By Howard Baldwin, Contributing Columnist
While the European and United States economies struggle with mounting debt, there’s an encouraging success story south of the equator; one that combines infrastructure improvement, broadband deployment, and thriving commerce.
According to the findings in a white paper entitled Latin American Economic Outlook 2012 — jointly produced by the Economic Commission for Latin America and The Caribbean (ECLAC) and the Development Centre of the Organisation for Economic Co-Operation and Development (OECD) — between 2000 and 2007, public debt in Latin America
“shrank on average by 15 percentage points of GDP, while fiscal balances moved from an overall deficit of 2.4% of GDP to a surplus of 0.4% of GDP. While real GDP growth in the advanced economies is expected to remain sluggish, Latin America is expected to grow 4.4% in 2011 and 4.1% in 2012.”
The report credits macroeconomic policies and higher primary export prices, but at the same time, another key economic capability is growing as well. For the last several years, Cisco Systems has shared the “Broadband Barometer” market study insights from South America — in conjunction with research firm IDC.
The studies track the increase of broadband deployment in seven major countries, and each of these has shown significant growth in 2010 in broadband connections (fixed, mobile, or both):
Argentina: Up 5.6 percent
Brazil: Up 27 percent
Chile: Up 18 percent
Colombia: Up 20.8 percent
Peru: Up 14.1 percent
Uruguay: Up 23 percent
Venezuela: Up 25.85 percent
Naturally, correlation does not equal cause. It’s still too early to claim that South America’s broadband growth is spurring Latin America’s economic growth. (Geographical note: South America and Latin America are not contiguous; the latter includes parts of Central America.)
In fact, the same report notes that compared to other countries, the broadband gap (the percentage of broadband users compared to the total population) in Latin America and the Caribbean is still growing, compared to other countries the OECD measures. Further, the report highlights the problems in public education and the lack of infrastructure, both physical and digital, facing the region.
It advocates that “These gaps can be closed through more and better investment in infrastructure.” And, improvements in digital infrastructure can simultaneously boost education as well as business.
Market Upside: Continued Economic Progress
Despite these negatives, the key indicators of South American barometers are pointing in the right direction. In countries saddled with debt, it’s harder to justify more borrowing for broadband development, even when it is economically beneficial.
South America’s prudent economic measures, in conjunction with increasing trade with Asia’s economic powerhouse, China, have placed it in an enviable position — one that may enable it to create a virtuous circle of boosting both broadband and business.
At the same time, it’s easy to see the value of increased economic trade with North America. The regions share common time zones. Also, the provisions of NAFTA and an increasing Hispanic population in the U.S. may help to diminish language barriers between the two continents.
The key for South America’s economic success: continue its progressive policies and keep moving forward on all its investments — whether in education, in roads, or in broadband.