Thursday, May 2, 2013

VOXXI:E-businesses in Latin America: The future is Ahora

E-Businesses in Latin America: The Future is Ahora
W. Alejandro Sanchez
May 1, 2013
Originally published:

The major economic growth that most Latin American nations currently enjoy has led to the emergence of what has been labeled as a “digital middle class.” Namely, more Latin American citizens are connecting to the virtual world thanks to increasingly cheaper internet-devices (computers, laptops, tablets and smartphones) as well as the spread of greater Wi-Fi access areas. One important result of this development is the rise of regional e-businesses by Latin American entrepreneurs. Even though these have not appeared as quickly as those in the “dotcom” boom in the U.S. in the late 1990s, they are certainly noteworthy.

Latin American e-businesses

Over the past years, e-stores and other types of e-businesses have appeared across Latin America, particularly in states such as Brazil, Chile, Mexico and Peru. There are several examples of successful e-businesses and retailers where users can buy merchandise such as clothes, alcohol, blenders and even vehicles. Examples of these e-stores are a Peruvian website called PlataTop and another one called, which has subsidiaries in Colombia, Peru, Mexico and Venezuela. In addition, there is a website called Mercado Libre based in Colombia, Mexico and Venezuela, which is a Latin American version of eBay. Users can sell their personal goods, such as clothing or electronic devices to others via this website and Mercado Libre receives a commission per transaction. However, there is the concern that some of this merchandise may be of illegal origin.
Moreover, as proof that anything can be bought and sold online, there are websites aptly called YourCar and YourMotorcycle based in Colombia, Panama and Venezuela. Through these websites, users can post ads for the sale of vehicles and motorcycles. For wealthier individuals, there are websites where a user can advertise the sale of small airplanes (YourPlane) and  others where users can browse houses for sale not only in Latin America but also in Florida (YourHouse).
As for Brazil, local startup e-businesses have appeared in the past couple of years, like for example Meliuz and Peixe Urbano. Meliuz is an interesting enterprise as it is essentially a “cashback” type of business in which users that join the site can have access to deals in a variety of major online retailers in Brazil, such as Sephora and Netshoes. In an email interview with the author of this commentary, a Meliuz spokeswoman stated that she thinks that online shopping will continue in the coming years. She explained that “Brazilians are getting used to shop[ing] online. That’s why Brazilian e-commerce is growing at an average of 20 percent each year. The biggest challenge for the online retailers, and also for web sites like Meliuz, is to keep in mind that the most important thing is the customer care, as this business is based on trust.”

Limits, limitations and leaping ahead too quickly


Nevertheless, there are still limitations to the growth of Latin American e-businesses. For example, Latin American governments will have to increase educational funding to promote computer literacy among their populations. Initiatives like providing free laptop computers to schoolchildren to help them become computer-literate, like Uruguay has done, are positive examples that other countries should follow. Nevertheless, in countries like Peru, a nation which has enjoyed propitious economic development, there are still communities with no access to water or electricity. These stark infrastructural deficits put Peruvian citizens at a disadvantage when it comes to entering the virtual job market and restricts their potential for creating independent online startups.
Moreover, recent rumors that Argentina may use the e-currency known as Bitcoin is interesting but potentially dangerous. The decision may arguably be based not so much on public interest in Bitcoin itself, but may rather be due to the country’s continuing economic struggles. This is a bad reason to turn to e-currencies, which are unpredictable. As a recent blog post in the Financial Times explains, “part of the rise in Bitcoin demand must be for saving, economists say, since Argentines lack instruments that can keep pace with inflation.” In an e-mail interview with the author, an IT expert that focuses on cyber security explained that Argentina should know more about Bitcoin using it. He explained that “this is part of the wider problem of people using the internet but not fully understanding it, they just click ‘OK’ on a box that appears without fully knowing the repercussions.” Computer and internet literacy goes hand in hand with internet security, and it will also be up to Latin American e-businesses, just like their e-customers, to make sure that cyber criminals do not exploit the still vulnerable market that is e-businesses in Latin America. For example, the aforementioned Meliuz spokesperson stressed how her company sees the protection of consumer data as vital, exemplified by the company’s “implementation of a method to encrypt personal user information data based on a random generated string only available on the server running the application.”
Furthermore, there are continuing limitations to scaling up e-business in Latin America, especially in terms of geographic access. E-stores like Peru’s PlazaTop work well for the bigger Peruvian cities such as Lima, but still do not have delivery options for smaller towns.  Startup companies in the region cannot (yet) be compared to well-established e-businesses like Amazon, which has essentially worldwide delivery capacities.
The virtual world provides plenty of opportunities for commercial growth, as exemplified by the appearance of Latin America-based e-businesses such as PlazaTop, Meliuz and Mercado Libre. Nevertheless, there are still limitations such as geography, internet connectivity and computer literacy, as well as concerns over the e-security of users’ personal information. Given the potential perils of trying to take advantage of potential virtual profits (such as Bitcoin, which can be manipulated by hackers), perhaps the current slow pace is a good idea.

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