Telecommunications and Development in Latin America: The Role of Multinationals 12th EADI General Conference Geneva, Switzerland 25 June 2008 Juan R. de Laiglesia OECD Development Centre
Mar 27, 2015
Telecommunications and Development in Latin America: The Role of Multinationals
12th EADI General Conference
Geneva, Switzerland
25 June 2008Juan R. de Laiglesia
OECD Development Centre
Telecommunications and FDI in Latin America
• Good performance by usual indicators……associated with the large incoming FDI flows
• However inequality in access remains high and has not been dented by foreign enterprise entry
• Telephony markets are not very competitive and consolidation has not helped
• The challenge: creating regulatory frameworks and access promotion strategies to increase coverage, service and affordability.
2
Telecommunications performance in Latin America
3
Source: ITU, 2006, World Telecommunications Database
Latin America leads developing world in telecoms FDI
0
5 000
10 000
15 000
20 000
25 000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
FDI in telecommunications toward Latin AmericaMillions of US dollars
4
56%24%
7%
6%4% 3%
FDI in telecommunications, by region
Latin America and Caribbean
Central and Eastern Europe
South East Asia
South Asia
Middle East and Northern Africa
Sub-Saharan Africa
Source: OECD Development Centre, based on PPI Database, World Bank Source: Information and Communications for Development 2006, World Bank
In ten years, telephone density has become less sensitive to the country’s GDP…
5
Income per capita and telephone density
… but relative performance remains very different from one country to the
next
-20 -10 0 10 20 30Deviation from prediction (lowess)
VENURYSLVPRYPERPANNIC
MEXHTI
HNDGUYGTMECUDOMCRICOLCHLBRABOLBLZ
ARG
1995
-20 -10 0 10 20 30Deviation from prediction (lowess)
VENURYSLVPRYPERPANNIC
MEXHTI
HNDGUYGTMECUDOMCRICOLCHLBRABOLBLZ
ARG
2000
-20 -10 0 10 20 30Deviation from prediction (lowess)
VENURYSLVPRYPERPANNIC
MEXHTI
HNDGUYGTMECUDOMCRICOLCHLBRABOLBLZ
ARG
2005
6Source: OECD Development Centre, based on ITU(2007) and World Development Indicators data.
Investment in telecommunications has accompanied a marked increase
connectivity
7Source: OECD Development Centre, based on SEDLAC (2007) and IADB (2007) data.
The number of telephone lines has increased by a factor of 10 in Latin America, in part because of foreign investment
Across countries, foreign investment has gone hand in hand with increased
connectivity
8Source: OECD Development Centre, based on PPI Database, the World Bank
Part of the story is the relative success of privatisations
9Source: OECD Development Centre, based on PPI Database, the World Bank
Note: Includes only countries with available data for Latin America (Argentina, Belize, Bolivia, Brazil, Chile, El Salvador, Guatemala, Guyana, Mexico, Panama, Peru, Trinidad and Tobago, Venezuela)
Multinational presence is linked to different models and market structures across the
region• Public monopolies
Costa Rica (all),Uruguay, Paraguay (fixed)
• Privatised fixed line monopolies with substantial market power:
Mexico, Peru, Nicaragua
• Decentralised ‘competition’Bolivia, Colombia
• Oligopolistic competition (fixed)
10
n o
on
o
p
n
pn o
o
n
on
n o
op
p
p
o
onn
n o
n
o p
onoon
Mobile operations
Milicompo America Moviln Telefonica
p
Fixed line leader
Telefonica (4)Both operating, neither leader (1)Telmex/Am. Movil (5)Other (14)Outside region (2)
Source: OECD Development Centre, based on company data
An unequal distribution of benefits
11Source: OECD Development Centre, based on SEDLAC surveys.
Inequality is high: a quarter of poor households have a telephone at home,
3 times less than high-income households
Foreign actors are not associated with lower inequality
12Source: OECD Development Centre, based on PPI Database, the World Bank and SEDLAC.
Market contestability is limited
13Source: OECD Development Centre, based on companies’ data.
MonopolyPerfect competition
Challenges and opportunities
• Fair and stable regulatory frameworks …
… complemented by access promotion
• Digital gap and connectivity
• Expand other services through telephony:– Mobile Banking– Remittances– E-government
14
Thank you for your attention!
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Appendix
16
Latin America’s performance has improved vis-à-vis other regions
17Source: OECD Development Centre, based on ITU (2006) and World Bank (2006) data.
Access has improved significantly but large disparities remain
18Source: ITU, World Telecommunication Indicators Database, 2006
Quality has also improved substantially
19Source: Telefónica
Two major players: Telefónica and Telmex/America Móvil
• Similarities:– ‘Safe’ home markets: the result of
national champion policies– Seeking markets: expansion or
survival?– Corporate alliances and buyouts
• Differences– Different corporate cultures– Different paces
20
Other outcome measures: inequality
• Data: household survey aggregates– Differentiated according to income– Measure access as “ownership” (phone at home)
• Measuring the access gap:– Absolute Gap = (Q5-Q1)– Relative Gap = (Q5-Q1)/Q5– Quasi-Gini
(measures the concentration of phone access)
where q(i) is the proportion of people with access who have income below income index i (so q(1)=1)
))(1(2
1 1
0 iqG
21
Diffusion and inequality: the example of Brazil
0.2
.4.6
.81
me
an
1990 1995 2000 2005year
mean
0.2
.4.6
.81
1990 1995 2000 2005year
Q1 Q2 Q3 Q4 Q5
22