Why did Amazon announce a 47,000 square-meter distribution center in Brazil alongside a huge investment in Prime Video marketing? Why does Uber's CEO Dara Kroshrowshahi say that Latin America is one of the best markets in the world for the rideshare business? Why did Instagram launch a new feature just for Brazilians? What is so special about Latin America that has attracted these global companies to invest in the region so heavily?
The answers to these questions circle back to two main reasons: consumer power and internet access. The combination of these two factors that are increasing rapidly in Latin America (LATAM) makes countries like Brazil, Mexico, Chile and Colombia some of the most promising countries for investment in the next few years. Otherwise, brands like the ones I mentioned wouldn't bet millions of dollars there, right?
Let's dive deeper to understand the real situation of digital consumption landscape in LATAM. Shopify, for instance, an EBANX partner, has Brazil as its third largest market in the world. In the digital services market, Spotify’s investments also show the potential of LATAM, where the company has more than 45 million active users in the region and holds an impressive 89% market share in Mexico. Additionally, Uber selected LATAM as one of its priority regions for one simple reason: Brazil and Mexico are among the company's most popular countries. In fact, Brazil is Uber’s second largest national market. Internet access and consumer power.
And it doesn’t stop there. By the end of 2020, 450 million people in the region will be connected to the internet through their smartphones, meaning that nearly 100% of the adult population will have access to digital services provided by companies like Netflix, Amazon, Disney+ and more. But it isn’t just the access to the internet that makes LATAM different and unique from other regions, the smartphone usage also sets it apart. In Brazil, 62% of consumers have used smartphones to buy online on international websites, according to a recent study by EBANX. This number is only expected to increase a year from now.
The increase in digital consumption and internet access undoubtedly boosts ecommerce as well - no other region in the world has seen greater growth in cross-border ecommerce than South America. The region’s cross-border ecommerce saw a 37% increase over the last year and is the only region with a more rapid growth than APAC. Regionwide, ecommerce also represents only 2.5% of all retail spending in LATAM, compared to 10% in the United States and 20% in China, as reported by Americas Market Intelligence. Meanwhile, Mexico’s ecommerce market is expected to reach double-digit growth in 2020. Today, it is already worth USD 22.6 billion US dollars, according to J.P. Morgan.
That's not just for the big B2C companies. Data around investments in services offered by B2B companies, like cloud computing and Software-as-a-Service (SaaS) shows impressive growth as well. Although Brazil is the largest market in LATAM and the fourth market of the world in terms of internet users, the country is ranked 18th globally in cloud computing policies and infrastructure, as reported by BSA | The Software Alliance. That is expected to change within the next five years, as the SaaS industry is projected to grow by about 25% annually throughout LATAM, according to Gartner, especially with the boom in new successful startups, most of it aiming at digital service demand – EBANX included.
It would be safe to say, by the movements in the market and the fast-growing internet access that LATAM has had in the past years that there’s a clear opportunity here. LATAM is expected to become one of the largest markets in the coming years and is currently in its finest years for those who are seeking an investment based on new digital services and internet users. Technology giants like Uber, Amazon, Spotify and Facebook don't invest without a purpose. They know where they're going and why they're doing it. And the magic around LATAM is that there is still plenty of room for other companies. But this won’t be for long, I'm sure. The time is now. The year is 2020.
About Henrik Nilsmo
With over 10 years of experience in commercial and product leadership, Henrik Nilsmo, based in New York City, is the Chief Commercial Officer of EBANX. He is leading the initiative to further grow and expand EBANX geographical reach and footprint, especially in North America, APAC and EMEA.
About EBANX
EBANX is a payments company that offers end-to-end payment solutions for global companies wanting to expand in Latin America. Founded in 2012 to bridge the access gap between Latin Americans and international websites, EBANX operates across the entire cross-border ecommerce transaction flow for international companies. It has operations in Brazil, Mexico, Argentina, Colombia, Chile, Peru, Ecuador, and Bolivia, and offices in Brazil, Mexico, Uruguay, Argentina, US, the UK, and China.
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