Latin America Logs On

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The Internet business community believes the market will naturally reach down to include the middle class and some of those below, whether governments help or not. "The poor will have access," says Roberto Wilson, partner at the Rio-based private-equity firm CVC/Opportunity Equity Partners, because "the working poor consume." Many entrepreneurs and analysts point to the example of television in Brazil, where, despite extreme poverty, more than 80% of households own a set. "This is not a rich country, but things really penetrate," says Alvaro de Castro, director of business development at Web incubator Visualcom and author of two books on e-commerce in Brazil. "In every favela there are satellite dishes. It will be the same thing with the Internet."

A major step toward that goal came, last December, when a wave of ISPs began offering completely free access. Today Brazilians can choose from a number of free ISPs, including one, , owned by a Roman Catholic diocese. Another free ISP, , expected a television-ad blitz to bring in 60,000 applicants over three months. Instead, the company got 940,000 in eight weeks. "The consumers were more ready for this than we were," says iG vice president Matinas Suzuki.

Free access has spread to Argentina and three major cities in Mexico, with Chile, Colombia, Ecuador, Peru and a few smaller markets plus the rest of Mexico due next year. Meanwhile, large infrastructure projects are in the works that will expand the region's ability to meet almost any demand. Global Crossing, an international telecommunications company, is building a $2 billion fiber-optic network that will encircle and crisscross South America, connecting with existing superfast cable lines to Europe, the U.S. and Asia by 2001. The lines will improve connectivity in the region tenfold. Starting this May the Americas II cable system will connect Brazil, the Caribbean and South America's northeast corner to the U.S. A region-wide $1.5 billion Telefonica system will be operational in 2003.

In Panama, Swedish-Panamanian entrepreneur Nils Petterson is set to open @Altec Cyber Park, Latin America's first hosting provider, which will be able to store 600,000 different sites on its 10,000 servers. For the first time, Latin Americans won't have to waste precious minutes reaching computers in Europe or the U.S. for websites stored there. Access, says Petterson, will be 300 times as fast and 50 times as cheap. Both these projects are helping build an Internet backbone that will speed up data transfer and bring down the cost of metered calls. New satellite and cable technologies will also help.

Latin America's 4% household penetration of personal computers seems less relevant every day. This year, for example, TV set-top boxes that, for $100 to $200 each, can turn a television set into a computer screen are due to appear in Brazil. Wireless broadband expansion will turn Brazil's ubiquitous cell phones into tiny screens. "Latin Americans have been early and avid adopters of technology," says Antonio Bonchristiano, CEO of the e-commerce company . "The key to growth is the cost of a Web device."

With Internet use spreading virally, businesses are racing to keep up. The results are uneven. "A year and a half ago, no one had an e-mail address on his business card," says Jose Gatti, manager of the Rio de Janeiro print-and-design firm Agilita. "Today I'd estimate that between 40% and 50% have it." But that does not guarantee what Visualcom's Castro calls a "culture of the Internet." "Even small companies have a Web page, but in many cases they just have it to be cool, and that's it," he says. "You go into any store and ask the people there, 'What is your website?' and they don't know."

But that is bound to change, especially as governments realize that their future involves adapting to the Net. Take income tax collection. In Brazil for the past five years it has been available online, and last year an astounding 85% of the 11.5 million Brazilians who pay federal income taxes filed electronically. The government's software allows them to link to banks and sets up an automatic-payment plan, saving the federal government about $500 million in processing costs each year. "It's been a huge success," says program supervisor Luis Carlos Rocha de Oliveira.

Several countries--Brazil and Mexico in particular--have experimented successfully with TV-based education. Now they are translating it to the Net. Last October an initiative led by the Cisneros Group, Venezuela's leading media company, used donated computer equipment, television sets, transmission time and satellite dishes to wire 1,800 teachers from seven countries to live broadcasts of continuing-education classes held at the Monterrey Institute of Technology and Advanced Studies in Mexico. The teachers watched from their schools and sent e-mail questions that the professor opened during pauses in the broadcast and then addressed live.