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Telecommunications and Development in Latin America: The Role of Multinationals

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. Telecommunications and FDI in Latin America.

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Telecommunications and Development in Latin America: The Role of Multinationals

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  1. Telecommunications and Development in Latin America: The Role of Multinationals 12th EADI General Conference Geneva, Switzerland 25 June 2008Juan R. de LaiglesiaOECD Development Centre

  2. 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.

  3. Telecommunications performance in Latin America Source: ITU, 2006, World Telecommunications Database

  4. Latin America leads developing world in telecoms FDI Source: OECD Development Centre, based on PPI Database, World Bank Source: Information and Communications for Development 2006, World Bank

  5. In ten years, telephone density has become less sensitive to the country’s GDP… Income per capita and telephone density

  6. … but relative performance remains very different from one country to the next Source: OECD Development Centre, based on ITU(2007) and World Development Indicators data.

  7. Investment in telecommunications has accompanied a marked increase connectivity The number of telephone lines has increased by a factor of 10 in Latin America, in part because of foreign investment Source: OECD Development Centre, based on SEDLAC (2007) and IADB (2007) data.

  8. Across countries, foreign investment has gone hand in hand with increased connectivity Source: OECD Development Centre, based on PPI Database, the World Bank

  9. Part of the story is the relative success of privatisations 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) Source: OECD Development Centre, based on PPI Database, the World Bank

  10. 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) Source: OECD Development Centre, based on company data

  11. An unequal distribution of benefits Inequality is high: a quarter of poor households have a telephone at home, 3 times less than high-income households Source: OECD Development Centre, based on SEDLAC surveys.

  12. Foreign actors are not associated with lower inequality Source: OECD Development Centre, based on PPI Database, the World Bank and SEDLAC.

  13. Market contestability is limited Perfect competition Monopoly Source: OECD Development Centre, based on companies’ data.

  14. 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

  15. Thank you for your attention! www.oecd.org/dev/

  16. Appendix

  17. Latin America’s performance has improved vis-à-vis otherregions Source: OECD Development Centre, based on ITU (2006) and World Bank (2006) data.

  18. Access has improved significantly but large disparities remain Source: ITU, World Telecommunication Indicators Database, 2006

  19. Quality has also improved substantially Source: Telefónica

  20. 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

  21. 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)

  22. Diffusion and inequality: the example of Brazil

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