EIU / INFO-e

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