The Americas Online

SAN FRANCISCO (01/28/2000) - It's official. Latin America is the new Asia.

The hype machine started last spring with the rollout of U.S.-based Starmedia and Yupi.com. Then it intensified as south-of-the-border portals like El Sitio and Terra entered the game. Just a few weeks into 2000, interest in Latin America's Internet revolution cannot be contained: "Internet Stock Fever Hits Latin America" ran one breathless Wall Street Journal headline last week.

What about Ecuador or Colombia? It seems that many sanguine Net analysts have overlooked these small Latin American countries and others like them in their talk of the new Latin American revolution.

Far away from the noisy tech babble, whole nations in Latin America are falling apart. In Venezuela, recent flooding has destroyed the country's infrastructure. In Colombia, the 40-year civil conflict continues to intensify, and last Saturday, in Ecuador, President Jamil Mahuad was ousted by a joint military and indigenous people's coup. The complaints of the inflation- and poverty-ravaged population were not their AOL stock's prices, I can assure you.

Latin America, of course, cannot be considered a single entity - it is, after all, made up of some 35 different economies. That presumption would be both simplistic and condescending. And yet that's exactly how the majority of non-Latinos in the U.S. look at it. Most Yankee investors in the Latin American Internet machine consider it one emerging market. In reality, the Internet is increasing the emergence of not one, but two very different Latin Americas. The question is, who will really benefit from dot-com growth?

"There is no doubt that the Internet economy is furthering the divide," says Terry McCoy, director of the Latin American business-environment program at the University of Florida. "Some countries are beginning to distance themselves from others [in terms of economic development] and are looking more like Eastern Asian countries than Latin American." Heading the list are Brazil, Argentina, Chile, and Mexico - the vanguard of the Latin revolution.

The secret to the Big Four's success is simple. They already boast the most robust and resilient economies on the continent, as well as fielding the best telecommunications structures. These are key factors for an infant Internet economy looking to capture an immediate audience. Now, with millions of eager U.S. and European money chasing hot Latin ventures, the El Sitios - and the Latin American Onlines - see the chance to make it big.

But Latin America, like Asia and Africa, has only limited potential for immediate online growth. Most of the computer-buying population throughout the region can also afford some form of Internet access. Still, some analysts argue that using U.S. methodology to count Latin American Net consumers is faulty.

"Latin America has an important informal market," says Fernando Alvez of ebrainstorm.com, an e-business strategy, design and development house with offices in seven Latin American countries. "There are many more people connected illegally that analysts in the U.S. don't count. Due to their relative income, Latin Americans have to share the few resources they can afford."

So the problem, no matter how you carve the numbers, is how to build up this affluent but shallow base. Again, the Big Four would seem to have the advantage. In Argentina, for example, only 1 percent of the population has Internet access but nearly 45 percent has cable TV, the much-touted future avenue onto the Net.

So the more investment that gets pumped into the few buoyant Latin American online economies - specifically chasing the e-commerce dollar - the more the question arises: Is building a global Net about bettering peoples' lives, be it through education, health care, or community living, or is it just about selling stuff?

Most businesspeople would argue that building a strong online economy will ultimately have a ripple effect through the rest of society, but that won't necessarily aid Latin America's "laggards," as McCoy calls nations like Ecuador. Given its massive inflation, a weak government-culture riddled with petty corruption, and a 40 percent indigenous population with little access to education and decent health care - never mind a telephone (there are only seven per 1,000 people), e-commerce alone won't help Ecuador develop.

In September, Ecuador will have the chance to see how other small countries are benefiting at the first World Internet Forum, or WIF, a British-organized conference designed to help governments harness the power of the Web. "The prime aim is to improve people's lives through the best use of IT strategy by governments," says WIF executive director Robert Blaney. Though the specifics have yet to be worked out, Blaney hopes to highlight successful Internet strategies from countries like Singapore and the Philipines, and help educate other less-developed nations. "As the gaps get bigger," Blaney says, "the WIF will address them."

WIF is not trying to push some global Marshall Plan. Blaney sees whole-world Internet development as being very much in the interest of private companies.

"There are many opportunities for the private sector to help, and not just out of altruism," he says. "The more Internet users, the more revenue that's out there." Even if you're counting in Ecuadorean sucres.

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