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IT Outlook in Latin America

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How will the economic downturn affect IT spending in Latin America? Four experts share their predictions.

BY LATIN AMERICA ADVISOR
Inter-American Dialogue 

The global economic downturn has cut growth projections for countries in Latin America, with the UN's ECLAC now predicting an average growth rate of 1.9 percent for the region in 2009. What will be the consequences of slower economic growth on information technology (IT) spending? Will government and corporate budgets for IT shrink, or will stimulus packages and strategic plans allocate more spending on IT? Which segments of the market, and in which countries, do you anticipate growth to be strongest and weakest?

Peter Wiegandt, vice president of Dell Latin America: IT spending across the region may change as companies and governments consider their IT budget allocations and spending this year. However, to remain globally competitive, governments, businesses and other entities should consider increasing their investments in IT. Countries and corporations that do will be in a strong position globally when the economic situation normalizes. IT investment now will stimulate the economy while increasing global competitiveness for decades to come. In fact, there is a direct link between IT deployment and increased productivity. IT also empowers small business—the engine of most of the region's economies. Also, governments are facing serious challenges to transform public services, healthcare and education. Meeting these challenges will require investment in the right information technologies in order to ensure continued progress and welfare. Countries including Brazil, Mexico, Colombia, Chile and Argentina have already started investing in their health care and education systems, but there still exists a tremendous opportunity to seize the moment to improve IT infrastructures to ensure the global competitiveness of nations in Latin America. For example, higher education institutions can boost school and student competitiveness by installing secure, mobile technology that enhances student and teacher productivity. Investing within healthcare is also critical. Modernizing local systems will not only reduce errors, accelerate disease detection and treatment, but will also save lives. Investing in information technology services such as remote infrastructure managements improves cash flow and lower costs. Governments and corporations must lead by example. They need to show confidence in the future, particularly during difficult times like these and invest in the right infrastructure. That will lead to recovery, progress and development.

Gustavo Roosen, chairman of Envases Venezolanos SA and former president of Venezuelan telecommunications service provider CANTV: This question has two answers. The first and very obvious one is that as the economic downturn hits the region, all expenditure will be negatively hit, in particular that which managers regard as discretionary and 'nice to have,' but not strictly necessary. The second answer has to do with the fact that IT has evolved from corporations into everyday life. One only has to look at banking today to see the integration of technology with every kind of platform—ATMs, cellular phones, and the Internet—with the sole purpose of offering more services at reduced costs. The same can be said of the insurance and health care industries, which will find it very hard to compete without IT. If one looks to governments, the only way to manage the implementation of now in-fashion (and direly needed) inclusive social policies is technology, as governments look forward to managing the business of tax collection, education and providing services to an ever-demanding and growing population. So the counterintuitive answer to the question is that in order to survive in difficult times, companies and governments should look, more than usual, to carry out what they do more efficiently and at a lower cost, and in that IT is the weapon of choice. Of course, that will remain only theory if the IT industry does not adapt to the new circumstances. It must deploy products that not only provide the desired service, but are themselves cost competitive. Therefore, service companies will be at the forefront of IT, whereas manufacturing industries will look for false savings in the IT front.

Francisco Alvarez-Demalde, partner at Riverwood Capital: It is difficult to answer this question at a regional level, as it will vary by country. However, I believe that in summary, most of the corporations will be very conservative during 2009 on any IT spending that might be considered discretionary or that can be delayed. I also believe that there would be a slowdown on software and hardware updates, as well as on new large enterprise software implementations. On the government side, there are some countries in the region that are expanding IT spending to stimulate the economy, as China is planning to do. That will benefit the industry and compensate for part of the lost demand. For example, Chile recently announced a 27 percent increase in innovation, science and technology spending in order to improve the country's efficiency and competitive positioning. Finally, on a brighter note, I believe that the significant depreciation of the Latin American currencies during the past six months will help the region to improve its competitive position and value offer in order to export IT services to developed countries.

João Macias, vice president for Latin America at BT Americas: IT investment in Latin America will not be as impacted as the most pessimistic predictions are forecasting. Latin America is also vulnerable to restrictions in the flow of credit and foreign funding, which may result in a substantial decrease in IT investments in large-scale projects like other regions in the world. Nevertheless, the latest IDC forecast report revealed that IT spending will be 4 percent higher this year, as compared with 2008. This figure not only gives us a positive overview of the situation we will be facing in the upcoming months but also encourages us to bring new products and solutions to the market that can help our customers meet their cost-reduction plans. ICT suppliers need to view the current economic scenario as a privileged moment when we are given the opportunity to present our customers with new solutions to help them meet their financial challenges. We expect businesses and governments to invest in ICT in order to reduce costs and increase productivity and in line with this, many enterprises will give priority to green IT projects in which it is possible to reduce costs while focusing on efficiency. This is an area in our industry where there is considerable room for growth and Brazil, for example, is an ideal market in this respect due to the opportunities it offers. We expect that sectors such as government, utilities and energy will maintain their IT investments and will continue to do so for a considerable time to come, in a sustainable way.

Republished with permission from the Inter-American Dialogue's daily Latin America Advisor newsletter.

 

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