TECHNOLOGY GROWS IN LATIN AMERICA

Throughout Latin America, educators, executives and consumers are realizing that to keep pace in a global economy, they must have fast PCs, the latest software and high-speed Internet connections.

That demand–and Latin America’s newfound control over inflation–has helped make the region one of the world’s fastest-growing markets for information-technology products and services this decade.

Schaumburg-based Motorola has found a big market in South America for its wireless services, and software and PC companies have set up new operations in South Florida to get in on the bonanza. The region’s seaports and airports handled more than $1.2 billion last year in computer products to Latin America.

Hewlett-Packard alone has been doubling its business in Latin America every two to three years, said Rui G. da Costa, president and managing director for Latin American operations.

“The customers want the latest technology,” Da Costa said. “They do not want second- or third-generation systems. They are very sophisticated and demanding.”

Last year, Latin Americans spent $18.4 billion on high-technology gear and services, up 22.8 percent from the year before. That’s far faster than last year’s worldwide growth rate of 13.1 percent, according to International Data Corp.

And the fast pace won’t stop.

By 2001, information-technology spending in Latin America should more than double to $42.9 billion, with Brazil alone accounting for 45 percent of the total or $19.3 billion, International Data said.

Mexico, Argentina, Peru, Venezuela and Ecuador also are strong markets leading the demand for multimedia, Internet and telecommunications products and services.

It’s not always easy deploying the latest technology to Latin America because of weak phone networks there. Many countries lack the high-speed digital phone lines needed to transfer large amounts of data over the Internet.

But those problems are fading, as Latin nations move to sell their government-owned phone companies and offer licenses for high-tech services–some of them more advanced than in the United States.

“Much of the infrastructure that exists in North America does not exist in Latin America,” said Bruce Claflin, senior vice president of worldwide sales and marketing for Digital Equipment Corp. “That allows Latin America to leapfrog certain technologies and have the best in the marketplace today.”

Leading Latin America’s growth are small to medium-size businesses, said Sergio Restrepo, an executive with IBM Latin America in Ft. Lauderdale. Those businesses want the latest Pentium microprocessors and high-quality service, he said.

“Customers don’t buy computers,” Restrepo said. “They buy solutions and tools that allow them to be more effective in their industries.”

Still, strong growth does not mean easy sales. As in the United States, PC producers are fighting hard for market share, with major companies slashing prices considerably this year to attract more buyers.

Sales are consolidating among five market leaders: Compaq, IBM, Acer, Hewlett-Packard and Brazil’s Itautec, according to Dataquest Corp., a San Jose, Calif., research corporation.

With prices coming down, companies are competing more on service, inventory, guarantees and financing. The big PC companies offer financing for purchases in Latin America, much the same way that Ford or General Motors offer credit for car buyers in the States, analysts say.

Just a decade ago, offering ample credit in Latin America would have been unthinkable because of high interest rates, especially in Brazil.

But Latin America has tamed inflation by cutting government budgets and aligning its currencies more closely to the U.S. dollar.

More American companies now have the confidence to expand operations inside Latin American countries themselves rather than operating from bases in Florida.

For example, Miami-based CHS Electronics expects $1.2 billion in Latin sales this year, up 30 percent from last year. The company now has a presence in 10 Latin nations. It depends on those operations for about 40 percent of its Latin business.

“Miami is still the biggest market for our Latin American sales, but it’s not growing as fast as our in-country operations,” said Arturo Osorio, chief operating officer for Latin America.

“The trend we see is that Miami is becoming more of a logistical center for high-end products or a mix of products that isn’t available in those countries,” he said. “The core of the business–PCs, printers and software–is shifting more to the countries directly.”

Microsoft knows that trend. It sells all of its products through vendors based in Latin America, said Gabriel Torres, the company’s regional sales manager. The software giant expects Latin America to double within the next four years, reaching $1 billion in revenues in 2001.

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Microsoft has experienced 30 percent to 40 percent growth this decade in Latin America, Torres said, with Brazil and Mexico leading the region.

For the short term, the biggest question mark for high-tech companies is the outlook for Brazil, which accounts for nearly half of all sales in the region.

Brazil has been hard hit by recent financial woes in Asia, and its stock market has plunged since October. The government has responded with a tough austerity program that includes government spending cuts and interest rate hikes. Those measures are expected to slow Brazil’s economic growth–from about 4 percent this year to 2 percent or less next year, economists say.

Just how that slowdown will affect overall Latin American sales “is still up in the air,” said Andrew Newman, an International Data Corp. market analyst.

Some big Brazilian companies that compete globally, such as Banco do Brasil, are forging ahead with their plans. But some individuals and smaller firms that buy retail may opt to delay purchases, now that interest rates have doubled to about 40 percent a year, Newman said.

CHS already is feeling the pinch, but Osorio expects the downturn to last only through the first quarter of next year. “We feel the government has taken the correct steps,” he said.

Longer term, the prospects remain bright.

Apple Computer, which dominates the U.S. education market, believes that Latin America is ripe for more computer-based educational training, said Mike Caram, general manager of Apple Computer Latin America.

“The $999 machines will hit Latin America by March or April,” Caram said. “Our customers will get a lot more machine for a lot less money. That will help fuel demand further.”