Latin America – Selected Country Characteristics

The three leading countries at this moment are:

Brazil, the leader in Latin America

The Federative Republic of Brazil is Latin America’s largest economy. With 3,290,000 square miles, bordering 10 other countries and with 4,650 miles of coastline, Brazil is the largest country in Latin America and fifth largest in the world. Its population of 202 million makes Brazil the world’s sixth-most populous nation. With a Gross Domestic Product (GDP) in 2013 of US$2.3 trillion, Brazil is the world’s seventh-largest economy, spurred by a 2.5% annual growth during 2013. Growth slowed during last year due to reduced demand for Brazilian exports in Europe and Asia and modest consumer demand from Brazil’s large middle class. By 2020, Brazil is projected to be the fifth-largest consumer market in the world, ahead of France and the United Kingdom.

Brazil is leading the region with respect to the total value of B2C e-commerce. Total B2C e-sales reached US17.4bn in 2013 from US$15.5bn in 2012, a growth of 12% per cent. At the end of the year 2013, there were 53 million e-shoppers, according to the Brazilian Association of Electronic Commerce (ABComm). In 2014, e-commerce is expected to increase 37%, a higher growth than foreseen by other experts. Reasons for this strong lead in e-commerce and the ongoing growth forecast increase include rapid sale of mobile devices and a growing “new” middle class, with more than 50% of consumers going online.

Brazil is showing absolutely zero signs of slowing down in the digital expansion and buying sectors. While only 23% of the population has internet capable smart phones, that’s still the largest mobile phone network in South America. Over the course of the next few months, it’s predicted that Brazil will be the 5th largest mobile phone market in the world. Out of the over 100 million Brazilian internet users out there, 61% have already bought something online. The largest demographic in Brazil (15 to 34 year olds) is also the largest amount of e-commerce shoppers (62%).

With 65 million Facebook users, Brazil is second to America in the number of active users each month. And even with those numbers, Twitter is actually the largest social media platform in the country! Plus, Brazilians are on their computers 27 hours per month on average, compared to the 24 hours worldwide.

Brazil is in the top five countries for cross-border shopping as an estimated79% of the Brazilian population shops in US-based stores.

Doing business in Brazil requires intimate knowledge of the local environment, including both the direct as well as the indirect costs of doing business in Brazil (referred to as “Custo Brasil – Brazil Cost”). Such costs are often related to distribution, government procedures, employee benefits, environmental laws, and a complex tax structure. Logistics pose a particular challenge, given the lack of sufficient infrastructure to keep up with nearly a decade of economic expansion. In addition to tariffs, companies will find a complex customs and legal system[1].

Mexico, one of the fastest growing markets in the region

E-commerce sales in Mexico are growing at a rapid rate and will continue to climb. Mexico ranks second in the region after Brazil with respect to total e-sales. The thriving middle class and rapid growth of internet connectivity make the Mexican e-commerce market attractive. More internet users means more opportunities for e-commerce. The Mexican Internet Association AMIPCI estimates the number of internet users in Mexico at 50 million in 2013, ten per cent more than in 2012. The number of digital buyers in Mexico is expected to grow by 114% by 2018, a much higher growth rate than any other country in the region. Smartphone adoption is also encouraging online spending. 57% of Mexican consumers own a smartphone and 20% have already made a purchase with their mobile device.

Most internet surfers use the web only as a way to search for information. In fact, while 90% of Mexicans research online when they want to make a purchase, only 39% make that purchase on the Internet. Nevertheless, e-commerce in the country grew by 57% in 2012 and by 42% in 2013.
44% of Mexican online buyers shopped on foreign websites in 2013, of which just 5% solely.

While e-commerce is thriving in Mexico, there are definitely some challenges that come with doing business in the region. First of all, Mexico is still largely a cash economy with only 13% of adults holding a credit or debit card. Even those with cards don’t feel comfortable giving out their information online and want to pay cash on delivery. This leads to restricted payment options for merchants.

Logistical challenges present a problem as well. Complicated tariff and tax structures, and expensive and unreliable shipping methods are just a few of the challenges merchants need to be aware of.

The Mexican e-commerce market is definitely one to watch with its growing affluent population and heavy online spenders. To be successful in the region merchants need to concentrate on providing reassurance to consumers as well as fast, reliable, and cost effective delivery methods. As we’ve seen, mobile purchase intent is high so a mobile friendly site should also be a high priority. By understanding that shopping behaviour of consumers will differ from region to region, and even within the region, merchants will have the best chance to take advantage of e-commerce growth in Latin America[2].

Argentina, cross-border shopping increasingly popular

According to CACE (the Electronic Commerce Chamber), online commerce reached a new record in 2013 by growing almost 50% compared to 2012. Online sales turnover reached ARS 24.8 billion (US$4,56bn) spent in online purchases carried out by 12 million people. Forecast for 2014 is that the markets will grow another 40% to reach ARS34.7bn.

The increase of the number of Internet users and companies who sell products online together with a wider variety of products offered, more safety measures and increased user confidence are some of the reasons behind the growth.

Online cross-border shopping is becoming increasingly popular in Argentina. Often better deals and a wider range of goods attract customers to foreign websites. This trend is fuelled by the relatively high rate of inflation in Argentina, which the government does not seem able to bring under control. The number of online shoppers in Argentina purchasing from foreign websites doubled in 2013,
Transport and travel-related tickets top the list of online purchases with close to 30%, followed by electronic goods and accessories (11%), food and drinks (8%), mobile phone purchases (7%) and home supplies (4%).

In January 2014, the Argentinian government imposed control and increased taxes on goods bought online from foreign stores. Items purchased through international websites are subject to a 50% tax. Anyone buying abroad is now required to sign a declaration at the customs office where the package is to be collected. The Argentinian government worried about the devaluation of the Peso enforced this embargo to protect its currency. However, since the “foreign embargo” local e-commerce sites have seen record sales growth. 40% of the Argentinian population is making daily online purchases. Forecast for 2014 is a growth between 40 and 45 per cent to reach AR$34,7bn (US$4,7bn). The Argentinian preferred online payment methods are credit cards and electronic fund transfers.  The Argentinian e-commerce market is clearly a market to watch.

Argentina is one of nine global “high-growth markets,” expected to account for 21.7% of global revenue in 2018. Additionally, the Millennia demographic is substantial in Argentina, with 65% of the population aged from 15 to 34 years old; providing huge opportunities for e-commerce sites specialising in fashion for the youth demographic. Lastly, social media usage is exponential in Argentina. The country is number three in the world for most hours spent on social media each month. The majority of time is spent on Facebook, Twitter, Tumblr and Instagram.

The table hereunder shows the number of Internet Users and Digital Shoppers in selected Latin America countries:

[1] Sources: ABCcomm, Luna Vega, LatinLink, Visa et alia

[2] Sources: AMIPCI, Luna Vega, IORMA research and estimates


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