With the 2014 FIFA World Cup and the 2016 Summer Olympics contributing to change, Brazil is leading Latin America in the development of its telecommunications industry. Yet, as billions are predicted to fuel this rising industry there and in other Latin American nations, issues like regulation and tax threaten to bog down progress.
Since the movement from state-owned operations to privatization in 1996, Brazil has pushed for an improved telecommunications industry, an effort that has largely paid off. The United Nations Economic Commission reports that it expects Brazil’s economy to grow by 4% in 2013. This growth has many foreign investors racing to gain permissions to purchase property, for example, ahead of the government’s plans to revamp its games-related infrastructures, as NuWire Investor reports. As both people and investment pour into Brazil, the expectation and demands for continued telecom improvements are high.
Like Brazil, other Latin American nations are improving their telecom situation by implementing national broadband plans. Chile and Columbia have followed Brazil’s lead, with infrastructure and service plans that have investors excited about the potential of their markets.
Economists are also pointing to the increasing number of consolidations as telecom companies partner to meet increased service demands Mexico’s media giant Televisa invested 1.6 billion dollars in the mobile operator Grupo Iusacell to capture a greater chunk of the country’s telecom industry. In Columbia, Telefónica Móviles merged with Colombia Telecomunicaciones to create the nation’s second largest telecommunications group.
No Latin American nation, including Brazil, has a clear playing field to telecommunications bliss. Last August, The Globe and Mail reported that “aggressive moves recently by Brazilian regulators have shaken the industry and raised concerns about increasing state intervention.” Strict regulation has also been problematic for telecomm development in other regional nations like Mexico.
Taxation of both telecom operators and consumers also hinders growth, according to a study conducted by GSMA. It reports that recent tax hikes in Mexico and Panama caused “penetration and usage of mobile services” to shrink.
GSMA reports that Brazil’s tax rate for telecom is high in comparison with the region. And according to the International Business Times, regardless of these tax rates, Brazil is demanding its telecomm giants further invest 9.8 billion in upgrades to resolve issues like dropped calls and poor reception.
Not surprisingly, their report also demonstrates that decreasing taxes for the telecom industry may lead to market growth, just like it did in Ecuador and Uruguay.
End Goal in Sight
Other Latin American countries will be watching to see how Brazil fares in the coming months and years before the international games further transform the region and the attention it draws from abroad. If Brazil continues to place game-time readiness in front of the telecom industry — with nods to foreign investors in the way of regulatory- and tax relief — the region may have its first real telecom star.