Telecommunications and Development in Latin America: The Role of Multinationals
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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
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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.
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Telecommunications performance in Latin America
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Source: ITU, 2006, World Telecommunications Database
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Latin America leads developing world in telecoms FDI
0
5 000
10 000
15 000
20 000
25 000
1995
1996
1997
1998
1999
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2005
FDI in telecommunications toward Latin AmericaMillions of US dollars
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56%24%
7%
6%4% 3%
FDI in telecommunications, by region
Latin America and CaribbeanCentral and Eastern EuropeSouth East Asia
South Asia
Middle East and Northern AfricaSub-Saharan Africa
Source: OECD Development Centre, based on PPI Database, World Bank Source: Information and Communications for Development 2006, World Bank
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In ten years, telephone density has become less sensitive to the country’s GDP…
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Income per capita and telephone density
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… but relative performance remains very different from one country to the
next
-20 -10 0 10 20 30Deviation from prediction (lowess)
VENURYSLVPRYPERPANNIC
MEXHTI
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ARG
1995
-20 -10 0 10 20 30Deviation from prediction (lowess)
VENURYSLVPRYPERPANNIC
MEXHTI
HNDGUYGTMECUDOMCRICOLCHLBRABOLBLZ
ARG
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-20 -10 0 10 20 30Deviation from prediction (lowess)
VENURYSLVPRYPERPANNIC
MEXHTI
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ARG
2005
6Source: OECD Development Centre, based on ITU(2007) and World Development Indicators data.
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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
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Across countries, foreign investment has gone hand in hand with increased
connectivity
8Source: OECD Development Centre, based on PPI Database, the World Bank
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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)
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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)
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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
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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
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Foreign actors are not associated with lower inequality
12Source: OECD Development Centre, based on PPI Database, the World Bank and SEDLAC.
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Market contestability is limited
13Source: OECD Development Centre, based on companies’ data.
MonopolyPerfect competition
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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
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Thank you for your attention!
www.oecd.org/dev/
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Appendix
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Latin America’s performance has improved vis-à-vis other regions
17Source: OECD Development Centre, based on ITU (2006) and World Bank (2006) data.
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Access has improved significantly but large disparities remain
18Source: ITU, World Telecommunication Indicators Database, 2006
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Quality has also improved substantially
19Source: Telefónica
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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
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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(21 1
0 iqG
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Diffusion and inequality: the example of Brazil
0.2
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mean
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.4.6
.81
1990 1995 2000 2005year
Q1 Q2 Q3 Q4 Q5
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