Elatin America Report July 2001

Latin America Online: Demographics, Infrastructure, Usage Patterns and eCommerce Trends

July 2001

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Methodology 13 I Overview 15 II Population and Economy 19

A. Deﬁning the Region 20

Population 20

B. Identifying Potential Internet Users in Latin America 22

Age Distribution 22

Income Distribution 24 III Technology Infrastructure 29

A. Telecommunications 30

Fixed-Line Telephones 31

Wireless Telephony 34

B. Broadband 40

Cable 42

DSL 45

Alternative Broadband Technologies 47

C. Dial-Up Access and Internet Service Providers (ISPs) 49

Dial-Up Access 49

ISPs 51

D. Hardware 53

E. Internet 60

Network Capacity 60

Internet Hosts 61

Internet Content 62

F.Access Costs 63 IV Internet Users and Access 69

A. Internet Users 70

Market Concentration 71

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Comparative Estimates 73

B. Wireless Internet Users 77

C. Access Preferences 80

Home and Work 80 V Usage and Demographics 85

A. Usage 86

Frequency of Sessions 86

B. Usage Patterns 87

C. Demographics 88

Gender 88

Age 89 VI eCommerce 91

A. Total eCommerce 92

Comparative Estimates 95

B. B2C eCommerce 97

B2C Revenues 97

Comparative Estimates 99

Payment Methods 99

Residential Delivery 101

Privacy and Security 103

Consumer Attitudes and Preferences 105

C. B2B eCommerce 106

Comparative Estimates 108

Business Process Automation and IT Spending 109

D. mCommerce 112 VII eAdvertising 113

A. Online Advertising Expenditures 114

B. Click-Through Rates 115

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C. Wireless Advertising 116 VIII eFinance 117

A. Online Banking 118

Argentina 119

Brazil 120

Chile 122

Colombia 122

Mexico 122

Venezuela 123

B. Online Trading 123

Brazil 124

C. Wireless Financial Services 125 IX Argentina 129

A. Overview 130

Low-Cost Access 131

B. Technology Infrastructure 131

Fixed-Line Telephones 131

Wireless Telephony 132

Broadband 134

C. Internet Users and Access 140

Comparative Estimates 140

Access Preferences 141

D. Usage and Demographics 144

Frequency of Sessions 144

Duration of Sessions 145

Usage Patterns 146

Most Popular Websites 258

Gender 260

Age 261

Socioeconomic Status 262

E. eCommerce 263

Total eCommerce 263

Comparative Estimates 264

B2C eCommerce 264

Comparative Estimates 265

Transactions 266

Payment Methods 267

Taxation 268

Residential Delivery 268

Privacy and Security 268

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B2B eCommerce 274

Comparative Estimates 275

Business Internet Penetration 276

Exchanges and Marketplaces 277

F.eAdvertising 278 XII Chile 279

A. Overview 280

Low-Cost Access 281

B. Technology Infrastructure 281

Fixed-Line Telephones 281

Wireless Telephony 283

Broadband 287

C. Internet Users 289

D. Demographics 290

Socioeconomic and Educational Status 290

Geography 291

E. eCommerce 291

Total eCommerce 291

B2C eCommerce 292

Transactions 295

Payment Methods 296

Taxation 296

Residential Delivery 296

Privacy and Security 296

Consumer Attitudes and Behavior 297

B2B eCommerce 298

Business Internet Penetration 299

F.eAdvertising 301

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XIII Colombia 303

A. Overview 304

Low-Cost Access 305

B. Technology Infrastructure 305

Fixed-Line Telephones 305

Wireless Telephony 306

Broadband 307

C. Internet Users, Access and Usage 308

Access Preferences 309

Usage Patterns 309

D. eCommerce 310

Payment Methods 310

Taxation 310

Residential Delivery 311

Privacy and Security 311

Consumer Attitudes and Behavior 312

E. eAdvertising 312 XIV Venezuela 313

A. Overview 314

Low-Cost Access 314

B. Technology Infrastructure 315

Fixed-Line Telephones 315

Wireless Telephony 315

Broadband 317

C. Internet Users 318

D. eCommerce 318

B2C eCommerce 319

Transactions 319

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Payment Methods 319

Residential Delivery 320

Privacy and Security 320

Consumer Attitudes and Behavior 320

E. eAdvertising 321 Index of Charts 323

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July 2001

Welcome to eMarketer

Dear Reader:

Noah Elkin Senior Analyst, eMarketer [email protected] eMarketer’s July 2001 Latin America Online: Demographics, Infrastructure, Usage Patterns and eCommerce TrendsTM offers the most comprehensive and accurate picture available of the internet in eMarketer, inc. this important region of the globe. 821 Broadway This report is a valuable reference tool for tracking the internet market in Latin America. It provides New York, NY 10003 T: 212.677.6300 critical data and insights for developing business and marketing plans, creating presentations, answering F: 212.777.1172 vital, “need-to-know-now” questions and making informed decisions about online ventures. Presenting statistical information from a wide range of authoritative research sources, Latin America Online: Demographics, Infrastructure, Usage Patterns and eCommerce TrendsTM provides quick answers to hundreds of questions, such as: How many people are using the internet in Latin America and what are their preferred online activities? Which country has the highest internet penetration rate? How fast is e-commerce growing in Argentina? Brazil? Mexico? How are businesses budgeting and implementing their e-commerce strategies? Where is broadband internet access growing the fastest? How many people subscribe to wireless services across the region and what is the future of the mobile internet in Latin America? Who is using online banking in Latin America?

If you have any questions or comments concerning eMarketer or any of the material in this report, please call, fax or e-mail us.

Noah Elkin Senior Analyst

Written by Noah Elkin

Also contributing to this report: Reuse of information in this document, without prior authorization, Mustafa Sakarya, researcher is prohibited. If you would like to license this report for your Tracy Tang, researcher organization, please contact David Iankelevich at Deborah Sroge, editor [email protected], or 212.763.6037. Pascale Gabbey, copyeditor Dana Hill, production artist James Ku, production

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Methodology 13

I Overview

II Population and Economy

III Technology Infrastructure

IV Internet Users and Access

V Usage and Demographics

VI eCommerce

VII eAdvertising

VIII eFinance

IX Argentina

X Brazil

XI Mexico

XII Chile

XIII Colombia

XIV Venezuela

Index of Charts

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Methodology Methodology: The eMarketer Difference Overview

Population and Economy Technology Infrastructure eMarketer research is founded on a simple philosophy of aggregation: Internet Users and Access

Usage and Demographics eCommerce The key to approaching quantitative truth – particularly when eAdvertising examining the internet marketplace – is to consider data from as many eFinance reputable sources as possible. No one has all the answers. But taken Argentina together, multiple sources, coupled with healthy doses of common Brazil sense and business intelligence, create a reasonably accurate picture. Mexico

Chile

Colombia eMarketer has no testing technique to protect, no research bias and no Venezuela clients to please. The eMarketer research team begins each report by Index of Charts examining research studies, surveys and reports from hundreds of published, publicly available sources; we then filter, organize and synthesize the information into tables and graphs. Finally, we present the comparative source data along with our own analysis, estimates and projections. As a result, each set of findings reflects the collected wisdom of numerous research firms and industry analysts. The benefits to our readers are threefold: Information is more objective and comprehensive than that provided by any other single research source Information is available in one place – easy to find, evaluate and compare Information can be quickly accessed to make intelligent, well-informed business decisions

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Methodology I Overview 15

II Population and Economy

III Technology Infrastructure

IV Internet Users and Access I V Usage and Demographics VI eCommerce

VII eAdvertising

VIII eFinance

IX Argentina

X Brazil

XI Mexico

XII Chile

XIII Colombia

XIV Venezuela

Index of Charts

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Methodology This eMarketer report provides a guide to the internet in Latin America. It Overview covers the entire Latin American and Caribbean region in its assessment of Population and Economy internet users and usage, focusing in particular on Argentina, Brazil and Technology Infrastructure

Internet Users and Access Mexico, the region’s three largest internet markets. It examines the current Usage and Demographics state of the web in the region, projects the growth of active internet users eCommerce over the next 4 years and examines key opportunities for - as well as eAdvertising obstacles to - the internet’s growth throughout the region. By combining eFinance

Argentina eMarketer’s own forecasts of the Latin American internet market with

Brazil estimates from other research ﬁrms, this report is designed to give the Mexico reader a complete picture of the internet’s evolution across the region. Chile Over the course of 2000, internet markets worldwide experienced some Colombia very dramatic ﬂuctuations and the Latin American internet market was no Venezuela

Index of Charts exception. In the first half of the year, investments in internet portals, Internet Service Providers (ISPs), e-commerce marketplaces and personal finance sites soared. Latin America witnessed a marked rise in the number of Spanish- and Portuguese-language websites, spurred in great part by the recent launch of heavily financed portals such as StarMedia and Terra Networks. The launching of Spanish and Portuguese versions of major US players like Yahoo!, AltaVista, Microsoft’s MSN.com and AOL added to this growth. Local content producers contributed to this trend as well, with Argentina becoming one of the largest producers of Spanish-language content on the internet. In short, with internet usage in Latin America growing at one of the fastest rates in the world, visions of millions of e- commerce dollars danced before the eyes of internet proponents across the region and abroad. Enthusiasm for the internet cooled around the world in the spring of 2000, and, again, Latin America was part of the trend. Venture capital markets contracted and even the most glorified Latin American websites were forced to tighten their belts and reexamine strategies and revenue projections. Some skepticism towards Latin America’s internet market is warranted, particularly where its short-term growth is concerned. Considerable barriers to rising internet usage remain, among which are widespread poverty and income inequality that make the internet unaffordable to all but a small percentage of the population, an antiquated and limited telecommunications infrastructure, and low PC ownership and penetration rates. Consequently, only about 15% of the population (largely made up of members of the middle class and above) can be considered a “target market” for internet services. Not surprisingly, most studies find that the vast majority of internet users are concentrated in the top three socioeconomic segments. The greater challenge for internet companies lies in extending access of new technologies to the broader population that has far more limited financial means.

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Methodology Much of the region’s telecommunications infrastructure is fragile and Overview poorly developed, and teledensity rates across Latin America tend to be Population and Economy low. For example, there are only 21.5 telephones per 100 inhabitants in Technology Infrastructure

Internet Users and Access Argentina, 14.9 per 100 in Brazil and 12.5 per 100 in Mexico. Basic Usage and Demographics telephone costs are high, and remain one of the principal obstacles to eCommerce growth in internet usage across the region. However, thanks in large part to eAdvertising deregulation, investment in the telecommunications market is proceeding eFinance

Argentina rapidly, promising better and cheaper service for home and business users.

Brazil The wireless market is also expanding aggressively, with estimates putting Mexico the number of subscribers in 2004 as high as 189 million. However, in the Chile near term, the number of people accessing the internet from a wireless Colombia device will be small. Rather, increased ﬁxed-line teledensity is one of the Venezuela

Index of Charts keys to growth in Latin America’s internet market. Likewise, the percentage of the Latin American population with a PC at either home and/or at work is still exceedingly small, ranging from a low of an estimated 3% in Peru to a high of nearly 10% in Argentina. Like the region’s low teledensity rates, low PC penetration rates will hamper growth in the number of internet users. Still, all signs indicate that Latin Americans without a PC at home will increasingly have the option of using a computer at their offices, schools, public libraries and community centers. As a result, Latin America remains an emerging internet market, one whose promise is far from fulfilled. However, this unfulfilled potential is cause for optimism. First of all, the region’s 527 million brand-conscious consumers represent a sizeable market. Moreover, a significant portion of those 527 million is young. For example, 48% of Brazilians and 54% of Mexicans are 24 and younger. As they mature and as their income and spending power grow, the youth of today will emerge as a powerful force in the region’s internet market. The number of active internet users in the region will increase exponentially over the next 4 years, from 15.3 million in 2001 to 40.8 million in 2004. However, this considerable user population is not evenly spread throughout the region. Three countries, Brazil, Mexico and Argentina, account for approximately 65% of the region’s 15.3 million active internet users, and Brazil’s user population alone represents 40% of the total. Other countries with substantial populations, such as Colombia, Peru and Venezuela, currently lack the infrastructure and a sufficient target market to substantially contribute to the region’s overall internet population. Nations like Chile, which has a relatively high internet penetration rate, are simply too small to play a significant role in the overall internet market.

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Methodology Formerly the province of men, the internet user population in Latin Overview America has been tending toward increasing gender parity. Whereas a 1997 Population and Economy survey found that 76% of users throughout the region were male, a study Technology Infrastructure

Internet Users and Access conducted last year determined that the proportion of male users had fallen Usage and Demographics to 60%. Even in countries like Argentina and Mexico, where as recently as eCommerce 1999 approximately 75% of internet users were men, the ratio of male to eAdvertising female users is becoming more balanced. The latest studies have revealed eFinance

Argentina that only 58% of Mexican and 57% of Argentine internet users are men. On

Brazil one hand, the growing proportion of female internet users reﬂects the fact Mexico that a majority of the population in countries like Argentina, Brazil and Chile Mexico is female. On the other, it is indicative of other trends throughout Colombia the region: more women are participating in programs of higher education Venezuela

Index of Charts and, subsequently, entering the workforce. Online advertising expenditures and total e-commerce revenues in Latin America will increase as the number of active internet users and the average time spent online increase. Online ad spending will total $277 million in 2001 and will rise to $814 million in 2003. Meanwhile, total e- commerce revenues will reach $9.63 billion in 2001, with B2B transactions of $7.87 billion and B2C transactions of $1.76 billion. As with the region’s internet user population, Brazil is the powerhouse in e-commerce, accounting for nearly 70% of total e-commerce revenues. Overall e- commerce revenues will increase markedly by 2004, to $66.50 billion, largely fueled by advances in the B2B segment. Businesses of all sizes as well as national and local governments will increasingly do their procurement online. By 2004, B2B transactions will generate 88% of e- commerce revenues in the region. B2C revenues will increase at a more modest pace, hampered by low credit card, PC and telephone penetration rates, fragile infrastructures, limited parcel delivery systems and the fact that online Latin American buyers continue to shop at foreign sites. Consequently, many of the approximately 1,300 online retailers in Latin America will be hard-pressed to survive, and the likelihood is that the number will shrink in the near term. Finally, as with the use of the wireless internet, mobile commerce and advertising will not see significant growth for several years. However, use of wireless financial services will grow precipitously over the next 5 years, with 24.8 million users of wireless financial content and transaction capabilities expected by 2005.

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Methodology

I Overview II Population and Economy 19 A. Deﬁning the Region 20 B. Identifying Potential Internet Users in Latin America 22

III Technology Infrastructure IIIV Internet Users and Access V Usage and Demographics

VI eCommerce

VII eAdvertising

VIII eFinance

IX Argentina

X Brazil

XI Mexico

XII Chile

XIII Colombia

XIV Venezuela

Index of Charts

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Methodology A. Deﬁning the Region Overview Population and Economy This report analyzes internet users and usage in the countries of the Technology Infrastructure Caribbean and Central and South America, with particular attention to Internet Users and Access Argentina, Brazil, Chile, Colombia, Mexico and Venezuela. The region is Usage and Demographics eCommerce linked not only linguistically by both Spanish and Portuguese, but also by a eAdvertising shared history and longstanding economic interdependencies. Although eFinance the terms “Latin America” and “Caribbean” are applied broadly to describe Argentina the region and circumscribe it geographically, the countries within, from Brazil Argentina to Venezuela, are anything but homogeneous. To the contrary, Mexico

Chile this report reveals that considerable differences exist in the development of Colombia internet markets across the region. Venezuela Index of Charts Population Just over half of Latin America’s people live in Brazil and Mexico. These two countries are the largest Latin American markets for computers, internet access devices and internet services. Argentina, although only the fourth most populous country in the region, is the third-largest internet market due to a combination of factors: high per capita GDP; a well- educated population; a strong telecommunications infrastructure and high credit card penetration rates. For similar reasons, Chile, with a population of only 15.3 million people, is home to a ﬂourishing internet market, although the country’s small population does represent a barrier to growth in online services and commerce.

Population of Latin America and the Caribbean, by Country, 2001 (in millions) Coutry Population % of total Brazil 174.5 33.1% Mexico 101.9 19.3% Colombia 40.3 7.7% Argentina 37.4 7.1% Venezuela 23.9 4.5% Chile 15.3 2.9% Other countries 133.7 25.4% Total 527.1 100.0% Note: Figures do not add up precisely due to rounding Source: US Census Bureau, 2000; eMarketer, 2001

Latin America’s 527 million inhabitants represent just 8.6% of the world’s total population. However, according to a 1999 study by the UN Population Division, 75% of the region’s population is concentrated in urban areas, the majority of which possess well-developed telecommunications, banking, media and transportation infrastructures.

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Methodology

Overview Population Living in Urban/Rural Areas in Latin Population and Economy America and the Caribbean, 2000

Technology Infrastructure

Internet Users and Access

Usage and Demographics eCommerce Rural 25% eAdvertising eFinance

Argentina

Brazil Urban Mexico 75% Chile

Colombia

Venezuela Index of Charts Source: UN Population Division, 1999

In fact, considerable disparity also exists in the region’s population density on a country level. For example, Brazil alone has 13 cities with more than 1 million inhabitants, while Mexico has 8 cities, Colombia has 4 and Argentina has 3. The metropolitan regions of the region’s largest, Mexico City, São Paulo, Buenos Aires and Rio de Janeiro, are home to 18.1, 17.8, 12.6 and 10.6 million residents, respectively, according to the 1999 UN study. In Brazil, the densest population concentration can be found in the Southeast and Southern regions, comprised of the states of São Paulo, Rio de Janeiro, Minas Gerais, Espírito Santo, Paraná, Santa Catarina and Rio Grande do Sul. The highly industrialized state of São Paulo alone represents nearly one-ﬁfth of Brazil’s total population, while the metropolitan region of Buenos Aires is home to one-third of Argentina’s total population. As it expands each year, Mexico City likewise assumes an increasing portion of Mexico’s inhabitants. Household incomes tend to be disproportionately higher and the infrastructure better developed than the national average in these densely populated regions. This concentration of population is advantageous for several reasons: Makes the expansion of existing and development of new technology and delivery infrastructures more cost effective Facilitates marketing of internet services using traditional media Eases delivery of goods bought and sold online

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Methodology

Overview Population Living in Urban Areas in Selected

Population and Economy Countries in Latin America, 1999

Technology Infrastructure

Internet Users and Access Argentina 90%

Usage and Demographics Venezuela 87% eCommerce eAdvertising Chile 85% eFinance Brazil 81% Argentina Brazil Mexico 74% Mexico

Chile Colombia 73%

Colombia Source: World Bank, 2000 Venezuela

Index of Charts B. Identifying Potential Internet Users in Latin America Unless otherwise noted, eMarketer counts only persons ages 14 or older as potential “internet users.” Therefore, internet penetration ﬁgures are percentages of this population age 14 and over, not the total population. The table below presents the population age 14 and over for the region’s leading internet markets for the years 2001 to 2005. This substantial group constitutes fully 70% of the region’s total population.

Population 14+ of Selected Internet Markets in Latin America, 2001-2005 (in millions) Country 2001 2002 2003 2004 2005 Argentina 28.1 28.5 28.9 29.3 29.7 Brazil 128.1 130.1 132.1 134.1 135.8 Chile 11.4 11.6 11.8 12.0 12.2 Colombia 28.3 28.9 29.5 30.0 30.6 Mexico 70.2 71.7 73.2 74.8 76.3 Venezuela 16.7 17.1 17.5 17.9 18.3 Rest of region 90.6 92.7 94.7 96.8 98.5 Total Latin America 373.4 380.6 387.7 394.9 401.4 Source: US Census Bureau, 2000; eMarketer, 2001

Age Distribution Latin America is a signiﬁcantly younger region than the United States and younger than many countries in Europe and Asia. For example, 48% of Brazilians and 44% of Argentines are 24 and under, and in Mexico, fully 63% of the population is less than 30-years-old. By contrast, only 35% of Americans, 32% of people in France, 31% in England and 27% of Germans and Japanese are 24 or younger.

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Methodology The youth of Latin America constitute a signiﬁcant block of both current Overview and future internet users, a fact not lost on governments, development Population and Economy organizations and private-sector consortia throughout the region. For Technology Infrastructure

Internet Users and Access example, the Argentine government, supported by funding from the Inter- Usage and Demographics American Development Bank, recently announced plans to provide internet eCommerce access for all public schools. The Brazilian government, backed by ﬁnancial eAdvertising assistance from the private sector and non-proﬁt organizations, has eFinance

Argentina likewise announced plans to connect thousands of schools to the internet

Brazil and install internet kiosks in urban areas throughout the country. The Mexico governments of Chile and Mexico have launched similar programs. Chile At present, children, teens and young adults may not have the same Colombia purchasing power nor the same ability to secure credit as adults, but the Venezuela

Index of Charts child who today demands the latest from Nintendo is a likely candidate to buy a mobile phone and computer tomorrow and to use one or the other (or both) to make purchases.

Age Breakdown of Selected Countries in Latin America, 2001

Argentina 44% 33% 24%

Brazil 48% 36% 16%

Chile 44% 36% 20%

Colombia 50% 36% 14%

Mexico 54% 33% 13%

Venezuela 52% 35% 14%

0-24 25-49 50+ Source: US Census Bureau, 2000; eMarketer, 2001

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Methodology Income Distribution Overview Even though Latin America has a large pool of potential internet users, the Population and Economy

Technology Infrastructure region’s widespread poverty and uneven income distribution put the ability Internet Users and Access to access the internet beyond the reach of most of the population. As the Usage and Demographics ﬁgures below demonstrate, 42.5% (or 43 million) of Mexico’s 100 million eCommerce people live on the equivalent of $2.00 per day, as do 17.4% (or 30 million) eAdvertising eFinance of Brazil’s 173 million citizens.

Argentina

Brazil Population Living on $2.00/Day or Less in Selected Mexico Countries in Latin America, 1994-1997

Chile

Colombia Brazil (1997) 17.4%

Venezuela Chile (1994) 20.3% Index of Charts Colombia (1996) 28.7%

Mexico (1995) 42.5%

Venezuela (1996) 36.4%

Note: 1993 prices Source: World Bank, 2000

Despite the fact that some countries in the region have seen relative economic stability in the past year, a considerable portion of the population, comprised particularly of the urban poor, will remain largely disconnected from the internet economy until income distribution equalizes. Consequently, the “target” market for internet services in Latin America represents a small segment of the total population. According to the Strategy Research Corporation (SRC), the buying power of the 18 largest Latin American markets, which are home to approximately 120 million households, totaled $1.3 trillion in 2000, up from $1.23 trillion in 1999. SRC predicts that buying power grew by 9% in Brazil, 7% in Mexico and 3% in Argentina. SRC forecasts indicate that average buying power per household will reach $20,703 in Argentina, $18,364 in Mexico and $15,299 in Venezuela. These figures are indications of economic recovery across the region, but given the pattern of income distribution in Latin America, the positive effects of the economic rebound will undoubtedly have an uneven impact across the region. In addition, in order for this trend to continue, Latin American countries must continue to display low indices of inflation, increasing exports and an overall climate of stability. Goldman Sachs predicts that in 2001, real GDP growth will range from 3% in Argentina to 5.5% in Chile, while inflation will range from a low of 1% in Argentina to a high of 15% in Venezuela. Ongoing recessions in parts of the region, particularly in Argentina and Colombia, may lead some consumers to conserve their disposable income.

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Methodology Deﬁnitions of socioeconomic segments differ from country to country in Overview Latin America owing to disparities in the cost of goods and services, the Population and Economy degree of accuracy in the reporting of household income to government Technology Infrastructure

Internet Users and Access authorities and survey research firms, and variances in year-to-year Usage and Demographics household income. As a result, national marketing associations in each eCommerce country have created their own country-specific definitions based on eAdvertising point-scoring schemes. What the definitions share is a focus on educational eFinance

Argentina achievement, occupation and ownership of consumer goods. Furthermore,

Brazil all divide the population into A, B, C and D strata, although some Mexico associations further divide the C stratum (middle class) into C1, C2 and C3 Chile designations, while others include an E stratum as the lowest socio- Colombia economic level. Venezuela

Index of Charts In Argentina, the definition developed by the Argentine Marketing Association (La Asociación Argentina de Marketing) is based on the occupation and level of education attained by the main income earner in each household, the possession of consumer goods, and housing factors (style, size, materials, appearance). The standard, accepted Brazilian classification, developed by the National Association for Research Organizations (Associação Nacional de Empresas de Pesquisa or ANEP), includes an E stratum as the lowest socioeconomic level. The definition looks at the head of household’s educational achievements as well as the number of consumer goods (TVs, vacuum cleaners, washing machines, radios), domestic helpers and bathrooms in each household. In Mexico, the point-scoring scheme formulated by the Mexican Association of Marketing and Public Opinion Research Agencies (La Asociación Mexicana de Agencias de Investigación de Mercado y Opinión Pública or AMAI) is based on the educational achievement and occupation of the head of household, the ownership of consumer goods, the number of light bulbs and rooms in the home (excluding bathrooms) and the number of domestic helpers. It also includes an E stratum as the lowest socioeconomic level.

Income Distribution in Selected Latin American Countries and the US, 2000 (as a % of income controlled) Brazil Chile Colombia Mexico Venezuela US Lowest 20% 2.5% 3.5% 3.0% 3.6% 3.7% 5.2% Second 20% 5.5% 6.6% 6.6% 7.2% 8.4% 10.5% Third 20% 10.0% 10.9% 11.1% 11.8% 13.6% 15.6% Fourth 20% 18.3% 18.1% 18.4% 19.2% 21.2% 22.4% Highest 20% 63.8% 61.0% 60.9% 58.2% 53.1% 46.4% Highest 10% 47.6% 46.1% 46.1% 42.8% 37.0% 30.5% Source: World Bank, October 2000

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Methodology Although not every resident of Brazil lives at or below the poverty line, the Overview average GDP per capita is nevertheless quite low, especially when Population and Economy compared with that of the United States. At best, even the richest 20% of Technology Infrastructure

Internet Users and Access the population in the wealthiest Latin American nations has roughly half Usage and Demographics the per capita income of the average US resident. eCommerce Morgan Stanley has estimated that in contrast to the US, where eAdvertising approximately 80% of the population possesses the “economic suitability” eFinance

Argentina to become regular internet users and repeat online shoppers, only 30% of

Brazil the population in Argentina, 25% in Chile and Mexico, 20% in Brazil, and Mexico 15% in the remaining Latin American countries have sufﬁcient means. Chile Colombia Wealth Distribution in Selected Latin American Venezuela Countries and the US, 2001 Index of Charts Avg. GDP Avg. GDP Avg. GDP per capita per capita: per capita: wealthiest wealthiest 20% 10% Argentina $8,130 – – Brazil $3,989 $12,905 $19,256 Chile $5,621 $17,539 $26,172 Colombia $2,218 $7,080 $10,565 Mexico $5,757 $17,262 $27,347 Venezuela $4,829 $14,441 $22,878 US $38,107 $88,055 $115,762 Source: International Monetary Fund (IMF), Morgan Stanley, 2000; eMarketer, 2001

Given that low per capita income predominates throughout the region, the “target” market for internet services is limited to approximately the top 15% of the population, which translates to members of the middle class and above. Although the spending power of middle-class Latin Americans is far more limited than that of their counterparts in the United States and Europe, their consumption habits mirror those of middle-class people around the world. Moreover, because they enjoy a generally high level of education, middle-class Latin Americans are likely to have access to a PC with an internet connection at home, work or school.

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Methodology

Overview Potential Internet Users in Selected Latin American

Population and Economy Countries, 2001-2005 (in millions) Technology Infrastructure Country 2001 2002 2003 2004 2005 Internet Users and Access Argentina 4.2 4.3 4.3 4.4 4.5 Usage and Demographics eCommerce Brazil 19.2 19.5 19.8 20.1 20.4 eAdvertising Chile 1.7 1.7 1.8 1.8 1.8 eFinance Colombia 4.2 4.3 4.4 4.5 4.6 Argentina Mexico 10.5 10.8 11.0 11.2 11.4 Brazil

Mexico Venezuela 2.5 2.6 2.6 2.7 2.7 Chile Rest of region 13.6 13.9 14.2 14.5 14.8 Colombia Total Latin America 56.0 57.1 58.2 59.2 60.2 Venezuela

Index of Charts Source: US Census, 2000; eMarketer, 2001

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Latin America Online

Methodology

I Overview

II Population and Economy III Technology Infrastructure 29 A. Telecommunications 30 B. Broadband 40 C. Dial-Up Access and Internet Service Providers (ISPs) 49 III D. Hardware 53 E. Internet 60 F.Access Costs 63

IV Internet Users and Access

V Usage and Demographics

VI eCommerce

VII eAdvertising

VIII eFinance

IX Argentina

X Brazil

XI Mexico

XII Chile

XIII Colombia

XIV Venezuela

Index of Charts

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Methodology A. Telecommunications Overview Population and Economy Accelerated development of the telecommunications infrastructure is Technology Infrastructure necessary to widen the pool of internet users in Latin America. The Internet Users and Access International Telecommunication Union (ITU) estimates that only 11% of Usage and Demographics eCommerce Venezuelans, 13% of Mexicans and 15% of Brazilians had a ﬁxed-line eAdvertising telephone in 2000, so extensive wiring is necessary before people can get eFinance online en masse. Argentina Fortunately for both consumers and businesses, the telecommunications Brazil market in Latin America has been the object of signiﬁcant investment in Mexico

Chile the past several years. Privatization of the region’s telecommunications Colombia services is largely responsible for this trend. According to the ITU, the Venezuela Americas boasted one-quarter of the 89 incumbent public telephone Index of Charts operators privatized worldwide by the end of 1999. Altogether, 70% of countries in the Americas have either partially or fully privatized their telecommunication companies and 36% allow competition in basic (fixed- line local and long-distance) services. A positive outgrowth of the trend towards privatization has been the strict performance quality and improvement guidelines imposed on both fixed-line and wireless licensees. On the down side, however, many countries in Latin America have high metered local phone charges, and operators have not shied away from passing along network build-out costs to consumers. Over time though the trend towards greater competition promises to lower telecommunications costs for both businesses and consumers. The wireless sector is also experiencing rapid growth. In Latin America, as in other developing regions, the proliferation of wireless devices may become a key factor in expanding the internet user base. Given the region’s lagging fixed-line telecommunications infrastructure, wireless web applications may be the simplest, cheapest and quickest way to bring large numbers of new internet users online. More than 20 cellular operators have already begun to offer mobile internet access, but high costs are likely to restrict the initial audience for the additional services to business users. Until the cost of access drops considerably and data transmission rates improve, mobile internet users will remain a small segment of the overall internet user population in Latin America. An additional challenge to the growth of the telecommunications market across the region may come from regulatory bodies. According to the ITU, Latin American countries created 18 new regulatory agencies during the 1990s, giving the region the highest proportion of separate regulatory bodies in the world. In many countries (Argentina and Mexico being key examples), the new regulatory agencies continue to share jurisdiction and key regulatory functions with (and even remain under the total of) the ministry sector.

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Methodology According to the consultancy Frost & Sullivan, Brazil and Chile have been Overview more successful at stimulating competition in the telecommunications Population and Economy sector than Argentina and especially Mexico, where higher barriers to entry Technology Infrastructure

Internet Users and Access remain.

Usage and Demographics eCommerce Fixed-Line Telephones eAdvertising Landline telephones are still the primary link between computers and the eFinance

Argentina internet in Latin America and are likely to remain so until internet access

Brazil becomes more widely available through cable television networks and Mexico mobile devices. Therefore, the number of telephone lines per 100 people − a Chile country’s teledensity − is an important factor in determining the potential Colombia level of internet use. Venezuela

Index of Charts Although the presence of telephone lines does not ensure that people will dial up to the internet, low teledensity reduces the possibility. Also, teledensity, like paved roads, schooling and other human development indicators, is an indicator of a nation’s overall economic condition and technological development and is correlated with internet usage. Until infrastructure investments can catch up with pent-up demand for fixed-line telephones, teledensity rates will remain low. By comparison, Gartner Dataquest estimates that 80% of the US population has a wireline telephone connection. Fortunately, all signs indicate that the telecommunications infrastructure will improve over the next few years, as the forecasts below demonstrate. Among Latin American countries, Brazil will show the sharpest increase in teledensity rates, according to both a number of research firms and the country’s own telecommunications regulator (whose growth targets tend to be more optimistic than those of research firms and investment banks). Increased teledensity and lower monthly telephone charges are the keys to growth in Latin America’s internet market.

Telephone Lines per 100 Inhabitants in Selected Countries in Latin America, 2000

Argentina 23.1

Brazil 19.8

Chile 24.5

Colombia 22.4

Mexico 13.3

Venezuela 15.3

Rest of region 17.3

Source: Gartner Dataquest, 2001

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Methodology

Overview Main Telephone Lines per 100 Inhabitants in Selected

Population and Economy Countries in Latin America, 2000

Technology Infrastructure

Internet Users and Access Chile 22.1

Usage and Demographics Argentina 21.5 eCommerce eAdvertising Colombia 16.0 eFinance Brazil 14.9 Argentina Brazil Mexico 12.5 Mexico

Chile Venezuela 10.9 Colombia Regional average 33.4 Venezuela Index of Charts Note: Regional average includes North America Source: International Telecommunication Union (ITU), 2001

Telephone Lines per 100 Inhabitants in Selected Countries in Latin America, 1999 & 2000

Argentina 20.1 21.5

Brazil 14.9

Chile 20.7

Colombia 16.0

Mexico 11.2 12.5

Venezuela 10.9

1999 2000 Source: International Telecommunication Union (ITU), 2001

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Methodology Overview Telephone Lines per 100 Inhabitants in Latin America, Population and Economy 2001-2005 Technology Infrastructure Country 2001 2002 2003 2004 2005 Internet Users and Access Argentina 21.5 22.3 23.2 24.1 25.0 Usage and Demographics eCommerce Brazil 19.4 21.3 23.0 24.4 25.7 eAdvertising Chile 23.0 24.6 26.1 27.6 29.3 eFinance Mexico 12.5 13.5 14.5 15.7 16.9 Argentina

Brazil Rest of region 9.5 10.2 10.9 11.5 12.1

Mexico Average Latin America 14.8 16.0 17.0 18.0 19.0 Chile Source: Morgan Stanley, 2000 Colombia

Venezuela Index of Charts Telephone Lines per 100 Inhabitants in Argentina, Brazil and Mexico, 2001-2003

Argentina 24.9 26.3 27.9

Brazil 17.2 19.1 20.6

Mexico 13.2 14.4 15.7

2001 2002 2003 Source: InfoAmericas, 2000

Brazil is home to nearly 45% of all telephone lines in service in Latin America and nearly half of the region’s telephone subscribers. Even so, gross penetration rates may be misleading. First of all, they mask urban- rural disparities: typically, urban areas, particularly the principal city or cities in a given country, may have a teledensity that is double the national average. Secondly, newly installed lines in homes that already have telephones may not amount to more people with access to the internet. Supplying telephone access to underserved rural areas with predominantly poor residents remains unproﬁtable. However, over the next few years, universal service agreements imposed as a result of privatization will compel telephone companies to increase the communication infrastructure in areas traditionally showing low returns on investment. Operators in several Latin American countries are investing in community “telecenters” that provide basic telephone services.

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Methodology Some, such as those that are part of the Argentine government-sponsored Overview [email protected] program and Mexico’s e-Mexico plan, will also Population and Economy provide internet access to low-income and remote communities. Technology Infrastructure

Internet Users and Access

Usage and Demographics Number of Telephone Lines in Service in Latin eCommerce America, 2001-2005 (in millions) eAdvertising Country 2001 2002 2003 2004 2005 eFinance Argentina 8.1 8.5 8.9 9.4 9.9 Argentina

Brazil Brazil 34.0 37.8 41.0 44.0 46.7 Mexico Chile 3.5 3.8 4.1 4.4 4.7 Chile Mexico 13.0 14.2 15.5 17.0 18.6 Colombia Rest of region 17.5 19.2 20.8 22.4 24.0 Venezuela

Index of Charts Total Latin America 76.1 83.4 90.3 97.1 103.8 Note: Figures do not add up precisely due to rounding Source: Morgan Stanley, 2000

Number of Telephone Subscribers in Latin America, 2001-2005 & 2010 (in millions) Country 2001 2002 2003 2004 2005 2010 Argentina 8.6 9.0 9.4 9.8 10.2 13.1 Brazil 38.8 43.8 47.9 51.1 55.2 81.2 Chile 4.1 4.4 4.6 4.8 5.0 6.4 Colombia 8.7 9.4 10.0 10.5 11.0 14.1 Mexico 14.8 16.6 18.0 19.3 20.5 27.4 Venezuela 2.9 3.0 3.1 3.2 3.4 4.3 Rest of region 8.8 9.7 10.8 11.4 12.1 16.0 Total Latin America 86.7 95.9 103.8 110.1 117.4 162.5 Source: World Bank, 1999

Wireless Telephony The latest data from the ITU indicate that one in four telephone users in Latin America operates a mobile phone. In some markets, the ratio is as high as one in two, whereas the figure is around 40% in Argentina and Brazil. Paraguay and Venezuela were the first Latin American countries in which mobile phone users outnumbered those who depended on a fixed- line connection, and Mexico and Chile recently joined this group. As the number of wireless subscribers grow, this trend is likely to continue throughout the region. In addition, companies like Canada’s Nortel Networks are leading the effort to install fixed wireless networks across Latin America. Fixed wireless solutions, sometimes referred to as the wireless local loop (WLL), use fixed antennas and microwave transmission links to connect subscribers to local telephone exchanges or cable networks.

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Methodology They can be relatively inexpensive to install, especially when wireless Overview operators capitalize on their existing antenna infrastructure, and can be cost Population and Economy effective for users if an entire ofﬁce or apartment complex shares the Technology Infrastructure

Internet Users and Access wireless links. In theory, ﬁxed wireless networks offer data transmission Usage and Demographics capabilities that can approach throughput rates of ﬁxed lines. Fixed eCommerce antennas transmit data at high frequencies, but only over relatively limited eAdvertising distances. Most importantly, they require line-of-sight connections, which eFinance

Argentina can be sensitive to rain and high humidity, rendering ﬁxed wireless

Brazil networks largely inadequate for heavy business use. As a result, they will Mexico most likely coexist with and not replace the existing wireline infrastructure. Chile Despite growth in the cellular market, the number of cellular phones in Colombia Latin America as a whole is quite limited in comparison to other regions of Venezuela

Index of Charts the world, particularly given the size of Latin America’s population. Moreover, it is not clear what percent of those cellular subscriptions are additional phones for those who already own a ﬁxed-line telephone. At present, the overlap is likely to be high, although it will diminish over time, particularly as less expensive wireless service options like prepaid calling and Calling Party Pays (CPP) become more widely available. As in other regions with large populations of people with modest means, prepaid service and CPP provide consumers in Latin America with a major impetus to use mobile phones. For example, by the end of 1999, nearly 85% of Telcel (Telmex’s wireless subsidiary and Mexico’s leading wireless operator) subscribers were on a prepaid plan. Similarly, America’s Network estimates indicate that approximately 64% of all wireless subscribers in Brazil, Latin America’s leading mobile market, will be on a prepaid plan. All signs indicate that Latin America will remain divided among competing wireless standards. EMC World Cellular Database estimates that 40% of existing wireless subscribers in Latin America remain on analog systems. Digital trunking operator Nextel International, which uses Motorola’s iDEN technology, has been making inroads among high-end corporate users in several leading Latin American markets, offering subscribers mobile telephone, short messaging, and radio and data transmission in one handset.

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Methodology The company currently provides digital trunking services in Argentina, Overview Brazil, Mexico and Peru, and is expected to receive regulatory approval to Population and Economy launch services in Chile this year. Technology Infrastructure

Internet Users and Access Usage and Demographics Latin American Wireless Subscribers, by Technology, eCommerce 2000 eAdvertising eFinance GSM Argentina CDMA 3% Brazil 17%

Mexico

Chile AMPS (Analog) Colombia 40% Venezuela Index of Charts TDMA 40%

Source: EMC World Cellular Database, 2000

Latin American Wireless Subscribers, by Technology, 2001-2006 (in millions) 2001 2002 2003 2004 2005 2006 GSM 3.0 13.6 23.2 34.8 47.1 59.7 cdmaOne 23.6 34.4 44.0 50.9 55.5 59.2 TDMA 43.5 50.3 54.7 54.0 50.2 44.1 AMPS 13.2 7.1 2.7 0.6 0.1 0.0 Total 83.2 104.7 124.5 140.2 152.8 162.9 Note: Figures do not add up precisely due to rounding Source: The Yankee Group, 2001

As the following ﬁgures show, GSM subscribers currently represent a small portion of total wireless subscribers in Latin America, but Brazil’s decision to follow the European 1,800-MHz spectrum allocation standard in its recent PCS auction means that GSM will have considerable room to expand in the region. In addition, Mexico’s Telcel is in the process of migrating its subscribers to GSM from the company’s existing TDMA platform, and operators in other Latin American countries are beginning to follow suit. As a result, EMC’s forecast for the number of GSM subscribers in Latin America, which was released prior to Brazil’s spectrum auction, may be on the low side. Nevertheless, EMC estimates suggest that even by 2005, Latin America will account for the smallest percentage, by region, of total worldwide GSM subscribers.

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Methodology

Overview GSM Subscribers in Latin America, 2001-2005 (in

Population and Economy millions and as a % of total GSM subscribers)

Technology Infrastructure

Internet Users and Access 2001 4.1 (0.8%)

Usage and Demographics 2002 7.7 (1.2%) eCommerce eAdvertising 2003 12.6 (1.7%) eFinance 2004 17.3 (2.1%) Argentina Brazil 2005 21.0 (2.4%) Mexico

Chile Source: EMC World Cellular Database, 2001

Colombia Venezuela Second-generation (2G) networks are in place in most Latin American Index of Charts countries and operators are studying the timetable for rolling out 2.5G and 3G services. Mindful of the tremendous costs involved in obtaining 3G licenses in Europe and the additional ﬁnancial burden of making necessary technological upgrades to their networks, operators in Latin America are proceeding with caution. Telesp Celular, Brazil’s leading wireless operator, was among the ﬁrst when it launched its 2.5G service in March 2001. Investments in 3G technology will not begin to have a tangible effect until around 2005, according to most estimates.

Wireless Technology in Latin America, 2001-2004 (as a % of total users) 2001 2002 2003 2004 Analog 22% 13% 5% 2% 2G 78% 86% 92% 92% 2.5G 0% 1% 2% 4% 3G 0% 0% 0% 2% Source: The Yankee Group, 2000

Analysts expect that the Latin American wireless market will continue to grow strongly in the next few years, even if at less spectacular rates than in 1999-2000. The Yankee Group predicts a compound annual growth rate of 17.9% between 2000 and 2006, with the total number of subscribers expected to nearly double between 2001 and 2006. According to the Yankee Group, operators will focus on consolidating their region- and nationwide operations and achieving economies of scale. The investment bank Sanford C. Bernstein forecasts an increase in the number of subscribers from 85 million in 2001 to 140 million in 2004. Figures supplied by Merrill Lynch (extrapolated from Gartner Dataquest and Global Mobile projections) are considerably higher, but this may be attributed to the fact that they include all wireless subscribers (including PDAs and other devices), rather than simply mobile phone users. Meanwhile, Sanford C. Bernstein estimates that penetration rates will rise from 16% of Latin America’s population in 2001 to 25% in 2004.

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Methodology The Yankee Group predicts that penetration rates will reach nearly 40% by Overview 2006. By comparison, projections suggest that more than 80% of the European Population and Economy and North American population will be using cellular phones by 2004. Technology Infrastructure

Internet Users and Access

Usage and Demographics Wireless Subscribers in Latin America, 2001-2006 (in eCommerce millions and as a % of total population) eAdvertising eFinance 2001 83.2 (21.0%)

Argentina 2002 104.7 (25.9%) Brazil Mexico 2003 124.5 (30.2%) Chile 2004 140.2 (33.5%) Colombia Venezuela 2005 152.8 (35.9%) Index of Charts 2006 162.9 (37.7%)

Source: The Yankee Group, 2001

Comparative Estimates: Wireless Subscribers in Latin America, 2001-2006 (in millions) 2001 2002 2003 2004 2005 2006 EMC World Cellular Database 90.0 123.4 158.2 189.2 – – Gartner Group 71.9 96.9 127.6 ––– Merrill Lynch 106.0 146.0 191.0 ––– Sanford C. Bernstein 84.5 105.2 125.0 140.0 – – Yankee Group 83.2 104.7 124.5 140.2 152.8 162.9 Source: Yankee Group, 2001; various, as noted, 2000

Comparative Estimates: Wireless Phone Penetration in Latin America, 2001-2006 2001 2002 2003 2004 2005 2006 EMC World Cellular Database 17.1% 19.8% 24.3% 26.1% – – Sanford C. Bernstein 16.0% 20.0% 23.0% 25.0% – – Yankee Group 21.0% 25.9% 30.2% 33.5% 33.9% 37.7% Source: Yankee Group, 2001; various, as noted, 2000

Gartner Group predicts that Latin America’s share of the worldwide cellular market will increase steadily, from 11% in 2001 to 14% in 2003. Merrill Lynch, on the other hand, maintains that Latin America’s share will remain at a constant 9% of the worldwide subscriber market. Both ﬁrms agree that Europe and Asia will remain the dominant wireless markets.

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Methodology

Overview Worldwide Wireless Market, by Region, 2001-2003 (as Population and Economy a % of total wireless phones installed) Technology Infrastructure North America Internet Users and Access

Usage and Demographics 18.4% eCommerce 17.5% eAdvertising 16.7% eFinance

Argentina Europe

Brazil 34.3% Mexico 33.1% Chile 31.7% Colombia

Venezuela Asia Pacific Index of Charts 32.0% 32.3% 32.7%

Latin America 10.8% 12.4% 14.2%

Middle East/Africa 4.5% 4.7% 4.8%

2001 2002 2003 Source: Gartner Group, 2000

Worldwide Wireless Market,by Region, 2000–2003 (as a % of total subscribers) 2000 2001 2002 2003 North America 17% 16% 15% 14% Europe 36% 36% 34% 32% Asia Pacific 32% 33% 35% 37% Latin America 9% 9% 9% 9% Africa/Middle East 6% 6% 7% 8% Total 100% 100% 100% 100% Source: Merrill Lynch, 2000

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Methodology Mobile handset sales will increase dramatically over the next few years as Overview Latin American carriers strive to meet the pent-up demand for wireless Population and Economy services. By 2004, Sanford C. Bernstein expects handset sales in Latin Technology Infrastructure

Internet Users and Access America to exceed 86 million, resulting in a compound annual growth rate Usage and Demographics of 44.1%, the third-highest in the world behind Europe and Africa and the eCommerce Middle East, and well ahead of North America, Asia Paciﬁc, Japan and eAdvertising China. However, Latin America’s share of worldwide handset sales will eFinance

Argentina decline, from an estimated 9.4% in 2000 to a projected 7.1% in 2004. Sales

Brazil volume will remain highest in Europe, with North America a distant second.

Mexico Chile Handset Sales in Latin America, 2001-2004 (in millions Colombia and as a % of total worldwide sales) Venezuela Index of Charts 2001 53.41 (9.1%)

2002 66.40 (8.6%)

2003 80.55 (8.2%)

2004 86.17 (7.1%)

Source: Sanford C. Bernstein, 2000

B. Broadband In the years to come, consumers and businesses with sufficient means will predominantly use cable modems and/or digital subscriber lines (DSL) to access multimedia content at speeds greater than dial-up connections. A third option emerging in many urban areas is fixed wireless access. Cable modems and DSL bring advantages that make them attractive to both consumer and business users, particularly those in the small- office/home-office market, while cost, access and availability remain the major drawbacks for rural and lower-end residential users. Both technologies offer subscribers constant, “always on” internet access, eliminating the inconvenience of dialing into a service provider. From a small base in 2001, analysts predict that there will be over 3 million broadband households in Latin America in 2004. InfoAmericas suggests that while pent-up demand for broadband services does exist in Latin America, lack of supply and the high cost of broadband services have kept customers away. Even while price remains an obstacle, the potential market among A, B and C1 (upper and upper-middle class) households is substantial: according to InfoAmericas, it includes 13 million households in the three largest markets (Argentina, Brazil and Mexico) alone.

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Methodology

Overview Consumers with Broadband Access in Latin America,

Population and Economy 2000

Technology Infrastructure

Internet Users and Access Brazil 53,000 Usage and Demographics Argentina 38,000 eCommerce eAdvertising Chile 22,000 eFinance Mexico 20,000 Argentina Brazil Source: Gartner Dataquest, 2001 Mexico

Chile Colombia Comparative Estimates: Residential Broadband Venezuela Subscribers in Latin America, 2000-2004 (in thousands) Index of Charts 2000 2001 2002 2003 2004 InfoAmericas 272 552 1,175 2,209 3,313 Ovum 104 345 637 1,346 2,854 Pioneer Consulting 69 171 n/a n/a n/a Yankee Group 167 n/a n/a 2,255 n/a Source: various, as noted, 2000

Broadband Technologies in Latin America, by Market Share, 2004

Wireless Cable 14% 14%

Dedicated 28% DSL 44%

Source: InfoAmericas, Morgan Stanley, 2000

Leading researchers have conﬂicting predictions for the future of the business broadband sector. Ovum believes that it will not develop greatly over the next few years, forecasting a total of only 92,000 high-speed internet access lines for the business sector in all of Latin America in 2004. InfoAmericas, however, has an opposing view, suggesting that the majority of broadband subscriber growth in Latin America will come from both the large and small business market. InfoAmericas estimates that by 2004, approximately 7 million businesses in Latin America will have broadband internet access, accounting for 79% of all broadband connections in Latin America.

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Methodology The Yankee Group likewise believes that small-ofﬁce/home-ofﬁce markets Overview will lead broadband subscriber growth in Latin America’s major markets. Population and Economy

Technology Infrastructure Business Broadband Subscribers in Latin America, Internet Users and Access 2000-2004 (in thousands of lines) Usage and Demographics eCommerce 2000 24 eAdvertising eFinance 2001 34 Argentina

Brazil 2002 47 Mexico 2003 66 Chile

Colombia 2004 92

Venezuela Source: Ovum, 2000 Index of Charts

Business vs. Residential Broadband Subscriptions in Latin America, 2004

Other Residential (govt., 19% academic) 2%

Business 79%

Source: InfoAmericas, Morgan Stanley, 2000

Cable Cable modems enable users to connect to the internet at a cost that is only marginally greater than the cost of cable television service. Another advantage of cable modem service is that it does not rely on the existing telecommunications infrastructure, and therefore allows users of the service to “leapfrog” over the telecommunications network, which, in many cases, is plagued by an outdated analog and copper wire infrastructure. Argentina, which has Latin America’s highest cable TV penetration rates with approximately 50% of households passed, is the only country currently positioned to become a leader in cable internet access, although cable operators in Brazil, Mexico, Colombia and Venezuela are in the process of building out their networks.

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Methodology

Overview Number of Cable TV Subscribers in Latin America,

Population and Economy 2001-2006 (in millions)

Technology Infrastructure

Internet Users and Access 2001 13.8

Usage and Demographics 2002 15.3 eCommerce eAdvertising 2003 17.3 eFinance 2004 19.8 Argentina Brazil 2005 22.7 Mexico

Chile 2006 25.9

Colombia Source: The Strategis Group, 2001 Venezuela

Index of Charts

Number of Cable TV Subscribers in Selected Latin American Countries, 2001-2005 (in millions) Country 2001 2002 2003 2004 2005 Argentina 5.3 5.4 5.5 5.6 5.7 Brazil 3.2 3.9 4.7 5.5 6.0 Chile 0.9 0.9 1.0 1.1 1.1 Mexico 2.8 3.5 3.5 3.9 4.2 Total Latin America 15.4 17.1 18.9 20.6 21.9 Source: Morgan Stanley, 2000

Number of Cable TV Subscribers in Selected Latin American Countries, 2001-2005 (in millions) Country 2001 2002 2003 2004 2005 Argentina 6.3 6.6 6.9 7.2 7.5 Brazil 4.2 5.4 6.7 7.7 8.0 Chile 1.0 1.1 1.2 1.3 1.4 Colombia 2.0 2.5 2.6 2.7 2.9 Mexico 2.6 2.9 3.2 3.5 3.9 Venezuela 1.2 1.4 1.6 1.7 1.8 Rest of region 1.0 1.3 2.0 2.6 2.7 Total Latin America 18.3 21.2 24.2 26.7 28.2 Source: World Bank, 1999

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Methodology

Overview Households with Cable TV in Selected Latin American

Population and Economy Countries, 2001-2005 Technology Infrastructure Country 2001 2002 2003 2004 2005 Internet Users and Access Argentina 48.5% 48.2% 48.3% 48.2% 47.9% Usage and Demographics eCommerce Brazil 7.7% 9.2% 11.2% 12.7% 13.8% eAdvertising Chile 20.4% 21.4% 22.8% 23.7% 24.5% eFinance Mexico 13.2% 14.7% 16.2% 17.6% 18.5% Argentina Total Latin America 11.8% 12.9% 14.1% 15.0% 15.7% Brazil

Mexico Source: Morgan Stanley, 2000

Chile Colombia On the down side, only 3% of Latin America’s total population currently Venezuela has cable TV. And because they tend to pass homes and not office Index of Charts complexes, cable TV networks generally will not be able to serve the business users, who are the best potential clients for high-speed data access. Moreover, because cable lines are shared, they may provide a less secure means of data transmission than dedicated bandwidth such as DSL or ISDN (Integrated Services Digital Network). It also means they are vulnerable to traffic: subscribers to cable modem service may find that transmission speeds tend to degrade as more users are present on a particular node of the network and as the available bandwidth is split to accommodate all users.

Comparative Estimates: Residential Broadband Cable Subscribers in Latin America, 2001-2004 (in thousands)

2001 2002 2003 2004 InfoAmericas 215 408 695 1,042 Ovum 221 354 655 1,194 Pioneer Consulting 92 ––– Yankee Group ––1,147 – Source: various, as noted, 2000

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Methodology

Overview Cable Modems in Operation in Selected Countries in Population and Economy Latin America, 2001-2003 Technology Infrastructure 2001 2002 2003 Internet Users and Access Argentina 19,320 34,240 64,290 Usage and Demographics eCommerce Brazil 73,150 204,600 409,540 eAdvertising Chile 5,150 15,740 30,580 eFinance Colombia 19,920 35,290 58,170 Argentina

Brazil Mexico 100,260 159,180 237,050

Mexico Peru 6,670 11,280 20,300 Chile Venezuela 11,260 22,320 39,060 Colombia Total Latin America 235,730 482,640 859,000 Venezuela

Index of Charts Source: Pyramid Research, 2000

DSL The main advantage of DSL technology, where available, is that it allows for the simultaneous transmission of voice and data traffic by exploiting unused voice frequencies on existing copper cables. In short, installing DSL does not require telecommunications companies to make a substantial investment in new cabling. In addition, DSL connections offer higher data transmission rates than cable modem service. The most popular version of this technology is ADSL − Asymmetrical Digital Subscriber Line − so termed because it delivers downstream data at far higher speeds than upstream data. As such, ADSL is an effective broadband solution for users who tend to download more data than they send. Pyramid Research expects the number of digital lines in operation throughout the region to quadruple by 2003, with the residential and small-office/home-office markets leading the growth.

Comparative Estimates: Residential DSL Subscribers in Latin America, 2001-2004 (in thousands) 2001 2002 2003 2004 InfoAmericas 337 767 1,514 2,271 Ovum 141 311 1,096 2,869 Pioneer Consulting 51 ––– Yankee Group ––1,108 – Note: Ovum forecast includes residential and business subscribers Source: various, as noted, 2000

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Methodology

Overview Digital Subscriber Lines in Selected Countries in Latin Population and Economy America, 2001-2003 Technology Infrastructure 2001 2002 2003 Internet Users and Access Argentina 9,190 14,990 22,590 Usage and Demographics eCommerce Brazil 109,560 257,010 473,850 eAdvertising Chile 240 440 670 eFinance Colombia 24,440 49,170 86,940 Argentina Mexico 37,410 110,630 230,310 Brazil

Mexico Peru 80 260 1,480 Chile Venezuela 19,550 44,770 83,410 Colombia Total Latin America 200,470 477,270 899,250 Venezuela

Index of Charts Source: Pyramid Research, 2000

However, DSL service is also not without its disadvantages. Due to technological constraints, DSL connections are costly to install in locations that are more than 3 miles from a central telephone office, which may mean that they will be off limits to many residences and businesses in rural and outlying urban areas. In addition, telephone operators have initially targeted their DSL offerings at businesses and high-end residential customers, often at price points that may be beyond the reach of most Latin American consumers. Given that a greater percentage of the Latin American population has more access to the fixed-line telephony networks than to cable networks, DSL connections, which pass both households and offices, are the technology that will most likely speed up internet access and data transmission in the region. Brazil is already the region’s leader in DSL, and will remain in the lead in terms of total digital subscriber lines installed, although Colombia, Mexico and Venezuela will also see impressive growth in their DSL markets. An additional telephone-based broadband technology, which is available in some Latin American markets, is ISDN, an all-digital replacement for analog telephone service. ISDN carries two separate channels on a single phone line that can be used together or independently for voice or data. However, unlike DSL, ISDN is not an “always on” technology, so users must still dial up the internet and, consequently, may incur high monthly telephone charges. In addition, ISDN only allows data transmission at speeds up to 128 Kbps at best, or half of that offered by most ADSL service.

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Methodology Alternative Broadband Technologies Overview Additional broadband technologies include ﬁxed wireless and satellite Population and Economy

Technology Infrastructure access, powerline and broadcast technology and fiber to the home (FTTH). Internet Users and Access Of the five, fixed wireless solutions, sometimes referred to as the wireless Usage and Demographics local loop (WLL), are the most diffuse in Latin America, although a new eCommerce report by The Strategis Group suggests that the number of subscribers to eAdvertising eFinance digital broadcast satellite (DBS) service will increase from 3.6 million in

Argentina 2001 to 8.8 million in 2006. Still, according to a report by Strategy Brazil Analytics, Latin America’s share of the interactive television (iTV) audience Mexico remains small, at approximately 1%. Chile Fixed wireless solutions use ﬁxed antennas and microwave transmission Colombia

Venezuela links to connect subscribers to local telephone exchanges or cable

Index of Charts networks. They can be relatively inexpensive to install, especially when wireless operators capitalize on their existing antenna infrastructure, and can be cost effective for users if an entire office or apartment complex shares the wireless links. Fixed antennas transmit data at high frequencies, but only over relatively limited distances. Most importantly, they require line-of-sight connections, which can be sensitive to rain and high humidity, rendering fixed wireless networks largely inadequate for heavy business use. As a result, they will most likely coexist with and not replace the existing wireline infrastructure. According to InfoAmericas, fixed-wireless solutions will service a limited portion of residential and business customers in Tier I cities (Buenos Aires, São Paulo, Santiago, Caracas, Monterrey) in the near term, as these will have more immediate access to cable and DSL, while they will be among the few broadband options available in Tier II cities such as Rosario, San José, Quito and Manaus for the next 2 to 4 years. Velocom and Millicom have rolled out the first WLL services in Argentina, while Axtel and Unefon dominate in Mexico, and Vésper leads the Brazilian market. The Yankee Group estimates that WLL lines in Brazil will account for 8% of the country’s total mainlines and 50% of the region’s WLL lines by 2003. Most Latin American telecommunications regulators are working to introduce competition in the local loop, a process that should continue during 2001.

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Methodology

Overview Comparative Estimates: Residential Subscribers to

Population and Economy Alternative Broadband Technologies in Latin America,

Technology Infrastructure 2000–2004 (in thousands)

Internet Users and Access 2000 Usage and Demographics eCommerce 0 eAdvertising 7 eFinance 2001 Argentina 0 Brazil

Mexico 28

Chile 2002 Colombia 1 Venezuela Index of Charts 2003 13

2004 97

Ovum Pioneer Consulting Source: various, as noted, 2000

Digital Broadcast Satellite Subscribers in Latin America, 2001-2006 (in millions)

2001 3.6

2002 4.6

2003 5.6

2004 6.8

2005 7.8

2006 8.8

Source: The Strategis Group, 2001

Distribution of Worldwide Interactive TV Audience, by Region, 2001 Latin America Rest of 1% world Asia Pacific 9% 10%

Western Europe North America 62% 18%

Source: Strategy Analytics, 2001

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Methodology C. Dial-Up Access and Internet Service Overview

Population and Economy Providers (ISPs)

Technology Infrastructure Internet Users and Access Dial-Up Access Usage and Demographics Due to cost, technological and geographical constraints, the broadband eCommerce eAdvertising revolution has been slow in coming to Latin America. Most people in the eFinance region will continue to dial up the internet over analog lines from PCs. Argentina Morgan Stanley estimates that in 2000, 86% of Latin Americans with Brazil internet subscriptions access the internet through a dial-up connection. Mexico

Chile Pyramid Research expects this trend to continue, estimating that by 2002,

Colombia cable modems and DSL will account for only 5% of internet access in Venezuela Latin America, while dial-up connections will still account for an Index of Charts overwhelming 81%.

Internet Subscribers in Latin America, by Access Type, 2000

Cable Modem Dedicated 1% Line 10% Wireless Connection 1%

DSL 2%

Dial–Up 86%

Source: Morgan Stanley Dean Witter, 2000

Internet Subscribers in Latin America, by Means of Access, 2002 Cable modem ISDN 2.3% 1.4% DSL 2.6% Leased lines Mobile 1.3% internet 14.7%

Dial-up (subscription) Dial-up 46.5% (free) 34.3%

Note: Does not add up to 100% due to rounding Source: Pyramid Research, 2000

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Methodology In addition, a signiﬁcant portion of dial-up connections takes place over Overview slow 33.6 or 28.8 Kbps modems. A survey conducted in 2000 by the Population and Economy International Data Corporation (IDC) revealed that on average, 38% of Latin Technology Infrastructure

Internet Users and Access American internet users were connecting at speeds of 33.6 Kbps or less. Usage and Demographics Among businesses, a Harte-Hanks survey of more than 15,000 eCommerce businesses across Latin America found that 33% had high-speed internet eAdvertising access (greater than 56 Kbps), with ﬁrms in Brazil, Mexico and Chile eFinance

Argentina leading the way.

Brazil

Mexico Internet Access Speeds in Selected Countries in Latin Chile America, 2000 Colombia Country 28.8 Kbps 33.6 Kbps 56 Kbps Cable ISDN Other Venezuela or slower Modem or xDSL Index of Charts Argentina 7% 19% 60% 2% 4% 8% Brazil 12% 32% 45% 2% 4% 5% Chile 16% 19% 41% 2% 12% 10% Colombia 15% 22% 38% 6% 6% 14% Mexico 12% 14% 46% 4% 10% 15% Venezuela 7% 20% 59% 1% 4% 8% Note: Does not add up to 100% due to rounding Source: International Data Corp. (IDC), 2000

Businesses with High-Speed Internet Access (>56 Kbps), 2000 (as a % of total businesses surveyed)

Argentina 19%

Brazil 35%

Chile 33%

Colombia 27%

Mexico 34%

Venezuela 21%

Source: Harte-Hanks, 2001

Content providers must recognize the technological limitations of their user base and adjust their offerings accordingly. Dial-up connections made with a 28.8 or 33.6 Kbps modem result in an entirely different internet experience than connections made with a fast 56 Kbps modem or a high- speed dedicated line. Downloading software, music or viewing streaming video can be an excruciating exercise with a slow connection.

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Methodology The transfer time for a 10-megabyte ﬁle varies widely depending on a Overview user’s connection speed: Population and Economy Up to 1 hour on a 28.8 Kbps modem Technology Infrastructure

Internet Users and Access 10 to 13 minutes on an ISDN line Usage and Demographics Approximately 1 minute over a T-1 line eCommerce eAdvertising Creative graphics and effects that take forever to load may be lost on users eFinance

Argentina with slow connections. Content providers and online retailers must deliver

Brazil sufﬁcient information and facilitate rapid transactions for the considerable Mexico percentage of users who remain stuck in the information superhighway’s Chile slow lane. According to InfoAmericas, a major failing of Latin American Colombia consumer sites in general has been an emphasis on ﬂashy graphics that Venezuela

Index of Charts take too long to load over slow dial-up connections. In many cases, frustration has caused many consumers to simply abandon their purchase.

ISPs The free ISP revolution started by Brazil’s Banco Bradesco in December 1999 has slowed: several free ISP services have failed, even in the region’s largest internet market, Brazil, and market leaders like Universo Online (UOL) have withdrawn their no-cost offerings. Other companies, such as IG and Tutopia have replaced their free services with fee-based alternatives. Because current telecommunications regulations do not compel local telephone companies to share connection charges with ISPs, the free internet services must compete for a limited pool of online advertising dollars for the bulk of their revenues, and the internet advertising market is simply not large enough to support a host of competitors offering free services. The likelihood is that the free ISP marketplace will consolidate further, with the few remaining players absorbing the subscribers of the failed services. Nevertheless, the demise of some of the larger free ISPs does not necessarily signal the end of free internet services, particularly in Brazil. Banks, which are able to both draw on an enormous pool of capital and save money on transaction costs, even as they offer free internet services to customers, are likely to maintain their free services for the foreseeable future. They also have a captive audience of consistent users that is attractive to online advertisers. The ISPs that continue to maintain no-fee subsidiaries may use the free services as loss-leading marketing tools to help build up the brand identity of the pay services. Meanwhile, independent companies are pinning their futures on their ability to leverage the free services to cross sell users a variety of paid products and value-added services.

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Methodology A number of ISPs in Latin America is in a state of ﬂux. The Central Overview Intelligence Agency ﬁgures for 1999 are based on information available as Population and Economy of January 2000. Given that many free ISPs have closed up shop Technology Infrastructure

Internet Users and Access subsequent to the beginning of 2000, the current number has likely Usage and Demographics decreased considerably in many countries, most notably Brazil. eCommerce eAdvertising Comparative Estimates: Number of ISPs in Selected eFinance Countries in Latin America, 1999 Argentina

Brazil Argentina

Mexico 47 Chile 200 Colombia Brazil Venezuela

Index of Charts 197 250 Chile 26 Colombia 13 Mexico 167

Venezuela 11 20

Central Intelligence Agency Pyramid Research (CIA World Factbook) Source: various, as noted, 2000

In the business segment, the Harte-Hanks survey found that 64% use a local ISP for internet access. 14% of all sites surveyed used Terra as their access provider, making the Spanish company the leading multinational, pan-regional ISP among Latin American businesses. According to Harte- Hanks, Mexico is the only country where local ISPs do not dominate the business market. Rather, multinational and/or pan-regional ISPs account for 63% of usage among Mexican businesses.

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Methodology D. Hardware Overview Population and Economy Internet usage is closely tied to PC ownership and penetration rates. Recent Technology Infrastructure sales data indicate that PC ownership in Latin America will continue to Internet Users and Access grow over the next few years. The number of PCs shipped to Latin America Usage and Demographics eCommerce in 2000, which is not the same as the number of PCs sold but still an eAdvertising indicator of the size of the market, saw an increase of 50% from the eFinance number shipped in 1999. According to Gartner Dataquest, growth was Argentina particularly strong in Brazil, where shipments rose 108% in 2000, fueled Brazil largely by falling interest rates, rising demand for internet services, creative Mexico

Chile ﬁnancing options and an overall resurgence of the Brazilian economy. Colombia Sales in Chile, Argentina and Mexico grew 37%, 36% and 25%, Venezuela respectively. Index of Charts For the period from 1999 to 2004, IDC has forecast a compound annual growth rate (CAGR) of approximately 26% for portable computer shipments to Latin America, and a CAGR of about 22% for desktop units. This projected growth is second only to Asia Paciﬁc, and far outstrips the growth forecast for the US and Japan. IDC estimates indicate that desktops overwhelmingly dominated computer shipments to Latin America in 2000 and that hardware sales will continue to generate the majority of revenues in Latin America’s IT market through 2004.

PC Vendors in Latin America, by Market Share, 2000 (in millions of shipments and as a % of market share)

Compaq 1.5 (21.1%)

IBM 0.4 (6.1%)

Hewlett-Packard 0.4 (5.4%)

Acer 0.3 (4.7%)

Dell 0.2 (3.3%)

Alaska 0.2 (3.2%)

Others 3.9 (56.3%)

Total 6.9 (100.0%)

Source: Gartner Dataquest, 2001

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Methodology

Overview Combined Desktop and Notebook Shipments to Latin

Population and Economy America, 2002-2005 (in millions)

Technology Infrastructure

Internet Users and Access 2002 9.5

Usage and Demographics 2003 11.5 eCommerce eAdvertising 2004 13.6 eFinance 2005 16.0 Argentina Brazil Source: International Data Corp. (IDC), 2000 Mexico

Chile

Colombia Computer Shipments to Latin America, 2000 (in

Venezuela millions and as a % of Latin America’s total)

Index of Charts

PC servers 0.1 (1%) Notebooks 0.4 (7%)

Desktops 5.1 (92%)

Total = 5.5 Note: Figures do not add up precisely due to rounding Source: International Data Corp. (IDC), 2000

Hardware Revenues in Latin America, by Category, 2000 & 2004 (in billions and as a % of Latin America’s total) Notebooks Notebooks 3.7 (13%) 5.5 (12%)

Hardware Hardware 15.6 (53%) 23.9 (52%) PC servers PC servers 10.2 (35%) 16.8 (36%)

2000 2004 Source: International Data Corp. (IDC), 2000

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Methodology Server shipments were also on the rise in Brazil: according to Gartner Overview Dataquest, they grew 35% in 2000, giving Brazil the largest growth rate in Population and Economy the region. Brazil was also the leading country in the region in terms of Technology Infrastructure

Internet Users and Access overall servers shipped. Server shipments in Mexico and Argentina Usage and Demographics increased by 26% and 25%, respectively, with locally branded vendors eCommerce leading the growth. eAdvertising eFinance Server Vendors in Latin America, by Market Share, Argentina 2000 (in thousands of shipments) Brazil

Mexico Compaq 35.9 (19.9%) Chile Colombia IBM 26.1 (14.5%) Venezuela

Index of Charts Hewlett-Packard 15.6 (8.7%) Dell 9.7 (5.4%)

Acer 6.1 (3.4%)

Others 86.9 (48.2%)

Total 180.3 (100.0%)

Source: Gartner Dataquest, 2001

Despite indications of growth in PC ownership, the percentage of the population with a PC is still exceedingly small, with estimates ranging from a low of 3% in Peru to a high of 11% in Argentina. By comparison, more than half of the US population has a PC. Even the most optimistic forecasts predict that PC penetration rates will not come close to 20% in Latin America by 2005. Thus, it is important to keep in mind that like the telecommunications market, the PC market may be expanding rapidly, but it is doing so from an extremely low base and on an uneven basis throughout the region.

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Methodology

Overview PCs per 100 Inhabitants in Selected Countries in Latin

Population and Economy America, 1999 & 2000

Technology Infrastructure Argentina Internet Users and Access 4.9 Usage and Demographics eCommerce 5.1 eAdvertising Brazil eFinance 3.6 Argentina

Brazil 4.4

Mexico Chile Chile 6.7 Colombia

Venezuela 8.6 Index of Charts Colombia 3.4

Mexico 4.4 5.1

Venezuela 4.2 4.6

1999 2000 Source: International Telecommunication Union (ITU), 2001

PC Penetration in Latin America, 2001-2005 (as a % of population) Country 2001 2002 2003 2004 2005 Argentina 11.1% 12.5% 14.0% 15.4% 16.6% Brazil 7.5% 9.1% 10.6% 12.1% 13.5% Chile 9.3% 10.4% 11.7% 12.8% 14.2% Mexico 10.2% 11.6% 13.0% 14.4% 15.8% Rest of region 7.2% 8.5% 10.5% 11.8% 11.9% Total Latin America 8.3% 9.7% 11.3% 12.7% 13.6% Source: Morgan Stanley, 2000

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Methodology

Overview PC Penetration in Latin America, 2001-2005 (as a % of

Population and Economy population) Technology Infrastructure Country 2001 2002 2003 2004 2005 Internet Users and Access Argentina 9.0% 10.9% 13.2% 16.0% 19.5% Usage and Demographics eCommerce Brazil 6.8% 8.2% 9.8% 11.7% 13.9% eAdvertising Chile 9.9% 11.7% 13.8% 16.3% 19.2% eFinance Colombia 5.2% 6.3% 7.5% 9.1% 10.9% Argentina Mexico 6.1% 7.3% 8.7% 10.5% 12.6% Brazil

Mexico Venezuela 7.1% 8.7% 10.5% 12.7% 15.5% Chile Rest of region 3.8% 4.7% 5.8% 7.2% 8.9% Colombia Total Latin America 6.1% 7.3% 8.8% 10.6% 12.8% Venezuela

Index of Charts Source: Jupiter Research, 2000

Although overall per capita PC ownership in Brazil and Mexico is low relative to the US, Europe and even other countries in the region, Latin America’s two largest nations are still home to the majority of computers in the region, accounting for 56% of the Latin American total forecast by Morgan Stanley.

Number of PCs in Latin America, 2001-2005 (in millions) Country 2001 2002 2003 2004 2005 Argentina 3.8 4.2 4.7 5.1 5.5 Brazil 11.3 13.6 15.8 18.0 19.7 Chile 1.2 1.4 1.5 1.7 1.8 Mexico 9.5 10.7 12.0 13.2 14.4 Rest of region 11.5 13.5 16.7 18.9 19.1 Total Latin America 37.3 43.4 50.7 56.9 60.5 Note: Figures do not add up precisely due to rounding Source: Morgan Stanley, 2000

Distribution of PCs in Latin America, 2001 (in millions and as a % of Latin America’s total)

Argentina 3.8 (10.2%)

Brazil 11.3 (30.2%)

Chile 1.2 (3.2%)

Mexico 9.5 (25.5%)

Rest of region 11.5 (30.8%)

Total Latin America 37.3 (100%)

Source: Morgan Stanley, 2000

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Methodology The sheer size of Brazil and Mexico’s population also means that the two Overview countries are ahead of all other countries in the region in terms of the Population and Economy number of households with at least one PC. According to Jupiter Research, Technology Infrastructure

Internet Users and Access 3.2 million Brazilian households will have PCs in 2001, which is more than Usage and Demographics twice the 1.5 million households with PCs in the second-place country, eCommerce Mexico. Nevertheless, household PC penetration rates remain considerably eAdvertising higher in Mexico and Argentina, aided by more competitive pricing and eFinance

Argentina ﬁnancing options.

Brazil

Mexico Number of Households with PCs in Latin America, Chile 2001-2005 (in millions) Colombia Country 2001 2002 2003 2004 2005 Venezuela Argentina 0.9 1.1 1.4 1.7 2.1 Index of Charts Brazil 3.2 3.9 4.8 5.8 7.1 Chile 0.4 0.5 0.6 0.7 0.9 Colombia 1.0 1.3 1.7 2.1 2.7 Mexico 1.5 1.8 2.2 2.7 3.4 Venezuela 0.5 0.6 0.7 0.9 1.1 Rest of region 1.2 1.6 2.0 2.5 3.2 Total Latin America 8.2 10.1 12.5 15.4 19.1 Source: Jupiter Research, 2000

Households with PCs in Latin America, 2001-2005 (as a % of total households) Country 2001 2002 2003 2004 2005 Argentina 15.0% 15.6% 16.6% 17.3% 17.9% Brazil 8.0% 9.0% 9.8% 10.5% 11.0% Chile 11.4% 11.8% 12.9% 13.6% 14.1% Mexico 18.4% 19.9% 21.7% 23.0% 23.7% Rest of region 6.0% 6.8% 7.5% 8.0% 8.5% Total Latin America 9.6% 10.5% 11.4% 12.2% 12.8% Source: Morgan Stanley, 2000

Latin Americans without PCs at home increasingly have the option of using them at their ofﬁces. According to Morgan Stanley estimates, 60% of Latin America’s PCs are located in the workplace. Still, only 10% of the region’s economically active population of approximately 220 million employees will have access to a computer or an information appliance in 2001. However, this number is expected to nearly double to 21% by 2005 as more businesses move online. Morgan Stanley estimates that close to 30% of the workforce will have a PC by 2010.

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Methodology Gartner Group predicts that business spending on hardware in Latin Overview America will continue to be brisk in 2001-2002, and will begin to slow Population and Economy down by 2003. In 2001, spending on hardware in Latin America will be Technology Infrastructure

Internet Users and Access second only to the Asia-Paciﬁc region.

Usage and Demographics eCommerce Workforce with PC Access in Latin America, 2001-2005 eAdvertising (as a % of workforce) eFinance Country 2001 2002 2003 2004 2005 Argentina

Brazil Argentina 14.2% 16.7% 19.2% 21.7% 23.3%

Mexico Brazil 10.4% 13.2% 15.9% 18.6% 20.1% Chile Chile 12.4% 14.5% 16.6% 18.7% 20.1% Colombia Mexico 14.2% 16.7% 19.2% 21.7% 23.3% Venezuela

Index of Charts Rest of region 11.7% 14.0% 16.3% 18.6% 20.1% Total Latin America 11.9% 14.4% 16.9% 19.4% 20.9% Source: Morgan Stanley, 2000

Growth in Business Spending on Hardware in Latin America, 2001-2003

2001 10.6%

2002 6.9%

2003 3.8%

Source: Gartner Group, 2000

Although more computers in Latin America can be found in ofﬁces than in homes, a far greater percentage of home PCs than business PCs are internet ready. Not surprisingly, therefore, most Latin Americans continue to access the internet from home. According to Morgan Stanley: In 2001, 50% of home PCs have an internet connection, while only 39% of business PCs have internet service In Brazil, almost twice as many home PCs have internet connections as business PCs (69% to 39%) The percentage of home PCs in Brazil with internet service is well above the average for Latin America, while the ﬁgures for business PCs are consistent with the regional average Argentina, Chile and Mexico have a roughly equal percentage of home and business PCs with internet connections By 2010, the percentage of business PCs with internet connections will overtake the percentage of home PCs with web connectivity by a small margin (85% versus 82%)

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Methodology E. Internet Overview

Population and Economy Technology Infrastructure Network Capacity Internet Users and Access In addition, low teledensity rates, uneven income distribution, the general Usage and Demographics eCommerce population’s lack of disposable income, and insufﬁcient information eAdvertising technology (IT) infrastructure have hindered the development of a bigger eFinance internet market in Latin America. The region has the fewest routers − 5 − of Argentina any in the world. This in part explains why internet service quality in Latin Brazil America, measured by average response times and percent packet loss, is Mexico

Chile low relative to other regions. For example, in Latin America, the average Colombia response time − the time required for a mass of data to make a round trip Venezuela from point A to point B − is three times as slow as the average response Index of Charts time in the United States and more than twice as slow as in Europe.

Average Response Time, Packet Loss (past 30 days) and Number of Routers, by Region, 2001 Region Average Average # of response packet routers time loss (milliseconds) Asia 351 1% 9 Australia 386 1% 9 Europe 199 4% 16 North America 156 0% 24 Latin America 484 1% 5 Note: Data based on average of 30 days prior to 1/29/01 Source: Internet Traffic Report, 2001

According to the June 2000 US Department of Commerce study, “Internet, E-Commerce, and Telecommunications Market Opportunities for U.S. Small- and Medium-Sized Businesses,” IT spending per capita tends to be much lower in Latin America than in the United States (by nearly a factor of 20). Latin America’s ﬁber optic network and internet backbone are also far less developed than that of the United States. High tariffs (relative to import duties imposed by other countries throughout the world) on IT and telecommunications products are partly to blame. Brazil and the other members of MERCOSUR (Southern Cone Common Market) have established a common external tariff (CET) on all telecommunications and IT equipment imported from non-MERCOSUR countries. This will average a maximum of 16% by 2006.

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Methodology Other good news is also on the horizon. Companies such as BellSouth, Bell Overview Canada, Global Crossing, Spain’s Telefónica and Brazil’s Embratel (owned Population and Economy by MCI WorldCom), are investing heavily to improve international data Technology Infrastructure

Internet Users and Access transmission capacity to and from Latin America. Submarine optical cable Usage and Demographics networks between Latin America, the United States and Europe are eCommerce growing, and Latin America’s terrestrial ﬁber optic footprint is also eAdvertising expanding rapidly. According to IDC, ﬁber optic networks within Latin eFinance

Argentina America increased in size by 50% last year, rising from 166,000 route-kms

Brazil in 1999 to 249,000 route-kms in 2000. Mexico As in the US, companies not traditionally involved in the Chile telecommunications industry, such as electric utilities, transportation Colombia companies and oil distributors, have also been busy laying ﬁber optic Venezuela

Index of Charts cable, taking advantage of their own rights of way to diversify their product and service offerings. Eventually, the combined efforts of incumbent operators and new entrants will result in new ﬁber optic-based connectivity corridors between major business centers and metropolitan areas throughout the region and will also strengthen the internet backbone between Latin America, Europe and the US. The main challenge, according to a report by Ovum, lies in the vast distances that often separate business centers and the resulting spans of “dead” network between cities. This means that large portions of the networks’ capacity will remain underutilized, thereby driving up costs for end-users.

Internet Hosts The steady increase in the number of internet hosts registered under Latin American country domains indicates that the region’s internet infrastructure is growing rapidly. Although not a perfect measure of the extent of local content, the number of local hosts does point to the presence of websites in a particular country. Between July 1999 and July 2001, the number of internet hosts with Latin American domain names has soared, particularly for Argentina, Brazil, Chile and Mexico, increasing by considerably more than 200% in each of these countries.

Internet Hosts in Selected Countries in Latin America, 1995- January 2001 Argentina Brazil Chile Colombia Mexico Venezuela 1995 1,262 800 3,054 1,127 6,656 529 1996 5,312 20,113 9,027 2,262 13,787 1,165 1997 12,688 77,148 15,885 9,054 29,840 2,417 1998 19,982 117,200 17,821 10,173 41,659 3,869 Jan–1999 66,545 215,086 30,103 16,200 112,620 7,912 Jul–1999 101,833 310,138 32,208 31,183 224,239 9,424 Jan–2000 142,470 446,444 40,190 40,565 404,873 14,281 Jul–2000 175,303 662,910 51,380 42,927 495,747 15,658 Jan–2001 270,275 876,596 74,708 46,819 559,165 16,154 Source: Network Wizards, 2001

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Methodology Internet Content Overview The native language of most Latin Americans is Spanish or Portuguese. Population and Economy

Technology Infrastructure According to the marketing ﬁrm Global Reach, Spanish and Portuguese Internet Users and Access speakers (including those in Latin America, Spain, Portugal and countries Usage and Demographics in Africa and Asia) make up 5.2% and 2.6% of the global online eCommerce population, respectively (measured by the number of users online in each eAdvertising eFinance language group). In Latin America, English remains the most important

Argentina second language, and its inﬂuence over business, media and popular Brazil culture continues to grow as the region becomes more fully integrated in Mexico the world economy. Furthermore, as the following table demonstrates, the Chile overwhelming majority of internet content is in English. Colombia

Venezuela Although Spanish and Portuguese account for less than 3% and 2% of

Index of Charts total webpages, respectively, language has not been a barrier to the current mix of Latin American internet users, in part because they tend to be wealthier and better educated than the average Latin American. Moreover, the number of Spanish- and Portuguese-language websites is growing rapidly, spurred in part by the launch of heavily ﬁnanced sites such as StarMedia, Universo Online (UOL) and Terra Networks. In the past year, leading US portals like Yahoo!, AltaVista and AOL and web services like ICQ, Real.com and Passport among others have recognized the potential of the Latin American internet market and have added Spanish- and Portuguese-language content and/or local versions of their sites. The linguistic breakdown of the internet will change over time, spurred in part by a rise in the number of non-English-speaking users. As Spanish- and Portuguese-language web content grows, the number of internet users who understand only Spanish or Portuguese is likely to increase, extending to a user population that is less cosmopolitan than the current one.

Webpages in Spanish, Portuguese and Other Languages, 2000 (in millions and as a % of total)

Other 87.3 (27.8%)

Portuguese 4.3 (1.4%) English 214.3 (68.4%)

Spanish 7.6 (2.4%) Total = 313.5 Source: VilaWeb, 2000

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Methodology

Overview Online Language Populations Worldwide, March 2001

Population and Economy Russian Technology Infrastructure Portuguese 2.5% 2.1% Internet Users and Access Italian 3.1% Others Usage and Demographics 8.4% French eCommerce 3.7% eAdvertising Korean eFinance 4.4% English Argentina 47.6%

Brazil Spanish 4.5% German Mexico 6.1% Japanese Chile 8.6% Chinese Colombia 9.0% Venezuela

Index of Charts Source: Global Reach, 2000

F.Access Costs Basic telephone costs remain one of the principal obstacles to growth in internet usage in Latin America. Initial residential connection fees (a one- time charge) tend to be high, and therefore may prevent many households from getting telephone service. In most Latin American countries, fees are comparable to, if not higher than, those charged by local US phone companies, which makes them very high in real terms given the differences in average GDP per capita between Latin America and the US. It is worth noting that the monthly subscription fees and cost figures for 3-minute local calls are not indicative of the total monthly charges that users may incur, given that most online sessions last more than 3 minutes. In addition, unlike in the United States, calls in most Latin American countries are billed on a per-minute or per-pulse basis, which results in higher overall monthly costs and prompts users to ration the time they spend online. Following the example set by neighboring Argentina and Chile, the Brazilian government is studying the possibility of establishing reduced-price telephone numbers designed specifically for internet access. In 1999, the Argentine government took steps to boost internet usage by establishing low-price telephone numbers designed specifically for internet access. According to a report by the US Department of Commerce, this measure has since raised the average connection time from 15 to 24 minutes. Telephone operators are likewise evaluating the possibility of rolling out flat-rate pricing plans. In Mexico, local calls are unmetered and Mexicans receive 100 local calls as part of their monthly subscription fee.

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Methodology The latest ITU data on telephone tariffs date from 1999-2000. Since the Overview introduction of competition in most Latin American countries, the price of Population and Economy local calls as well as connection and monthly subscription fees can vary Technology Infrastructure

Internet Users and Access considerably from state to state. In Brazil, for example, some local calling Usage and Demographics plans now come with a limited allotment of free minutes (90, in a number eCommerce of cases) that are good for making local calls, but only to another ﬁxed- eAdvertising wireline phone. One thing, however, is uniform: thanks to competition, eFinance

Argentina Latin Americans now have a wealth of calling plan options that would

Brazil have been unthinkable under the previous monopoly system.

Mexico Chile Home and Business Telephone Costs in Selected Colombia Countries in Latin America, 1999 & 2000 Venezuela Country Connec- Connec- Monthly Monthly Cost of Cost of Index of Charts tion fee tion fee subscrip- subscrip- a 3- a 3- for for tion fee tion fee minute minute home business for home for local local tele- tele- tele- business call call phone phone phone tele- (peak (off- service service service phone rate) peak service rate) Argentina $150.00 $150.00 $13.22 $33.89 $0.09 $0.05 Brazil $27.32 $27.32 $7.71 $12.01 $0.04 $0.04 Chile $159.04 $159.04 $16.33 $16.33 $0.09 $0.01 Colombia $167.96 $209.54 $3.51 $4.68 $0.04 – Mexico $110.69 $366.11 $14.50 $19.94 $0.14 $0.14 Venezuela $102.14 $169.08 $11.08 $21.90 $0.10 – Note: Connection and monthly subscription fee data for Chile are for 1998; other Chile and all Colombia and Mexico data are for 1999 Source: International Telecommunication Union (ITU), 2001

IDC’s Project Atlas survey, conducted in the summer of 1999 and released in February 2000, estimated that the average monthly cost of internet access in Latin America, including monthly telephone charges and internet access fees, was $53, of which nearly 65% went towards telephone calls. The average monthly fees in Argentina and Venezuela were well above the regional average, while the ﬁgures for Brazil, Chile, Colombia and Mexico were near or slightly below. In mid-2000, a study by Pyramid Research found the average monthly cost of internet access in Brazil to be nearly $30, well below the ﬁgures reported for Argentina and Mexico, the region’s other two leading internet markets, which were $62.90 and $40.30, respectively. In its July 2000 study, “Local Access Pricing and E- Commerce,” the Organization for Economic Cooperation and Development (OECD) found the average monthly charges in Mexico to be $35.96, or slightly lower than those reported by Pyramid Research.

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Methodology Increased competition, particularly in the ISP market, may account for the Overview considerable fall in internet access costs from one year to the next. Population and Economy Although the free ISP revolution was short-lived, the large user bases that Technology Infrastructure

Internet Users and Access the free providers quickly attracted did have the effect of driving down the

Usage and Demographics fees charged by paid providers. eCommerce eAdvertising Telephone and Internet Access Fees Reported by eFinance Internet Users in Selected Countries in Latin America, Argentina 2000 Brazil

Mexico Country Monthly telephone Monthly internet charge access fee Chile

Colombia Argentina $48 $28 Venezuela Brazil $29 $18 Index of Charts Chile $25 $17 Colombia $23 $17 Mexico $29 $22 Venezuela $45 $19 Latin America $34 $19 average Note: Latin America average includes countries not included in this chart Source: International Data Corp. (IDC), 2000

Telephone and Internet Access Fees in Selected Countries in Latin America, 2000 Country Monthly telephone Monthly internet charge access fee Argentina $38.00 $24.00 Brazil $17.00 $12.75 Mexico $18.00 $22.30 Source: Pyramid Research, 2000

According to a report by Ovum, revenues from residential internet access will surpass those from business access by 2003, spurred in large part by rising per capita GDP, falling access charges and the popularity of the internet among the region’s youth population.

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Methodology

Overview Residential and Business Internet Access Revenues in

Population and Economy Latin America, 2001, 2003 & 2005 (in billions)

Technology Infrastructure 2001 Internet Users and Access

Usage and Demographics $3.1 eCommerce 2003 eAdvertising $8.3 eFinance $7.2 Argentina Brazil 2005 Mexico $14.7 Chile $9.3 Colombia Venezuela Residential Business Index of Charts Source: Ovum, 2001

The dramatic rise in the number of wireless subscribers and the increase in competition among wireless service providers across the region have generally translated into falling wireless rates. According to research by the Yankee Group, average wireless rates in Latin America fell 15% from the second quarter of 1999 to the second quarter of 2000. The Yankee Group bases its pricing analysis on monthly access fees, usage costs after minutes bundled in monthly plans, and taxes, focusing on wireless costs in major cities (where the majority of subscribers can be found). Many carriers offer services that employ prepaid monthly cards as well as one-rate plans that include roaming and long-distance charges for a ﬂat monthly fee. Much of the growth in wireless subscribers is the result of prepaid plans and Calling Party Pays. However, given that growth in the number of prepaid subscribers has occurred predominantly among lower- income consumers who, when paying by the minute, are likely to restrict usage of their wireless phones, average revenues per user (ARPU) and the average talk time per customer per month (minutes of use or MOU) have been dropping across Latin America. Nevertheless, even as carriers aim to segment the market with innovative pricing and service offerings, prices have increased in some Latin American markets, most notably Chile, Colombia and Mexico. Increased infrastructure investments may account for the rise in Chile and Mexico, while the Mexican market is also less competitive than others in Latin America.

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Methodology

Overview Changes in Wireless Rates for Selected Markets in

Population and Economy Latin America, 1999–2000 Technology Infrastructure Argentina Internet Users and Access -18% Usage and Demographics Chile eCommerce 26% eAdvertising eFinance Colombia

Argentina 6%

Brazil Mexico Mexico 5% Chile Peru Colombia -12% Venezuela Uruguay Index of Charts -34% Venezuela -16% Average -15% Source: Yankee Group, 2000

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Latin America Online

Methodology

I Overview

II Population and Economy

III Technology Infrastructure IV Internet Users and Access 69 A. Internet Users 70 B. Wireless Internet Users 77 C. Access Preferences 80 IVV Usage and Demographics VI eCommerce

VII eAdvertising

VIII eFinance

IX Argentina

X Brazil

XI Mexico

XII Chile

XIII Colombia

XIV Venezuela

Index of Charts

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Methodology A. Internet Users Overview Population and Economy eMarketer estimates that 9.9 million Latin Americans 14 years or older were Technology Infrastructure active internet users in 2000. That ﬁgure is expected to increase to 15.3 Internet Users and Access million by the end of 2001. By 2004, almost 41 million Latin Americans Usage and Demographics eCommerce will be actively using the internet. Among the pool of active users, the eAdvertising internet penetration rate will be 4.1% in 2001, and will remain in the single eFinance digits until 2004, when it will rise to 10.3%. Argentina Brazil Internet Users in Latin America, 2001-2004 (in millions Mexico and as a % or population 14+) Chile Colombia 2001 15.3 (4.1%) Venezuela

Index of Charts 2002 22.1 (5.8%)

2003 31.0 (8.0%)

2004 40.8 (10.3%)

Source: eMarketer, 2001

Maintaining this level of growth in internet users depends on a number of interrelated factors:

Continued investment in the region’s internet infrastructure Ongoing deregulation of telecommunications markets Increased teledensity Declining telephone and ISP costs Rising PC ownership Adoption of alternative information appliances (cell phones, PDAs) Sustained economic stability, particularly in the region’s core internet markets (Argentina, Brazil and Mexico)

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Methodology Although Latin America’s internet user base will increase exponentially Overview over the next few years, its share of the global internet will remain modest. Population and Economy By 2004, Latin America’s 40.8 million internet users will equal 6.4% of the Technology Infrastructure

Internet Users and Access 640.2 million users worldwide, up from 5.0% in 2000.

Usage and Demographics eCommerce Distribution of Worldwide Internet Users, by Region, eAdvertising 2001 & 2004 (in millions and as a % of worldwide eFinance internet users) Argentina

Brazil North America

Mexico 114.4 (37.3%) Chile 160.6 (25.1%) Colombia

Venezuela Europe

Index of Charts 107.8 (35.1%) 254.9 (39.8%)

Asia Pacific 63.8 (20.8%) 173.0 (27.0%)

Latin America 15.3 (5.0%) 40.8 (6.4%)

Africa/Middle East 5.3 (1.7%) 10.9 (1.7%)

Global total 306.6 (100.0%) 640.2 (100.0%)

2001 2004 Note: Figures do not add up to 100% due to rounding Source: eMarketer, 2001

Market Concentration Latin America’s three most populous countries − Brazil, Mexico and Argentina − comprise approximately 65% of the region’s 15.3 million internet users and are expected to maintain this primacy through 2004, while Brazil alone is home to nearly 40% of internet users in Latin America. Many nations in Latin America are too poor to develop a signiﬁcant internal internet market. Other countries with substantial populations, such as Colombia, Peru and Venezuela, currently lack the technology infrastructure and a sufﬁcient target market that would enable them to substantially contribute to Latin America’s overall internet population. And nations like Chile, even with its relatively high internet penetration rates and robust e-commerce sector, are simply too small to play a leading role in the region’s overall internet market.

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Methodology

Overview Internet Users in Latin America, 2001-2004 (in Population and Economy millions)

Technology Infrastructure Country 2001 2002 2003 2004 Internet Users and Access

Usage and Demographics Argentina 1.5 2.0 2.5 3.0 eCommerce Brazil 6.1 8.8 12.5 16.4 eAdvertising Mexico 2.3 3.2 4.6 6.4 eFinance Rest of region 5.5 8.0 11.4 15.0 Argentina

Brazil Total Latin America 15.3 22.1 31.0 40.8 Mexico Note: Figures do not add up precisely due to rounding Chile Source: eMarketer, 2001

Colombia Venezuela Brazil will continue to drive much of the growth in Latin America’s internet Index of Charts user population. Through 2004, it will retain nearly 40% of Latin America’s internet users.

Concentration of Internet Users in Latin America, 2001 & 2004 (in millions and as a % of Latin American internet users) Rest of region 5.5 (35.9%)

Argentina Brazil 1.5 6.1 (9.7%) (39.7%)

Mexico 2.3 (14.7%) Total = 15.3 2001

Rest of region 15.0 (36.7%)

Argentina Brazil 3.0 16.4 (7.4%) (40.2%)

Mexico 6.4 (15.7%)

2004 Total = 40.8 Source: eMarketer, 2001

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Methodology Comparative Estimates Overview

Population and Economy − Technology Infrastructure eMarketer’s estimates are based on active internet users those who are Internet Users and Access online for at least an hour a week. Other research ﬁrms employ different, Usage and Demographics and often broader, criteria when calculating the number of internet users, eCommerce counting as internet users, for example, all those with access to the eAdvertising eFinance internet, the number of internet subscribers or all those people who have

Argentina ever used the internet within the past 30, 60 or 365 days. No deﬁnition is Brazil right or wrong, but certain deﬁnitions are more illuminating than others, Mexico and depending on the criteria, estimates of the number of internet users Chile may be dramatically higher or lower. For example, several people may Colombia

Venezuela share one internet account, as Morgan Stanley’s projections illustrate.

Index of Charts Internet Subscriptions in Latin America, 2001-2005 (in millions)

2001 17.5

2002 24.7

2003 33.3

2004 42.4

2005 48.7

Source: Morgan Stanley, 2000

Internet Users per Subscription in Latin America, 2001-2005

2001 1.5

2002 1.5

2003 1.4

2004 1.4

2005 1.4

Source: Morgan Stanley, 2000

Many other variables go into internet market forecasts, from estimates of annual growth rates for internet use to projections of the number of internet-ready computers in each country to teledensity and cable penetration rates to economic and demographic factors. The following figures present forecasts from other research firms next to eMarketer’s estimates in order to give the reader a complete picture of the internet landscape. Because eMarketer’s definition of an active internet user is restricted to people over the age of 14 who are online at least once a week for no less than an hour, our estimates tend to describe a smaller universe of internet users than those of some research firms.

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Methodology Even in the face of the ongoing restructuring and apparent shrinking of Overview Latin America’s internet industry, several leading research ﬁrms have Population and Economy forecast continued growth in the number of internet users in the region. In Technology Infrastructure

Internet Users and Access a study produced on behalf of Banco Santander Central Hispano (BSCH), a Usage and Demographics leading Spanish bank Accenture (formerly Andersen Consulting) predicted eCommerce that Latin American internet users will total 44 million in 2003 and grow at eAdvertising an average rate of 44% over the next 3 years, a ﬁgure more than double the eFinance

Argentina global average of 20% cited by the consultancy. Jupiter Research raised its

Brazil 2005 user base projection from 67 million to 77 million, an increase of Mexico 15%. Its revised estimate for 2000 of 21 million users is more than 20% Chile higher than the ﬁgure released early last year. IDC has likewise raised its Colombia user forecasts. Last year, the research ﬁrm predicted 29 million users in Venezuela

Index of Charts Latin America in 2003; now the estimate is 42 million, with 75 million users expected in 2005.

Comparative Estimates: Internet Users in Latin America, 2001-2005 (in millions) 2001 2002 2003 2004 2005 Accenture/Banco ––44.0 – – Santander Central Hispano (BSCH) Computer 31.8 43.2 55.8 – – Industry Almanac eMarketer 15.3 22.1 31.0 40.8 – IDC 18.2 – 42.0 – 75.0 Jupiter Research 23.0 –––77.0 Morgan Stanley 22.0 28.1 36.7 45.5 52.2 Pegasus 12.8 16.8 20.8 – – Research Source: Morgan Stanley, Pegasus Research, 2000; various, as noted, 2001

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Methodology Internet Penetration Overview Despite the exponential growth expected in the number of active internet Population and Economy

Technology Infrastructure users from 2001 to 2004, penetration rates throughout Latin America will Internet Users and Access remain low, particularly when compared with countries like the United Usage and Demographics States, which has a far more robust economy and a more even income eCommerce distribution. In 2001, the percentage of the population over the age of 14 that eAdvertising eFinance actively uses the internet in the United States will be a massive 46%, whereas

Argentina penetration rates will remain in the single digits across Latin America.

Brazil Mexico Internet Users in Latin America and the US, 2001-2004 Chile (as a % of population 14+) Colombia Country 2001 2002 2003 2004 Venezuela

Index of Charts Argentina 5.3% 7.1% 8.6% 10.3% Brazil 4.8% 6.8% 9.5% 12.3% Mexico 3.2% 4.5% 6.3% 8.6% Rest of region 3.7% 5.4% 7.4% 9.6% Total Latin America 4.1% 5.8% 8.0% 10.3% US 46.0% 51.9% 57.8% 62.1% Source: eMarketer, 2001

By comparison, Jupiter Research and Morgan Stanley, with their larger user population estimates, project internet penetration rates in Latin America that are comparable to eMarketer’s. However, the difference is that Morgan Stanley bases its projections on the portion of the entire population that used the internet anytime and from any location in the preceding 3 months, while Jupiter looks at the population over the age of 2 that accessed the internet from any location in the preceding 30 days. In any case, both research ﬁrms base their penetration estimates on a larger potential population than eMarketer.

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Methodology

Overview Comparative Estimates: Internet Users in Latin Population and Economy America, 2001-2005 (as a % of population)

Technology Infrastructure 2001 Internet Users and Access

Usage and Demographics 4.3% eCommerce 4.3% eAdvertising 2002 eFinance

Argentina 5.9%

Brazil 5.4%

Mexico 2003 Chile

Colombia 7.8%

Venezuela 6.9%

Index of Charts 2004 9.8% 8.4%

2005 11.7% 9.6%

Jupiter Research Morgan Stanley Source: various, as noted, 2000

Use of the internet will not spread to a broader segment of the population until the price of access (including capital costs for equipment and operating or connection costs) decreases substantially and incomes rise for more inhabitants in Latin America. Consequently, rather than comparing penetration rates among the entire population age 14 and above in a nation like Brazil, where 17% of the country subsists on $2.00 per day or less, to the rates of internet users among a comparable portion of the population in the United States, a country whose average GDP per capita is ten times as high as Brazil’s, a more useful metric to apply is the penetration rate among the top 15% of the population. As the following table shows, the percentage of active internet users in this smaller pool begins to approach penetration rates in the overall population of the United States. By comparison, InfoAmericas predicts that by 2003, over 40% of Argentine, Brazilian and Mexican households in the A, B and C1 socioeconomic segments (upper and upper-middle class) will have internet access (which InfoAmericas terms the “realistic market”), whereas the share of all households with access will range from 8% to 11%.

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Methodology

Overview Internet Users in Latin America, 2001-2004 (as a % of

Population and Economy top 15% of population 14+) Technology Infrastructure Country 2001 2002 2003 2004 Internet Users and Access

Usage and Demographics Argentina 35.2% 47.3% 57.4% 68.6% eCommerce Brazil 31.7% 45.0% 63.1% 81.6% eAdvertising Mexico 21.4% 30.1% 41.9% 57.1% eFinance Rest of region 24.9% 35.7% 49.5% 63.8% Argentina

Brazil Total Latin America 27.3% 38.7% 53.3% 68.9% Mexico US (total adults) 46.0% 51.9% 57.8% 62.1% Chile Source: eMarketer, 2001 Colombia

Venezuela

Index of Charts Households with Internet Connection in Argentina, Brazil and Mexico, 2003 (in millions and as a % of total households and ABC1 socioeconomic segments) Country Households % of total % of (in millions) households ABC1 SES Argentina 0.9 8.5% 47% Brazil 4.2 8.9% 42% Mexico 2.1 10.6% 45% Note: ABC1= Upper and upper-middle classes Source: InfoAmericas, 2001

B. Wireless Internet Users The number of wireless operators in Latin America offering services based on the Wireless Access Protocol (WAP) has risen dramatically in the past year. The Yankee Group reported that in mid-2000, seven operators in Latin America’s six largest wireless markets (Argentina, Brazil, Chile, Colombia, Mexico and Venezuela) were offering WAP services; by the end of the year, that number had risen to 23. The major regional portals − StarMedia, AOL, Universo Online, Terra Networks − have been busy contracting with wireless carriers to deliver content to mobile devices, starting with major markets like Brazil and Mexico. The Santiago Chamber of Commerce registered 39 WAP-enabled websites in Chile alone in March 2001. The cost and availability of internet-ready handsets are currently the chief impediments to wider adoption of wireless internet service. Constraints on handset availability should ease considerably over the next year, but given that users pay by the minute to access content and e-mail on their browser-equipped phones, charges can be considerable, especially given the slow transmission rates. Some operators are “bundling” access packages, allowing users to connect to the web from a cellular phone, handheld computer or portable laptop in an effort to boost internet adoption rates.

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Methodology However, the initial market for this type of service — even if offered in Overview conjunction with low-cost cellular phones (or perhaps handsets with price Population and Economy subsidies), handheld computers, and reduced internet access fees and phone Technology Infrastructure

Internet Users and Access tariffs — is likely to be limited to business and high-income personal users. Usage and Demographics As with ﬁxed-line internet content, developing wireless content speciﬁc to eCommerce individual countries, or even cities, will be a crucial factor in spurring eAdvertising adoption of the new technology. eFinance

Argentina Even if cellular phones and wireless devices are well suited to some

Brazil internet applications, such as instant messaging, checking e-mail and Mexico scanning stock quotes, they cannot at present replicate the experience of Chile accessing the internet on a larger screen. Consequently, users will likely Colombia limit the types of purchases they make with their wireless devices to Venezuela

Index of Charts inexpensive goods like movie and concert tickets or to intangible items such as stock trades and banking applications, which do not require high resolution pictures or extensive text descriptions. The range of long-term estimates for wireless internet users in Latin America is broad, but research ﬁrms agree that the market will not see signiﬁcant growth until 2003, when 2.5G technology will be in place across much of the region.

Comparative Estimates: Wireless Internet Users in Latin America, 2001-2005 (in millions)

2001 1.6 2.0 0.01

2002 6.0 7.0 0.2

2003 16.0 18.0 9.5

2004 35.0 20.5

2005 52.0

Computer Industry Almanac Jupiter Research Ovum Source: Computer Industry Almanac, Jupiter Research, 2001; Ovum, 2000

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Methodology The Strategis Group and IDC, on the other hand, see a larger market for the Overview wireless internet, starting primarily with users of data transmission Population and Economy capabilities and short messaging services. IDC, for example, predicts that 71 Technology Infrastructure

Internet Users and Access million Latin Americans will subscribe to mobile data services by 2004, Usage and Demographics with the number of WAP users rising from 500,000 in 2000 to more than 19 eCommerce million in 2004. The Strategis Group cautions that growth of the wireless eAdvertising internet depends on the wide availability of handsets appropriate to all eFinance

Argentina market segments and up-to-the-minute information that users can access

Brazil quickly. This latter point will be particularly important until 2003, while Mexico the majority of users will still be on slower 2G networks. Chile Colombia Wireless Data Users in Latin America, by Technology, Venezuela 2001-2007 (in millions) Index of Charts 2001 2002 2003 2004 2005 2006 2007 3G 0.0 0.0 0.3 1.2 4.0 10.9 22.9 2.5G 1.0 3.6 6.3 10.8 16.0 20.4 23.2 2G 4.7 7.6 6.6 4.6 3.4 2.3 1.5 Total 5.7 11.2 13.2 16.6 23.4 33.6 47.6 Source: The Strategis Group, 2000

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Methodology C. Access Preferences Overview

Population and Economy Technology Infrastructure Home and Work Internet Users and Access Most Latin Americans continue to access the internet from home. However, Usage and Demographics eCommerce by 2004, Morgan Stanley estimates that the balance will shift to the eAdvertising workplace. Applying Morgan Stanley’s percentages to eMarketer’s internet eFinance user projections, we estimate that the number of home internet users will Argentina increase from 7.8 million in 2001 to 17.6 million in 2004. By comparison, Brazil the number of business users will shoot up from 5.8 million in 2000 to 20.4 Mexico

Chile million in 2004. Thus, by 2004, business users will grow to half of the total Colombia user population, up from one-third in 2000. Venezuela Index of Charts Internet Users in Latin America, by Access Location, 2001-2005 (as a % of total)

2001 51.0% 37.8% 11.2%

2002 49.6% 41.1% 9.3%

2003 45.6% 46.3% 8.1%

2004 42.8% 49.9% 7.3%

2005 42.6% 50.2% 7.2%

Home Business Educational/governmental /other institution Source: Morgan Stanley, 2000

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Methodology

Overview Internet Users in Latin America, by Access Location,

Population and Economy 2001-2004 (in millions) Technology Infrastructure 2001 2002 2003 2004 Internet Users and Access

Usage and Demographics Home 7.8 11.0 14.3 17.6 eCommerce Business 5.8 9.1 14.3 20.4 eAdvertising Educational/ governmental/other institution 1.7 2.0 2.5 2.9 eFinance Total 15.3 22.1 31.0 40.8 Argentina

Brazil Source: eMarketer, 2001; Morgan Stanley, 2000

Mexico Chile Market research ﬁrm TGI Latina found not only slightly more conservative Colombia numbers but also considerable overlap in the location of internet access. Venezuela For example, the study revealed that 24% of home users also access the Index of Charts internet at work, while 27% of those who access the internet from the workplace also do so at home.

Internet Users in Latin America, by Access Location, 2000 (as a % of total) Use at Use at Use at Use home work school elswhere Home users 100% 24% 10% 1% Work users 27% 100% 6% 2% School users 16% 8% 100% 4% Other place 3% 5% 8% 100% users Source: TGI Latina, 2000

Home and workplace penetration rates for internet access are similarly low, although Morgan Stanley predicts that both will rise to double-digit ﬁgures by 2006. Still, as stated earlier, home computers are much more likely to have an internet connection than workplace PCs. In part, this may explain why a larger percentage of Latin Americans access the internet from home. By 2004, workplace computers will begin to close this connectivity gap.

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Methodology Harte-Hanks’ survey of more than 15,000 businesses across Latin America Overview found 16% of all Latin American workers are accessing the internet, Population and Economy although access is disproportionately concentrated among higher-level Technology Infrastructure

Internet Users and Access management. Harte-Hanks determined that 21% of Venezuelan workers Usage and Demographics have internet access, the highest of any country in Latin America, followed eCommerce by Colombia at 16%, Brazil at 13% and Mexico at 10%. eAdvertising eFinance Workforce with Internet Access in Latin America, Argentina 2001-2005 & 2010 Brazil

Mexico Country 2001 2002 2003 2004 2005 2010 Chile Argentina 5.1% 7.6% 10.5% 13.8% 15.7% 26.6% Colombia Brazil 4.1% 6.2% 8.8% 11.9% 13.5% 23.2% Venezuela

Index of Charts Chile 4.8% 6.8% 9.2% 11.9% 13.5% 23.2% Mexico 5.4% 7.8% 10.6% 13.8% 15.7% 26.6% Rest of region 4.7% 6.8% 9.1% 11.9% 13.5% 23.1% Total Latin America 4.6% 6.8% 9.4% 12.4% 14.1% 24.0% Source: Morgan Stanley, 2000

Households with Internet Access in Latin America, 2001-2005 & 2010 Country 2001 2002 2003 2004 2005 2010 Argentina 5.5% 7.2% 8.4% 9.4% 10.4% 12.8% Brazil 5.5% 6.8% 7.8% 8.7% 9.6% 12.1% Chile 5.0% 6.4% 7.5% 8.4% 9.3% 12.1% Mexico 6.8% 9.3% 11.0% 12.6% 14.0% 17.7% Rest of region 3.2% 4.3% 5.0% 5.7% 6.4% 8.2% Total Latin America 4.8% 6.2% 7.2% 8.2% 9.1% 11.5% Source: Morgan Stanley, 2000

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Methodology

Overview Home and Business PCs in Latin America with Population and Economy Internet Connection, 2001-2005

Technology Infrastructure 2001 Internet Users and Access

Usage and Demographics 49.7% eCommerce 39.0% eAdvertising 2002 eFinance

Argentina 59.0%

Brazil 47.3%

Mexico 2003 Chile

Colombia 63.0%

Venezuela 55.5%

Index of Charts 2004 67.1% 63.8%

2005 71.1% 67.3%

Home Business Source: Morgan Stanley, 2000

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Latin America Online

Methodology

I Overview

II Population and Economy

III Technology Infrastructure

IV Internet Users and Access V Usage and Demographics 85 A. Usage 86 B. Usage Patterns 87 C. Demographics 88 VVI eCommerce VII eAdvertising

VIII eFinance

IX Argentina

X Brazil

XI Mexico

XII Chile

XIII Colombia

XIV Venezuela

Index of Charts

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Methodology A. Usage Overview

Population and Economy Technology Infrastructure Frequency of Sessions Internet Users and Access According to a survey by the Strategy Research Corporation (SRC), Usage and Demographics eCommerce Brazilians access the internet with greater frequency than users in eAdvertising Argentina and Mexico, Latin America’s other two leading internet markets. eFinance Argentina Frequency of Internet Sessions in Argentina, Brazil Brazil and Mexico, 2000 (in number of times per week) Mexico Chile Brazil 4.71 Colombia

Venezuela Argentina 3.83 Index of Charts Mexico 3.79

Source: Strategy Resource Corporation, 2000

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Methodology B. Usage Patterns Overview Population and Economy The SRC survey also found that Brazilians tend to use the internet most Technology Infrastructure often for research and information purposes, followed closely by e-mail. Internet Users and Access These preferences are consistent with those of the Argentine and Mexican Usage and Demographics eCommerce users surveyed by SRC, and indeed, with those of users worldwide. eAdvertising Brazilians use the internet for shopping to a greater extent than Argentines eFinance and Mexicans. However, they use the internet far less frequently than either Argentina Argentines or Mexicans for educational purposes. Brazil

Mexico Internet Activities in Argentina, Brazil and Mexico, Chile 2000 Colombia Venezuela Research/Information Index of Charts 82% 73% 72%

eMail 74% 69% 64%

Entertainment 50% 49% 44%

Education 63% 44% 62%

eCommerce 17% 27% 16%

Argentina Brazil Mexico Source: Strategy Resource Corporation, 2000

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Methodology According to a survey conducted in 2000 by TGI Latina, shopping was by Overview far the least frequent activity of Latin American internet users, while e-mail Population and Economy was the most popular activity, particularly among home users. The study Technology Infrastructure

Internet Users and Access found that within 30 days of ﬁlling out the survey questionnaire, 69% of Usage and Demographics home users utilized e-mail. eCommerce eAdvertising Internet Activities of Survey Respondents in Latin eFinance America, 2000 (as a % of activities within the Argentina previous month) Brazil Home Work School Other place Mexico users users users users Chile

Colombia eMail 69% 63% 46% 37% Venezuela Read news 33% 33% 21% 16% Index of Charts Visit a chat room 31% 16% 28% 31% Did shopping for business 4% 7% 1% 1% Source: TGI Latina 2000

C. Demographics

Gender The gender imbalance that characterized the early universe of internet users in Latin America is giving way to increasing gender parity. A 1997 survey identiﬁed 76% of internet users as men. In 2000, TGI Latina estimated the split to be 60% male and 40% female. In contrast, researchers expect complete gender equality among internet users in the United States in 2001.

Internet Users in Latin America, by Gender, 2000

Female 40% Male 60%

Source: TGI Latina, 2000

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Methodology Age Overview

Population and Economy

Technology Infrastructure Latin American internet users are young, in large part because the region’s Internet Users and Access population is young. According to Nazca Saatchi & Saatchi, the mean age Usage and Demographics of the region’s total population is 24, while the TGI Latina study cited on eCommerce Zonalatina.com found the mean age of internet users to be 27. eAdvertising eFinance

Argentina Mean Age of Population and of Internet Users in

Brazil Latin America, 1999–2000

Mexico Total Region* 24 Chile

Colombia Internet Users** 27 Venezuela Index of Charts Source: *Nazca Saatchi & Saatchi, 1999; **TGI Latina, 2000

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Latin America Online

Methodology

I Overview

II Population and Economy

III Technology Infrastructure

IV Internet Users and Access

V Usage and Demographics VI eCommerce 91 A. Total eCommerce 92 B. B2C eCommerce 97 C. B2B eCommerce 106 VID. mCommerce 112 VII eAdvertising

VIII eFinance

IX Argentina

X Brazil

XI Mexico

XII Chile

XIII Colombia

XIV Venezuela

Index of Charts

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Methodology eMarketer deﬁnes an electronic commerce purchase of a product or service Overview as one in which the buyer initiates and completes the entire purchase order, Population and Economy or contract, via the internet (including via e-mail). How the merchant Technology Infrastructure

Internet Users and Access chooses to process the transaction order (i.e., manually or electronically), or Usage and Demographics how the product is actually delivered, are irrelevant to this definition. Other eCommerce researchers, with more liberal definitions, will often include revenues that eAdvertising are “facilitated” or “influenced” by the internet, such as when a person eFinance

Argentina researches merchandise online but then buys the item ofﬂine.

Brazil

Mexico Chile A. Total eCommerce Colombia

Venezuela Total e-commerce revenues in Latin America will reach $9.6 billion in

Index of Charts 2001, with B2B transactions of $7.9 billion and B2C transactions of $1.8 billion. Despite the slowdown in the region’s internet economy, most analysts remain confident that e-commerce revenues will continue to rise, in large part due to advances in the B2B segment. Pyramid Research, for example, expects the volume of all electronic transactions in Latin America to grow at a compound annual growth rate of 150% between 2000 and 2005, with the great majority concentrated in the B2B segment. Businesses of all sizes as well as national and local governments will increasingly do their procurement online. In addition, large brick-and-mortar concerns will begin to invest heavily in IT infrastructure in order to most effectively leverage strong brand identity, extend their market presence to a new sales channel and remain competitive. An IDC survey of 161 leading e-businesses in Latin America, released in December 2000, revealed that the majority of them (over 40%) believe they will reach profitability by year-end 2001, with an additional 20% reaching the profitability threshold by year-end 2002. Of the companies surveyed by IDC, 56% were solely consumer-oriented firms, and 86% had some consumer-facing business. The split among pure plays and brick-and- mortar companies represented in the survey sample was relatively even. Pure plays spent far more heavily on promotions and website development expenses than their brick-and-mortar counterparts. While consumer-oriented Latin American e-commerce sites initially tried to target a region-wide audience, many of those that survived the downturn in the internet economy have retrenched to focus on specific markets. Brazil is the principal target market for many B2C e-commerce merchants, given its large internet user population.

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Methodology Globally, e-commerce will see an upward trend over the next few years. Overview According to a study conducted by The RED Consultancy for DHL Population and Economy Worldwide Express (which surveyed several hundred companies with more Technology Infrastructure

Internet Users and Access than $15 million in revenues across 12 countries), 86% of companies Usage and Demographics expect increased total sales as a result of trading online. However, the eCommerce survey also revealed the signiﬁcant challenges that lie ahead: eAdvertising 74% of companies lack a dedicated e-commerce department eFinance Argentina 79% of businesses worldwide are not currently trading on the internet

Brazil

Mexico eCommerce in Latin America, 2000–2004 (in billions)

Chile

Colombia 2000

Venezuela $2.85

Index of Charts $0.73 $3.58 2001 $7.87 $1.76 $9.63 2002 $17.39 $3.31 $20.70 2003 $33.63 $5.49 $39.12 2004 $58.39 $8.11 $66.50

B2B B2C Total Source: eMarketer, 2001

Although analysts expect continued growth in e-commerce in Latin America, the region’s share of worldwide e-commerce will remain small, accounting for just below 2% of the total transaction volume in 2001. Only Africa and the Middle East represent a smaller share of the pie. From 2001 to 2004, Latin America’s share of global e-commerce transactions will increase slightly, but will hover around 2% of the total. Europe, meanwhile, will be the big gainer worldwide in terms of market share. In Latin America, B2B transactions will account for an increasing share of the total, rising from 82% in 2001 to 88% in 2004.

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Methodology

Overview Worldwide eCommerce Distribution, by Region, 2001

Population and Economy (in billions)

Technology Infrastructure

Internet Users and Access North America $391.18 (71.1%)

Usage and Demographics Europe $68.89 (12.5%) eCommerce eAdvertising Asia Pacific $76.81 (14.0%) eFinance Latin America $9.63 (1.8%) Argentina Brazil Africa/Middle East $3.57 (0.6%) Mexico

Chile Total $550.08 (100.0%)

Colombia Source: eMarketer, 2001 Venezuela

Index of Charts With a sizeable population of considerable wealth heavily concentrated in large cities and a signiﬁcant manufacturing base in the region’s core markets, Latin America’s potential for e-commerce remains vast. Brazil, the largest, most populous country in the region, is by far the leading market for internet commerce in both the B2B and B2C segments. It has an advanced, highly automated industrial sector that will beneﬁt considerably from the cost savings associated with online procurement and supply chain management, and a large, fairly cohesive consumer market located primarily in urban areas. At minimum, Brazil will retain a staggering 60% of total Latin American e-commerce revenues through 2004. All countries, however, will see impressive growth in e-commerce revenues over the next few years, although the B2B sector will grow the most quickly. Revenues in the B2C segment will also increase, but a familiar set of factors - low credit card, PC and telephone penetration rates, fragile infrastructure, limited parcel delivery systems, and high internet access costs - will continue to hinder B2C growth across the region. Although vendors are in the process of developing prepaid debit and smart cards as well as mechanisms for transacting business online, they will not penetrate the population at large for another 2 to 3 years.

eCommerce in Latin America, 2001-2004 (in billions) Country 2001 2002 2003 2004 Argentina $0.87 $2.28 $3.91 $6.65 Brazil $6.55 $12.63 $24.25 $39.90 Mexico $1.54 $4.14 $7.43 $13.30 Rest of region $0.67 $1.66 $3.52 $6.65 Total $9.63 $20.70 $39.12 $66.50 Note: Figures do not add up precisely due to rounding Source: eMarketer, 2001

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Methodology Brazil, the powerhouse for all things internet in Latin America, will account Overview for nearly 70% of the region’s e-commerce revenues in 2001. Its share will Population and Economy drop to 60% by 2004 as e-commerce increases in the rest of the region. Technology Infrastructure

Internet Users and Access Mexico’s share in particular will show the largest growth, fueled by industrial Usage and Demographics and assembly operations that are tightly linked to the global supply chain. eCommerce Meanwhile, with Argentina’s economy still stalled by recession, the country’s eAdvertising e-commerce markets will develop at a more modest pace. eFinance

Argentina

Brazil eCommerce Distribution in Latin America, 2001 & 2004

Mexico (in billons) Chile Argentina Colombia $0.87 (9%) Venezuela

Index of Charts $6.65 (10%) Brazil $6.55 (68%) $39.90 (60%)

Mexico $1.54 (16%) $13.30 (20%)

Rest of region $0.67 (7%) $6.65 (10%)

Total $9.63 (100%) $66.50 (100%)

2001 2004 Source: eMarketer, 2001

Comparative Estimates eMarketer and Forrester Research estimates show relative convergence through 2003, and then begin to diverge widely by 2004, as Latin America enters its period of “hypergrowth,” which Forrester contends will take place when online trade reaches 10% of its full potential. In order to move into the period of rapid technology adoption associated with hypergrowth, Forrester maintains that each nation must reach its “commerce threshold,” a building period of 12 to 18 months in which four principal factors − regulatory openness, technology infrastructure, global supply chain linkages and trading-bloc activity − fuse with opportunities for private and public sector action and investment.

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Methodology The relative lack of comparative information on region-wide e-commerce Overview is an indication of the degree to which online merchants, e-marketplaces Population and Economy and even research ﬁrms have reoriented their focus. Region-wide solutions Technology Infrastructure

Internet Users and Access have fallen out of favor, particularly in the B2C segment, given the cost Usage and Demographics and complexity of maintaining multiple country ofﬁces and coordinating eCommerce website content, procurement of goods and services, and management of eAdvertising supply chains. Instead, most B2C ﬁrms have begun to deploy their limited eFinance

Argentina resources in a more targeted set of markets.

Brazil eMarketplaces and B2B exchanges may yet reap some beneﬁts from the Mexico economies of scale associated with region-wide operation, but the Chile businesses that will transact through these exchanges will be buying and Colombia selling in far greater quantities and with greater regularity than the average Venezuela

Index of Charts consumer. Pyramid Research, for example, believes that B2B will account for 98% to 99% of total e-commerce revenues through the middle of the decade. IDC estimates that e-commerce revenues totaled $5 billion in 2000 and will grow at a rate of 68% per year until 2005, when revenues will reach nearly $79 billion, with B2B accounting for around 90% of the total.

Comparative Estimates: eCommerce Revenues in Latin America, 2001-2005 (in billions)

2001 $9.63 $13.40 $1.14 2002 $20.70 $29.60 2003 $39.12 $74.10 2004 $66.50 $188.80 2005 $79.00 $108.40

eMarketer Forrester Research International Data Corp. (IDC) Pyramid Research Source: Forrester Research, 2000; various, as noted, 2001

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Methodology B. B2C eCommerce Overview

Population and Economy Technology Infrastructure B2C Revenues Internet Users and Access Consumer-oriented e-commerce sites around the world suffered a Usage and Demographics eCommerce considerable shakeout in 2000, and Latin America was no exception. Some eAdvertising countries, particularly Argentina, which has been mired in a serious eFinance recession for more than 2 years, were hit harder than others. Brazil, for Argentina example, with its large internet user population and robust e-commerce Brazil market, fared better than most. Mexico

Chile Internet pure plays will undoubtedly continue to enter the market, but in Colombia far smaller numbers than at the beginning of the 1999-2000 Latin Venezuela American internet boom. Rather, bricks-and-mortar retailers will come to Index of Charts dominate the B2C segment, not only by exploiting their strong ofﬂine brands on the internet but also by offering consumers online experiences and payment options that are consistent with their ofﬂine shopping habits. Although consumer e-commerce tends to garner more publicity than business-to-business transactions, the B2C segment actually represents a small and shrinking share of Latin America’s total e-commerce revenues. B2B marketplaces, which function on the basis of large-scale trading in supplies, parts and surplus materials, attract less attention from the public, but far more revenues from businesses. As the B2C sector consolidates over the next few years, leaving fewer portals and online retails in each consumer category, its share of total revenues will contract from 18% in 2001 to 12% in 2004. Moreover, B2C e-commerce in Latin America has been hobbled by what the Economist Intelligence Unit’s ebusinessforum.com has labeled “transactional dysfunction”: In order to complete a purchase on a local site, Latin American consumers must click an average of 11.4 pages (by contrast, the US average is 5.5). As a result, ebusinessforum.com asserts, online shoppers abandon their cybershopping carts at an alarmingly high rate of 92%.

B2C eCommerce in Latin America, 2000-2004 (in billions and as a % of total Latin American e-commerce)

2000 $0.73 (20.2%)

2001 $1.76 (18.2%)

2002 $3.31 (16.0%)

2003 $5.49 (14.0%)

2004 $8.11 (12.2%)

Source: eMarketer, 2001

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Methodology As B2C e-commerce matures throughout Latin America in general, it is Overview likely that most markets will see an outgrowth of ﬁrms that craft buying Population and Economy opportunities in line with local preferences and shopping habits (in terms Technology Infrastructure

Internet Users and Access of merchandise as well as payment methods), rather than attempting to Usage and Demographics imitate successful US models, as was the case in the early period of Latin eCommerce American B2C e-commerce. Beyond successful marketing and advertising eAdvertising campaigns, improving the security of online transaction environments, eFinance

Argentina better disclosure of privacy policies, and on- and ofﬂine customer service

Brazil will be key factors in the effort to attract more consumers to B2C sites and Mexico retain them as repeat buyers. A high level of service and efﬁciency is Chile especially important for the elite who make up the majority of the existing Colombia online consumer segment, as they are used to receiving preferential Venezuela

Index of Charts treatment from brick-and-mortar merchants. Increasing e-commerce revenues, much like internet usage, depends in large part on getting more Latin Americans online and giving them reasons to come back as regular shoppers. Large chain stores in Brazil have been experimenting with physical stores that contain no merchandise but rather, internet-enabled terminals and a small staff to assist customers with the ordering and credit application process. This saves the company the expense of stocking the store with merchandise and also gets its customers comfortable with ordering goods online.

B2C eCommerce in Latin America, 2001-2004 (in billions) Country 2001 2002 2003 2004 Argentina $0.11 $0.30 $0.43 $0.73 Brazil $1.24 $2.15 $3.64 $5.19 Mexico $0.28 $0.62 $0.97 $1.46 Rest of region $0.12 $0.25 $0.46 $0.73 Total $1.76 $3.31 $5.49 $8.11 Note: Figures do not add up precisely due to rounding Source: eMarketer, 2001

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Methodology Comparative Estimates Overview Despite the fact that a relatively small percentage of the population Population and Economy

Technology Infrastructure currently has a credit card, the portion of the population that does has Internet Users and Access sufﬁcient spending power to drive up consumer e-commerce revenues. Usage and Demographics Moreover, because the potential of the market remains vast, credit card eCommerce companies will make concerted efforts to bring smart cards and other forms eAdvertising eFinance of electronic money to a large portion of the population.

Argentina As with their estimates for the number of internet users in Latin America, Brazil research ﬁrms have remained undeterred by the consolidation of the Mexico consumer e-commerce sector by forecasting optimistic growth in B2C e- Chile commerce revenues. Accenture, for example, foresees brisk growth in online Colombia

Venezuela consumer spending, rising from $4.6 billion in 2002 to $8 billion in 2003.

Index of Charts Comparative Estimates: B2C eCommerce in Latin America, 2001-2005 (in billions) 2001 2002 2003 2004 2005 Accenture/Banco – $4.60 $8.00 – – Santander Central Hispano (BSCH) eMarketer $1.76 $3.31 $5.49 $8.11 – Forrester $0.95 $2.10 $5.25 $13.40 – Research Pyramid Research $0.23 –– –$1.08 Source: Forrester Research, 2000; various, as noted, 2001

Payment Methods The generally low level of credit card ownership and use in Latin America is a well-known impediment to the growth of consumer-based e- commerce. Only the wealthy in Latin America hold credit cards to any signiﬁcant degree. A legacy of economic instability is partly to blame for the lack of a credit card culture in Latin America. During the 1980s and 1990s, hyperinﬂation sent interest rates soaring. Card issuers were reluctant to take the risk of extending credit to consumers, many of who lacked any credit history. As a result, both merchants and consumers turned to cash and checks. Even though the economy has stabilized, consumers still prefer to pay for their purchases by cash or check, often in monthly installments in the latter case. Consumers, particularly those from lower-income groups, are still far more likely to have credit extended by multiple retail outlets rather than an actual credit card.

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Methodology Although penetration rates for credit cards alone in Latin American Overview countries remain low relative to the United States, debit cards have Population and Economy experienced dramatic growth rates in the past several years. Research by Technology Infrastructure

Internet Users and Access Morgan Stanley indicates that penetration rates for credit and debit cards Usage and Demographics are considerably higher. The only exception is Mexico, and the combined eCommerce credit/debit card ﬁgure seems low given that InfoAmericas maintains that eAdvertising the issuance of debit cards has been growing at a rate of more than 40% per eFinance

Argentina year for the past 3 years.

Brazil

Mexico Credit Card Penetration in Selected Countries in Latin Chile America, 2000 (as a % of total population)

Colombia

Venezuela Argentina 27%

Index of Charts Brazil 18%

Chile 22%

Colombia 13%

Mexico 22%

Venezuela 12%

Source: Morgan Stanley, 1999

Combined Credit/Debit Card Penetration in Selected Countries in Latin America, 2000 (as a % of total population)

Argentina 46%

Brazil 50%

Chile 24%

Colombia 24%

Mexico 13%

Venezuela 27%

Source: Morgan Stanley, 2001

Given the region’s low credit card penetration rates, online merchants continue to offer consumers a variety of payment options. Among the most popular are deposits to a merchant’s bank account, direct debit from a customer’s account, banking tickets and payment in a brick-and-mortar retail outlet. All of these options add time, expense and friction to the online transaction process. However, they may offer a way of overcoming the barriers to more widespread e-commerce in Latin America. The most effective solutions will be those that adapt to the country’s infrastructure and economic constraints and are consistent with the buying habits and patterns of consumers.

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Methodology Pilot digital cash systems are under way in Latin America. In theory, using Overview chip-based “smart cards” and other prepaid devices instead of money and Population and Economy magnetic-strip credit cards would not only be more convenient than Technology Infrastructure

Internet Users and Access depositing a pocketful of coins at the local newsstand, but could also Usage and Demographics revolutionize B2C e-commerce by enabling consumers to make micro- eCommerce payments online. Other advantages of moving to a chip-based system eAdvertising include reduced fraud, lower processing costs and additional card features. eFinance

Argentina Still, most countries, including those in Latin America, have been slow to

Brazil adopt e-money solutions. Cost is the principal drawback associated with Mexico converting to smart cards. For example, the trade journal Card Technology Chile estimates that traditional magnetic-strip cards cost $0.50 to $0.75 each, Colombia while chip-based cards cost $2 to $5 each. Additional related costs include Venezuela

Index of Charts upgrading 15 million POS (point-of-sale) terminals and nearly 800,000 automated teller machines worldwide to read the chip cards. Brazil and Mexico have been leading the experiments with smart-card technology. They expect to replace magnetic-strip debit and credit cards with smart cards over the next 5 years. Brazil, in particular, has a considerable recent history of credit card fraud, and card issuers are therefore well motivated to switch to a more secure technology, even if this involves up-front costs. In addition, several software companies have pioneered online wallets that store and protect consumers’ personal data with 256-bit encryption. This type of solution should ease consumer fears about the security of buying online and will facilitate (and further automate) the transaction process. Research indicates that investments in more secure payment technology would be worthwhile, particularly for Latin America’s nascent online consumer market. According to InfoAmericas, two-thirds of credit card holders are reluctant to use their cards for online purchases on Latin American sites.

Residential Delivery Fulfillment remains a global concern for e-commerce firms. The DHL Worldwide Express study found that 25% of companies worldwide have yet to define their e-commerce fulfillment policies. The average delivery time across the world is currently 4 days, and not surprisingly, the DHL survey also revealed that 20% of all e-commerce deliveries arrive late when taking into account customers’ lead-time expectations. Overall, the companies surveyed by DHL regarded fulfillment-related matters (including customs and tax issues) as some of the leading barriers to the development of e- commerce around the world. In Latin America, where the logistics infrastructure remains generally underdeveloped, recent estimates have put the average delivery time for goods ordered over the internet at 5 days.

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Methodology

Overview Global eCommerce Barriers Cited by Companies Population and Economy Worldwide, 2000 Technology Infrastructure Web Security Internet Users and Access 69% Usage and Demographics eCommerce Ease of Payment eAdvertising 47% eFinance

Argentina Order Fulfillment

Brazil 41% Mexico Route to Market/Channel Conflict Chile 39% Colombia

Venezuela Customs/Tax Issues Index of Charts 35% Language 26%

Source: DHL Worldwide Express, 2000

At present, Latin America lacks advanced domestic courier companies along the lines of Federal Express, DHL Worldwide Express and UPS, and the existing distribution system, organized around the federal posts and local or regional couriers, is unreliable at best. In terms of drop-off locations, the coverage of major international courier ﬁrms is largely limited to major cities throughout the region. However, in terms of residential delivery, their reach is somewhat more extensive, thanks to partnerships with authorized agents around the region. Still, the high added cost of delivery remains an impediment to more widespread online purchasing in the region.

International Couriers' Drop-Off Locations in Selected Countries in Latin America, 2001 Country DHL FedEx UPS Argentina 12 locations 4 locations 6 locations Brazil 24 locations 7 locations 5 locations Chile 12 locations 2 locations 3 locations Colombia 12 locations 5 locations 6 locations Mexico 121 locations 25 locations 28 locations Venezuela 16 locations 16 locations 2 locations Note: Colombian FedEx drop-off locations are all with authorized in-country agent Source: various, as noted, 2001

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Methodology Moreover, for those Latin Americans ordering products from foreign online Overview merchants, getting their purchases through customs can be a complicated Population and Economy and often expensive process that requires an experienced hand. Long delays Technology Infrastructure

Internet Users and Access at customs, high port and transport costs, and fragile infrastructure are the Usage and Demographics norm in Latin America. The perception among many Latin Americans is that eCommerce customs officials are inefficient. Despite the considerable impediments, eAdvertising some Latin-based firms are attempting to enter the B2C logistics market. For eFinance

Argentina example, Lanexpress, the courier division of Chilean airline LanChile,

Brazil recently launched a shopping portal that provides Latin American Mexico consumers with a mailing address in Miami. Consumers can then purchase Chile products from US e-tailers and catalog merchants and have them shipped to Colombia Latin America by Lanexpress via their Miami address. The service promises Venezuela

Index of Charts 48-hour door-to-door delivery from Miami to Latin America.

Privacy and Security eCommerce firms face other hurdles beyond the region’s weak (albeit improving) telecommunications infrastructure and low credit card penetration rates. According to InfoAmericas, online merchants in Latin America allocate only 5% of their budgets to sales-related technology and software. By comparison, they typically spend 60% or more of their budgets on marketing and promotion under the assumption that increasing traffic is the easiest and quickest way to boost sales. As a result, e- commerce markets have been slow to develop. At the same time, with credit, especially for start-up ventures, expensive and difficult to access across Latin America, InfoAmericas has found that many online merchants are hesitant to invest in software technology that is unlikely to pay for itself in the short term. Yet, by failing to invest in front- and back-end technology, the expected e-commerce market may not emerge. Secure servers are necessary for the safe conduct of e-commerce. The secure socket layer (SSL) protocol encrypts data to prevent anyone who might intercept it from being able to actually read the data. SSL can assure clients that they are dealing with the real server to which they intended to connect and prevent unauthorized clients from connecting. SSL also inhibits hackers from tampering with data going to or coming from the server. Netcraft, a British firm that performs regular analyses of encrypted transactions on the internet, defines strong encryption as having a key length greater than 40 bits. Hackers can easily break into systems with weak encryption.

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Methodology The geographic distribution of websites that use the SSL protocol indicates Overview the relative potential for e-commerce transactions in different regions of Population and Economy the world (although it is not directly correlated with the volume of e- Technology Infrastructure

Internet Users and Access commerce transactions or revenues in any particular country). Consumer Usage and Demographics reluctance to provide credit card numbers and other personal ﬁnancial eCommerce information online is well justiﬁed, as the proportion of websites in Latin eAdvertising America that prompt for credit card numbers in unsecured environments is eFinance

Argentina extremely high. According to Netcraft, Brazil has the greatest number of

Brazil encrypted servers in Latin America, but the percentage of total servers in Mexico the country with some kind of encryption is still less than 1%. By contrast, Chile nearly two-thirds of the servers in the US surveyed by Netcraft had some Colombia degree of encryption. Venezuela

Index of Charts Servers with Strong and Weak Encryption in the US and Selected Countries in Latin America, 2001 Location Strong Weak % with encryption encryption encryption United States (US) 68,919 9,207 64.3% Brazil (BR) 572 456 0.9% Mexico (MX) 124 135 0.2% Argentina (AR) 130 108 0.2% Chile (CL) 66 75 0.1% Venezuela (VE) 66 26 0.1% Colombia (CO) 45 26 0.1% Source: Netcraft, 2001

The solution to the security dilemma, at least in the near term, may lie with the still-nascent market for outsourcing services: application service providers (ASPs). The ASP market is in its infancy in Latin America, but given the high costs associated with building proprietary software and technology solutions, the ASP model may, over time, reach the level of penetration it has reached throughout Europe and the United States, particularly as broadband access becomes more widespread. IDC predicts that the ASP market in Latin America will grow to $418 million by 2004. In the meantime, Latin American banks, which have already invested heavily in automated systems, are well-positioned to “insource” the transaction services that e-commerce merchants and digital exchanges may require. In essence, by providing the hardware and software, as well as personnel and expertise for processing credit card and other transactions, banks serve as a channel for purchases made in digital marketplaces. Independent payment processors are also emerging to meet demand in this sector.

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Methodology Consumer Attitudes and Preferences Overview With the continued exception of Brazil, online buyers in Latin America still Population and Economy

Technology Infrastructure shop predominantly at foreign sites. This trend is due in part to the Internet Users and Access cosmopolitan characteristics of the advanced internet users who shop over Usage and Demographics the internet: they are likely to be the same people who travel to Miami for a eCommerce weekend of shopping. It may also reﬂect a limited availability or a lack of eAdvertising eFinance variety of popular products – typically, electronic goods, computer

Argentina software and hardware, books, music and videos – at local sites. Thus, the Brazil wealthy “early adopters” – who tend to be pioneering online consumers – Mexico often opt to buy abroad, despite the considerable added expense and Chile logistical annoyance this may involve. Colombia

Venezuela By contrast, consumers in the United States overwhelmingly shop at

Index of Charts domestic sites, which is understandable given that the US is home to a majority of consumer commerce sites. On the other hand, an InfoAmericas study found that the overall average for those favoring domestic and foreign sites in Europe was the same 41%/59% split as in Latin America. Nevertheless, until Latin American shoppers shift their buying to domestic sites, and hence, make the internal Latin American market viable, the development of local websites and the diffusion of the internet to small- and medium-sized enterprises in Latin America may be stymied.

Consumers Shopping at Domestic and Foreign Sites in Latin America, US and Europe, 2000

Latin America 41% 59%

US 91% 9%

Europe 41% 59%

Domestic Foreign Source: InfoAmericas, 2000

An IDC survey of 26 regional and country-speciﬁc consumer-oriented portals in Latin America found that many have failed to retain loyal users due to a lack of key e-commerce and content features. The study pointed out that portal sites, as the ﬁrst point of entry for most internet users, play a central role in educating and transforming users into regular internet buyers. However, most Latin American portals, at both regional and country level, do not offer the tools required to complete this transformation.

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Methodology The regional portals included in the survey were America Online Latin Overview America, El Sitio, StarMedia, Terra, Tutopia, Universo Online, Yahoo! and Population and Economy Yupi; the study also focused on three local portals in each of the region’s Technology Infrastructure

Internet Users and Access top six internet markets.

Usage and Demographics eCommerce Features of Local and Regional Consumer-Oriented eAdvertising Portals in Latin America, 2001 (as a % of portals eFinance surveyed) Argentina

Brazil Online banking

Mexico 17% Chile 25% Colombia Online payment processing Venezuela

Index of Charts 61% 75%

Shopping assistance 36% 50%

eCommerce (avg) 51% 66%

Communications (avg) 60% 66%

Local Regional Source: International Data Corp. (IDC), 2001

C. B2B eCommerce The high level of fragmentation in the supply chain in Latin America means that tremendous opportunities exist in the B2B segment of the e- commerce market. For that reason, eMarketer expects B2B e-commerce revenues to grow rapidly in the next few years, and to gain an increasing share of overall e-commerce revenues in the region. Although the process of bringing procurement, operational and transactional activities online will initially be burdensome, particularly for small- and medium-sized enterprises (SMEs), the savings from lower purchasing prices, transaction costs and inventory levels and the prospect of using the internet to sell to a broader audience could dramatically increase overall operating margins for companies of all sizes.

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Methodology An additional factor is the vast potential of business-to-government (B2G) Overview e-commerce in the region. The government is a large force in Latin America Population and Economy and, according to the World Bank, government expenditures accounted for a Technology Infrastructure

Internet Users and Access signiﬁcant percentage of GDP in most countries in 1999, with Brazil leading Usage and Demographics the way at 16%. By 2004, the Brazilian government expects to bring all of eCommerce its procurement online, not only to cut costs but also as part of an effort to eAdvertising inject greater transparency in public expenditures. Chile and Mexico have eFinance

Argentina also allocated funds and technology for e-government initiatives, and other

Brazil countries in the region are sure to follow suit. Mexico B2B e-commerce will account for 82% − the overwhelming majority − of Chile online commerce revenues in Latin America in 2001. Its share will increase Colombia to 88% by year-end 2004, as marketplaces and exchanges mature, and as Venezuela

Index of Charts more businesses and governments move to online procurement.

B2B eCommerce in Latin America, 2000-2004 (in billions and as a % of total Latin American e-commerce)

2000 $2.85 (79.8%)

2001 $7.87 (81.8%)

2002 $17.39 (84.0%)

2003 $33.63 (86.0%)

2004 $58.39 (87.8%)

Source: eMarketer, 2001

With its large and relatively automated manufacturing sector, which has been the object of billions of dollars of foreign direct investment in recent years, Brazil dominates B2B revenues in Latin America, and will continue to do so through the middle of the decade. All countries in the region will show impressive growth in B2B e-commerce transactions, although only Mexico will see a signiﬁcant gain in its share of the region’s overall revenues.

B2B eCommerce in Latin America, 2000–2004 (in billions) Country 2000 2001 2002 2003 2004 Argentina $0.27 $0.75 $1.98 $3.48 $5.92 Brazil $1.95 $5.30 $10.48 $20.62 $34.72 Mexico $0.44 $1.26 $3.52 $6.47 $11.84 Rest of Region $0.19 $0.55 $1.41 $3.06 $5.92 Total $2.85 $7.87 $17.39 $33.63 $58.39 Note: Figures may not add up precisely due to rounding Source: eMarketer, 2001

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Methodology Comparative Estimates Overview Forrester Research’s projections for B2B e-commerce revenues in Latin Population and Economy

Technology Infrastructure America remain the most optimistic. However, the normally conservative Internet Users and Access Pyramid Research predicts that transactions will be worth more than $100 Usage and Demographics billion by 2005. This well exceeds projections by the Yankee Group, which eCommerce segments B2B transactions into three categories: e-marketplaces, electronic eAdvertising eFinance data interchange (EDI) made through private value-added networks and

Argentina direct corporate-to-corporate sales. Pyramid believes that private B2B Brazil networks, typically owned and operated by a single large ﬁrm and similar Mexico in design to Brazilian supermarket chain Pão de Açucar’s proprietary Chile exchange, Pd@Net, will account for the majority of transactions and Colombia

Venezuela revenues in the region. A Yankee Group study, released in September 2000,

Index of Charts listed ﬁve factors that are essential for e-marketplaces in Latin American to succeed: Local market connections Appropriate brick-and-mortar partnerships Latin American industry knowledge and expertise Revenue generation Real transaction capabilities

However, the Yankee Group cautions that the relative lack of intra-regional economic integration (with the exception of the MERCOSUR common market and, to a lesser extent, the Andean Pact) and the corresponding differences in customs and tariff policies will continue to challenge cross- border B2B transactions. InformationWeek Research’s Global IT Strategies 2001 study indicates that the Latin American businesses surveyed earn 22% of their revenues from domestic e-business transactions, and only 7% from transactions abroad. The interesting fact about Forrester’s projections is by 2002, they forecast higher total B2B e-commerce revenues for Mexico than for all of the rest of Latin America, including Brazil. This prediction runs contrary to nearly all other forecasts, but can perhaps be attributed to Mexico’s proximity to the US and the degree to which its assembly operations are closely linked to global supply chains. In addition, Forrester sees hypergrowth occurring in Mexico in 2003, 1 year before Brazil, and several years prior to the rest of Latin America.

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Methodology

Overview Comparative Estimates: B2B eCommerce in Latin

Population and Economy America, 2001-2005 (in billions) Technology Infrastructure 2001 2002 2003 2004 2005 Internet Users and Access eMarketer $7.87 $17.39 $33.63 $58.39 – Usage and Demographics eCommerce Forrester Research $12.40 $27.50 $68.77 $175.43 – eAdvertising Goldman Sachs $3.50 $14.20 $31.80 $61.10 – eFinance Pyramid Research $1.12 –– –$107.32 Argentina

Brazil Yankee Group $10.90 $17.60 $28.50 $44.30 $63.80

Mexico Note: Goldman Sachs figures do not include Mexico

Chile Source: Forrester Research, Goldman Sachs, 2000; various, as noted, 2001

Colombia Venezuela Business Process Automation and IT Spending Index of Charts An IDC survey of 161 leading e-businesses in Latin America, with a sample split between dot-com pure plays and brick-and-mortar companies, found that 70% use a web-hosting service and 53% outsource website development, particularly design work and the implementation of online transaction capabilities. In terms of website construction, pure plays paid out an average of $894,448 versus $481,796 spent by brick-and-mortar firms. IDC observed that brick-and-mortar firms were able to reduce their outlay by exploiting their existing IT infrastructures, an option most pure plays did not have. A Yankee Group assessment of 22 Latin American “e-builders” — the consultancies and systems integrators responsible for web development and e-commerce solutions — found that large corporations in the region spend an average of $1.2 million per project on e-business ventures. According to the study, financial services, telecommunications and manufacturing firms have been turning to e-builders with the greatest frequency, followed by governments and companies in the healthcare and wholesale industries. Given the degree to which Latin American governments expect to do their procurement and dispense services online over the next few years, the Yankee Group’s prediction that online government services will account for approximately 16% of e-builder revenue by 2003 is unsurprising. In terms of demand for solutions and services, requests from Latin American firms and governments have focused on storefronts, purchasing software, hosting services and multilanguage management tools. IDC expects the application outsourcing market to make significant gains in the next 3 to 4 years, reaching $418 million in revenues by 2004. Microsoft, for example, has been busy trying to tailor its “.Net” enterprise software to the economic and infrastructure constraints present in Latin America, in particular, the region’s relative lack of broadband connections, even among businesses. IDC likewise pointed to bandwidth constraints as the leading impediment to successful, widespread ASP deployment.

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Methodology The InformationWeek study, which polled 76 Latin American businesses, Overview also found IT outsourcing to be a common solution among companies in Population and Economy the region. In addition, the study revealed that many ﬁrms use third-party Technology Infrastructure

Internet Users and Access marketplaces to buy and sell their goods and services.

Usage and Demographics eCommerce eBusiness Initiatives Adopted by Latin American eAdvertising Companies, 2001 eFinance Company intranet Argentina

Brazil 68%

Mexico Website (no transactions) Chile 70% Colombia Venezuela Web-based e-commerce Index of Charts 31%

IP-based EDI 30%

Supply-chain network on the internet 12%

eMarketplace operated by third party to sell company's goods and services 18%

eMarketplace operated by third party to buy company's goods and services 17%

None of the above 9%

Note: Percentages are approximated from a bar chart Source: InformationWeek, 2001

Latin American businesses are moving more quickly to implement customer relationship management (CRM) solutions, particularly in Argentina, Brazil and Mexico, the region’s three largest markets. According to IDC, 10% of large companies surveyed already have a CRM solution in place and an additional 10% are in the process of implementing such a solution. The survey found that Latin American companies typically approach traditional enterprise resource planning (ERP) software vendors for CRM software, and also use leading system vendors for consulting and implementation services. In 2000, ﬁrms dedicated the largest portion of their CRM budgets to software. Overall, IDC expects the CRM services market to grow to $6.3 billion by 2004.

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Methodology

Overview CRM Technology Budget Allocation in Latin America, Population and Economy 2000

Technology Infrastructure

Internet Users and Access Other Usage and Demographics External 3% eCommerce IT services 14% eAdvertising eFinance Networking Packaged Argentina hardware software 15% 40% Brazil Mexico Server Chile hardware Colombia 28%

Venezuela Index of Charts Source: International Data Corp. (IDC), 2001

CRM Services Revenues in Latin America, 2001-2004 (in billions and as a % of total worldwide CRM services revenues)

2001 $2.3 (4.0%)

2002 $3.2 (4.3%)

2003 $4.5 (4.6%)

2004 $6.3 (5.0%)

Source: International Data Corp. (IDC), 2000

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Methodology D. mCommerce Overview Population and Economy Mobile commerce (m-commerce) is a nascent market with forecasts for Technology Infrastructure substantial growth, as the following estimates from Jupiter Research Internet Users and Access indicate. Usage and Demographics eCommerce However, apart from uncertainty about consumer acceptance of this new eAdvertising form of shopping, it is unclear whether the mobile revenues will represent eFinance new dollars spent or are sales cannibalized from the PC-based internet. Of Argentina the $22.2 billion in worldwide m-commerce revenues forecast for 2005, Brazil Jupiter predicts that $10.8 billion will come from shopping, $8.0 billion Mexico

Chile from paid content and $3.3 billion from advertising. Colombia Moreover, Jupiter’s projections indicate that the growth of m-commerce Venezuela in Latin America will not begin to truly take effect for several years. Even Index of Charts in 2005, Jupiter predicts that m-commerce spending in Latin America will reach only $500 million, the smallest total of any region in the world.

Worldwide Mobile Commerce Revenues, by Region, 2000–2005 (in billions) Region 2000 2001 2002 2003 2004 2005 Asia $0.4 $1.3 $2.6 $5.0 $7.4 $9.4 North America $0.0 $0.1 $0.2 $0.7 $1.8 $3.5 Western Europe $0.0 $0.1 $0.5 $1.7 $4.6 $7.8 Latin America $0.0 $0.0 $0.0 $0.1 $0.2 $0.5 Rest of World $0.0 $0.0 $0.1 $0.2 $0.4 $1.0 Total $0.4 $1.5 $3.4 $7.7 $14.4 $22.2 Source: Jupiter Research, 2000

Estimates from Ovum, which, unlike Jupiter Research’s numbers, include the purchase of physical goods, services and paid-for information in both the business and consumer segments, are somewhat higher, reaching $5.65 billion in 2004. Given Jupiter’s modest predictions for m-commerce in Latin America, the likelihood is that business-related purchases account for a large portion of Ovum’s much higher estimates.

Worldwide Mobile Commerce Revenues, by Region, 2000–2004 (in billions) Region 2000 2001 2002 2003 2004 North America $0.78 $3.82 $8.76 $19.22 $32.41 Western Europe $1.18 $4.91 $14.05 $30.08 $51.12 Asia/Pacific Rim $1.55 $5.98 $13.45 $28.06 $46.54 Latin America $0.02 $0.26 $0.89 $2.92 $5.65 Africa/Middle East $0.02 $0.21 $0.72 $2.30 $3.65 Total $3.55 $15.18 $37.87 $82.58 $139.37 Source: Ovum, 2000

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Methodology

I Overview

II Population and Economy

III Technology Infrastructure

IV Internet Users and Access

V Usage and Demographics

VI eCommerce VII eAdvertising 113 A. Online Advertising Expenditures 114 B. Click-Through Rates 115 C. Wireless Advertising 116 VIIVIII eFinance IX Argentina

X Brazil

XI Mexico

XII Chile

XIII Colombia

XIV Venezuela

Index of Charts

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Methodology A. Online Advertising Expenditures Overview Population and Economy Ofﬂine advertising in traditional media will continue to grow at a healthy Technology Infrastructure pace over the next several years. Thanks to the overall slowdown in the Internet Users and Access internet economy, online advertising expenditures will display more Usage and Demographics eCommerce modest growth than previously expected, even though research ﬁrms are eAdvertising predicting increases in the number of internet users and overall e- eFinance commerce in Latin America. A contraction in the number of internet Argentina companies in the region and a shrinking of internet advertising budgets in Brazil part explains the decline in online advertising expenditures. Mexico

Chile The allure of television remains a major challenge for online advertisers. Colombia Television is by far the most popular medium in the region, and Latin Venezuela Americans are more likely to pay attention to television as opposed to Index of Charts internet ads by a margin of nearly six to one according to a study produced by the market research ﬁrm TGI Latina. Online advertising expenditures in Latin America will triple between 2001 and 2003, reaching $814 million. The region’s share of total worldwide online advertising expenditures remains modest, but its portion of total non-US expenditures is considerably larger: nearly 10% in 2001 and increasing to more than 11% by 2003.

Online Advertising Expenditures in Latin America, 2001-2003 (in millions)

2001 $277.2

2002 $480.0

2003 $813.6

Source: eMarketer, 2001

Online Advertising Expenditures in Latin America, 2001-2003 (as a % of total worldwide and non-US worldwide online advertising expenditures)

2001 2.7% 9.9%

2002 3.2% 10.0%

2003 3.6% 11.3%

As a % of total As a % of non-US worldwide online worldwide online advertising advertising Source: eMarketer, 2001

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Methodology Comparative Estimates Overview eMarketer’s forecast for 2001 falls towards the higher end of ﬁve Population and Economy

Technology Infrastructure comparative estimates, while the 2003 estimate is below that of most other Internet Users and Access ﬁrms. Note that Forrester Research and Jupiter Research, whose estimates Usage and Demographics are among the most aggressive in terms of the growth in online advertising eCommerce expenditures, released their projections early in 2000, well before the eAdvertising eFinance downturn in the online advertising sector.

Argentina

Brazil Comparative Estimates: Online Advertising Spending

Mexico in Latin America, 2001-2005 (in millions) Chile 2001 2002 2003 2004 2005 Colombia eMarketer $277.2 $480.0 $813.6 – – Venezuela

Index of Charts Forrester Research $259.0 $517.0 $949.0 $1,647.0 – Goldman Sachs $321.0 $560.0 $902.0 $1,238.0 – International IAB ––$645.0 – – Jupiter Research $240.0 $402.0 $628.0 $888.0 $1,168.0 Zenith Media $253.3 $531.5 $1,210.4 – – Source: eMarketer, Goldman Sachs, 2001; various, as noted, 2000

B. Click-Through Rates Information on click-through rates (CTRs) in Latin America is limited. According to TGI Latina, 45% of internet users surveyed across Latin America had clicked on one or more banner ads in the 30 days prior to the survey. The 55% of Latin Americans who ignored banner ads altogether is consistent with the percentages estimated by eMarketer and other research ﬁrms. Not surprisingly, the TGI Latina study found that clicking on ads increases as a function of time spent online, using the logic that the more time users spend online, the more pages they will view and, consequently, the more ads to which they will be exposed. Note that this is distinct from CTRs, which most estimates put in the range of 0.5% worldwide.

Latin American Internet Users Clicking on Ads, by Time Online in Past 30 Days, 2000

Less than 5 Hrs 43%

5 to 9 Hrs 47%

10 to 19 Hrs 55%

20 to 29 Hrs 56%

30+ Hrs 64%

Source: TGI Latina, 2000

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Methodology C. Wireless Advertising Overview Population and Economy According to Ovum, Latin America will lag behind all other regions of the Technology Infrastructure world in mobile advertising spending through 2004. Even in 2004, when Internet Users and Access mobile advertising expenditures in Latin America is predicted to reach its Usage and Demographics eCommerce peak, it will represent less then 2% of total worldwide expenditures. eAdvertising eFinance Worldwide Wireless Advertising Spending, 2004 (in millions)

Argentina

Brazil Latin America Mexico $190 (1.8%) Chile Middle East/Africa Colombia North America $247 (2.4%) Venezuela $3,069 (29.3%) Index of Charts Europe $3,882 (37.1%)

Asia/Pacific Rim $3,086 (29.5%) Total = $10,474 Note: Figures do not add up to 100% due to rounding Source: Ovum, 2000

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Methodology

I Overview

II Population and Economy

III Technology Infrastructure

IV Internet Users and Access

V Usage and Demographics

VI eCommerce

VII eAdvertising VIII eFinance 117 A. Online Banking 118 B. Online Trading 123 C. Wireless Financial Services 125 VIIIIX Argentina X Brazil

XI Mexico

XII Chile

XIII Colombia

XIV Venezuela

Index of Charts

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Methodology Latin America’s banking market is currently in the midst of a wave of Overview consolidation. As governments place state-run banks up for sale, leading Population and Economy local and multinational ﬁnancial institutions are seizing the opportunity to Technology Infrastructure

Internet Users and Access extend their reach and customer bases. In turn, the consolidation process Usage and Demographics may make small- and mid-sized banks, which lack both the capital and eCommerce cheap ﬁnancing necessary to expand, attractive acquisition targets. eAdvertising At the same time, commercial banks, particularly those in Brazil, have eFinance

Argentina been moving aggressively to get their customers online. The main

Brazil challenge they face is their small customer base. Among the wealthy, bank Mexico account penetration rates are high. However, the wealthy are a distinct Chile minority in the region, and among the majority of people, most of whom Colombia earn far less than $15,000 per year, account penetration rates do not top Venezuela

Index of Charts 20%. Thus, although online banking offers financial institutions the long- term potential of cost savings, banks will most likely derive revenues from offering value-added service and a wealth of banking products (from mortgages to financial planning to equity trading) to the top 5% to 10% of their clientele. Similarly, investing in securities, either online or off, remains the province of the few. Until very recently, Latin Americans, with the exception of those in upper-income brackets and institutional investors, had not been in the habit of placing their disposable income in stocks. Rather, they were more likely to deposit funds in interest-bearing accounts that were calibrated to the rate of inflation. In addition, given that the supply of Latin American stocks has been shrinking steadily over the past few years and more companies in the region have been participating in American Depositary Receipt (ADR) programs, investors now have fewer choices of where to put their money. Nevertheless, there are signs, particularly in Brazil, home to Latin America’s largest stock exchange, that the volume of online trading has been increasing in recent years.

A. Online Banking In a region where the postal systems of many countries are neither secure nor dependable enough to carry monthly bill payments (even checks), the potential of the online consumer banking market is vast. Across Latin America, consumers lose hours waiting in lines to pay utility, credit card and other bills at banks or by going to branches of each individual utility company. Banks spend heavily to staff numerous neighborhood branches. Therefore, customers stand to gain time by using online banking, while banks stand to save considerably on transaction costs. Banks can also use online services as a way to maintain more efﬁcient customer service and build loyalty, particularly among high-income clients.

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Methodology Institutional Investor Magazine estimates that the cost of delivering bank Overview services through the internet across Latin America is drastically lower than Population and Economy other delivery channels: $0.10 per transaction. By contrast, transactions at Technology Infrastructure

Internet Users and Access ATMs and tellers cost $0.60 and $1.53, respectively. InfoAmericas Usage and Demographics estimates that internet transactions cost less than $0.03, while ATM and in- eCommerce branch transactions cost $0.50 and $1.30, respectively. Research by eAdvertising TowerGroup and UBS Warburg Dillon Read puts the average cost of web- eFinance

Argentina only banking even lower, at $0.01 per transaction, and the cost of branch-

Brazil based transactions much higher, at $4.05 per operation. Mexico Latin American banks have a tremendous advantage when dealing with Chile businesses, largely because banks have succeeded in developing strong Colombia relationships with business customers, particularly over the tense years of Venezuela

Index of Charts hyperinﬂation, when they proved their ability to respond quickly to changes in the region’s economic conditions. Banks, which in many Latin American countries are highly automated, have been integral links in local and regional supply chains and procurement systems. Despite the growth projected in multichannel delivery of consumer banking services in general, TowerGroup research ﬁndings indicate that bank branches will remain consumers’ preferred channel across Latin America. Branches currently account for an estimated 80% of transaction volumes and 70% of all channel spending. Given that online customers continue to use traditional delivery channels, such as branch banking, Latin American banks will continue to invest in these as well as bolstering their online service offerings.

Argentina A study of 42 financial institutions by the Argentine research firm Prince & Cooke has found that approximately 20% of banks have implemented a CRM solution, while an additional 40% plan to do so in the upcoming year. 90.5% of banks possess data transmission services, with fiber optics being the most commonly used technology. Finally, the study revealed that all banks have internet connections, of which 78% are dedicated lines. According to the Yankee Group, Banco de Galicia has established a sophisticated e-banking service − Galicia Office − that allows corporate users to transfer payments to any domestic financial institution and facilitates services such as payroll and electronic transfers to other third parties. The bank has enrolled several thousand corporate and small- business customers on the e-banking system. Banco Francés, a subsidiary of Spanish mega-bank Banco Bilbao Vizcaya Argentaria (BBVA), offers both consumer and business clients a free online service, Francés Net, which had reached 500,000 transactions per month by the end of 2000.

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Methodology The following banks offer online services: Overview Banca Nazionale del Lavoro Population and Economy Banco Bisel Technology Infrastructure Internet Users and Access Banco Credicorp Cooperativo Limitado

Usage and Demographics Banco de Córdoba eCommerce Banco de Galicia eAdvertising Banco de la Provincia de Buenos Aires eFinance Banco del Suquía Argentina Banco Francés (BBVA) Brazil Mexico Banco Hipotecario

Chile Banco Itaú Buen Ayre Colombia Banco Privado de Inversiones Venezuela Banco Río de la Plata Index of Charts BankBoston BNP Paribas Citibank Lloyds Bank Scotiabank Quilmes

Brazil According to a survey by the Angus Reid Group, 34% of Brazilian internet users responded that they had tried online banking, while 82% said they were “very likely” to continue using it.

The following banks offer online services: Banco1 Banco Bandeirantes Banco Boavista Banco de Boston Banco Bradesco Banco do Brasil Banco de Crédito Nacional (BCN) Banco do Estado do Ceará Banco do Estado de Santa Catarina Banco Indusval Banco Itaú Banco Real (ABN AMRO Bank) Banestado Banrisul Banco Safra Banco Santander Brasil Banco Sudameris Caixa Econômica Federal Citibank HSBC Bamerindus Nossa Caixa Nosso Banco Unibanco

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Methodology According to ﬁgures released by the state-run Banco do Brasil (BB), 2.6 Overview million customers performed 93 million online banking transactions in Population and Economy 2000. BB analysis indicates that initial adoption rates of online banking Technology Infrastructure

Internet Users and Access services have been highest among customers in the Federal District, which Usage and Demographics includes Brasilia, the national capital, followed by customers in São Paulo eCommerce state, the country’s ﬁnancial center, and Rio de Janeiro state, home to the eAdvertising nation’s second-largest city. Banco Bradesco, which inaugurated Brazil’s eFinance

Argentina ﬁrst free ISP to provide its customers with an incentive to use online

Brazil banking, has been particularly successful in moving its customers to the Mexico web. Recent data indicate that Banco Bradesco has expanded its customer Chile base by 65% over the past 2 years, while increasing the number of branches Colombia by only 4%. Much of the new clientele has been handled by electronic Venezuela

Index of Charts banking (both internet and call centers). This year, many banks expect to offer consumers attractive PC ﬁnancing and free internet access as part of a campaign to increase usage of the online channel. The chart below includes data current as of October 2000. More recently, the Yankee Group has provided updated ﬁgures, asserting that Branco Bradesco had 1.7 internet banking users in 2000, second in Brazil behind Banco do Brasil and well ahead of third-place Banco Itaú, which had 1.4 million online banking clients.

Online Transactions at Selected Banks in Brazil, 2000 (in millions)

Banco do Brasil 92.8

Itaú 87.3

Bradesco 66.0

Source: various, as noted, 2001

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Methodology Chile Overview Chile’s state-owned Banco del Estado is positioning itself to dominate the Population and Economy

Technology Infrastructure low- to middle-income segments, while leaving high-income individuals to Internet Users and Access institutions like Citibank, BankBoston and Banco de A. Edwards. Banco del Usage and Demographics Estado is trying to boost adoption rates among its lower-income customers eCommerce (many of whom lack access to computers or the internet) by making its eAdvertising eFinance website available from internet cafes in the Kioskonet chain throughout the

Argentina country.

Brazil Mexico The following banks offer online services: Chile Banco BICE Colombia Venezuela Banco de Chile

Index of Charts Banco de Crédito e Inversiones (BCI) Banco Santander Banco Santiago Banco Sud Americano BankBoston Citibank

Colombia According to the Yankee Group, Bancolombia initiated limited internet banking in 1996, and currently conducts approximately 520,000 online transactions per month, or, 4.5% of its total transactions.

The following banks offer online services: Banco DAVIVIENDA Banco de Bogotá Banco de Crédito de Colombia Banco de Occidente Credencial Bancolombia Banco Popular Banco Santander Conavi Interbanco

Mexico The following banks offer online services: Aﬁrme Grupo Financiero Banamex Banco Bital Banco Industrial Banco Santander BanCrecer Banorte BBVA Bancomer Citibank

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Methodology Grupo Finaciero Inbursa Overview Grupo Finaciero Interacciones Population and Economy Technology Infrastructure Grupo Finaciero Serﬁn Internet Users and Access Ixe Banco Usage and Demographics Scotiabank Inverlat eCommerce Value Casa de Bolsa eAdvertising eFinance

Argentina Venezuela Brazil The following banks offer online services: Mexico Banco Canarias de Venezuela Chile Banco Caracas Colombia Venezuela Banco de Venezuela

Index of Charts Banco Industrial de Venezuela Banco Mercantil Banco Soﬁtasa Banco Venezolano de Crédito Banesco Banplus BBVA Banco Provincial Citibank Corp Banca Eurobanco Norvalbank Unibanca

B. Online Trading Investments and the amount of funds raised dropped sharply across Latin America in 1999 in the wake of the Asian and Russian ﬁnancial crises and the devaluation of the real. However, as the region’s economies stabilized in 2000, investment activity rose considerably, particularly in the ﬁrst half of the year, with internet companies attracting much of venture capital investors’ attention. Interest in Latin American internet start-ups slowed in the second half of the year following the NASDAQ correction and the global crisis of faith in the technology sector. According to Goldman Sachs, the supply of Latin American stocks has been shrinking steadily over the past few years, to the point that most local stock markets in Latin America have become unimportant for institutional and high-income personal investors. Closely linked to this trend is a rise in the number of Latin American companies participating in American Depositary Receipts (ADR) programs. Since 1995, the number of Latin American ADRs has risen from 141 to 316, with Brazilian and Mexican companies accounting for nearly 60% of Latin regional ADR programs, followed by Chile and Argentina.

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Methodology As a result, Goldman Sachs estimates that investors have taken $43 billion Overview out of Latin American stock markets since 1998. Moreover, Goldman Sachs Population and Economy projections suggest that trading in ADRs will nearly equal the trading Technology Infrastructure

Internet Users and Access volume in local stock markets in 2000. Only in Chile does the capitalization Usage and Demographics of the local stock market still constitute a signiﬁcant percentage of GDP. In eCommerce Argentina, Brazil and Mexico, the ratio of market capitalization to GDP has eAdvertising been in steady decline since the early 1990s. eFinance

Argentina In terms of asset allocation, international and global emerging market

Brazil funds have risen steadily in capitalization and importance, while single- Mexico country and regional funds have been in a state of decline since the mid- Chile 1990s. Colombia

Venezuela

Index of Charts Brazil Brazil has the most active stock market in Latin America, but given the barriers to wider internet usage in Brazil and the fact that the country’s capital markets as a whole are somewhat limited, it is unsurprising that online trading services are still in an embryonic state. Individual investors accounted for only 19.2% of trading in 2000, although this figure represents a considerable increase over 1999, when they made just 15.3% of all trades. However, 55 broker-dealers, out of a total of 133 member firms registered with São Paulo’s Bovespa stock exchange (the largest in Brazil with 85% of all equity trades), now offer online trading through Bovespa’s Home Broker system. Online trading has been growing exponentially, with volume increasing 139% from January 2000 to January 2001, and 50% from December 2000 to January 2001 alone. Bovespa officials estimate that on average, 88% of daily transactions are processed electronically (although this figures includes trades made via the Home Broker system as well as by brokerage houses).

Average Daily Online Trading Value on the Bovespa Stock Exchange in Brazil, April 1999-Dec 2000 (in millions)

April 1999 $0.1

April 2000 $3.5

December 2000 $4.6

Source: Bovespa, 2001

At this point, online trading has yet to extend even to a broader segment of Brazil’s active internet users. A survey of six online brokerages by the Brazilian media ﬁrm, Agência Estado, revealed that men represent a staggering 90% of all online traders in Brazil. This shows that even as the internet user base in Brazil approaches gender parity, men retain a disproportionate degree of control over online ﬁnancial decisions.

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Methodology Online traders are further concentrated geographically: more than 70% live Overview in the southeast regions of the country, with 60% residing in the state of Population and Economy São Paulo alone. Technology Infrastructure

Internet Users and Access

Usage and Demographics eCommerce C. Wireless Financial Services eAdvertising eFinance TowerGroup predicts that the use of wireless ﬁnancial services will grow

Argentina precipitously over the next 5 years, with 24.8 million users of wireless Brazil ﬁnancial content and transaction capabilities expected by 2005. For the Mexico region’s banks, providing wireless delivery channels is part of an effort to Chile retain the top 10% to 15% of high-income customers, who, according to Colombia

Venezuela TowerGroup ﬁndings, represent approximately 80% of banks’ proﬁts. At

Index of Charts the same time, banks are looking to cut costs, and moving customers online, where the average cost per transaction is far lower than in a branch office, is an effective way to increase operating margins. Latin America’s largest banks, some of them subsidiaries of foreign powerhouses like Spain’s Banco Santander Central Hispano (BSCH) and Banco Bilbao Vizcaya Argentaria (BBVA) and others like Brazil’s Bradesco, Banco Itaú and Unibanco, have been aggressively building partnerships with wireless service providers. Mobile stock trading and bill payment systems are also in the works. Partnerships not only carry the benefit of access to the wireless carriers’ growing subscriber bases but they also serve to demonstrate the banks’ technological competency to investors in both Latin America and around the world. According to a study of 74 Latin American banks by the financial services consulting firm, Speer & Associates, Latin American banks exceed their US counterparts in wireless access: 23% of the banks surveyed offer this feature, compared to 13% in the US.

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Methodology

Overview Users Worldwide of Wireless Financial Services, by Population and Economy Region, 2000 & 2005 (in millions)

Technology Infrastructure Asia Pacific Internet Users and Access

Usage and Demographics 4.8 eCommerce 83.7 eAdvertising Western Europe eFinance

Argentina 3.9

Brazil 76.6

Mexico North America Chile 0.5 Colombia

Venezuela 35.0

Index of Charts E. Europe & former USSR 0.4 9.4

S. America/Caribbean 0.3 24.8

Africa/Middle East 0.0 1.1

Total 9.79 230.6

2000 2005 Note: Figures do not add up precisely due to rounding Source: TowerGroup, 2000

Spending on the development, maintenance and delivery of wireless ﬁnancial services will rise commensurately, from $8.6 million in 2000 to $116.9 million in 2005. However, Latin America’s share of worldwide spending on wireless ﬁnancial services will increase modestly, from 4% in 2000 to 7% in 2005. According to TowerGroup estimates, North America will show the greatest increase in spending, outpacing current market leaders in Western Europe and Asia.

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Methodology

Overview IT Spending on Wireless Financial Services by Region, Population and Economy 2000 & 2005 (in millions and as a % of the total)

Technology Infrastructure

Internet Users and Access Usage and Demographics Asia Asia North eCommerce Pacific Pacific America $443.3 North eAdvertising $71.2 $56.6 (26.2%) (25.7%) America eFinance (33.0%) $698.7 Argentina (40.5%) Brazil Western Western Mexico Europe Europe Chile $88.1 $583.1 Colombia (40.8%) (33.8%)

Venezuela Index of Charts Total= 2000 2005 Total= $215.9 $1,725.1 Note: Does not add up to 100% due to rounding Source: Tower Group, 2000

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Latin America Online

Methodology

I Overview

II Population and Economy

III Technology Infrastructure

IV Internet Users and Access

V Usage and Demographics

VI eCommerce

VII eAdvertising

VIII eFinance IX Argentina 129 A. Overview 130 B. Technology Infrastructure 131 C. Internet Users and Access 140 IXD. Usage and Demographics 144 E. eCommerce 156 F.eAdvertising 172

X Brazil

XI Mexico

XII Chile

XIII Colombia

XIV Venezuela

Index of Charts

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Methodology

Overview At a Glance: Argentina, 2001 Population and Economy Total population (in millions) (1) 37.4 Technology Infrastructure Population 14+ (in millions) (1) 28.1 Internet Users and Access

Usage and Demographics Population living in urban areas (1999) (2) 90% eCommerce GDP (PPP adjusted, in billions) (1999) (3) $367 eAdvertising GDP per capita (PPP adjusted) (1999) (3) $10,000 eFinance

Argentina PCs per 100 inhabitants (2000) (4) 5

Brazil Main telephone lines per 100 inhabitants (2000) (4) 22 Mexico Cellular subscribers per 100 Inhabitants (2000) (4) 12 Chile ISPs (1999) (3) 47 Colombia

Venezuela Internet users (in millions) 1.48 Index of Charts Internet users as % of Pop. 14+ 5% Compounded annual growth in users, 2001-2004 27% Total e-commerce (in billions) $0.87 Compounded annual growth in e-commerce, 2001-2004 97% B2B e-commerce (in billions) $0.75 B2C e-commerce (in billions) $0.11 Source: eMarketer, 2001; (1) US Census Bureau, 2000 (interpolated by eMarketer); (2) World Bank, 2000; (3) CIA World Fact Book, 2000; (4) International Telecommunication Union (ITU), 2001

A. Overview With its highly literate population of 37 million people and a relatively high GDP per capita of $8,130 (unadjusted) projected for 2001 by the International Monetary Fund (IMF), Argentina has the potential to be an extremely attractive internet market. More than one-third of the country’s population resides in and around Buenos Aires, the nation’s capital and the world’s tenth largest city. The average Argentine enjoys a high standard of living, particularly in comparison to neighboring countries. However, Argentina has been mired in a severe recession for over 2 years, which has caused contractions in GDP and placed a damper on both consumer and business spending. The Argentine government negotiated a bailout package from the IMF in December 2000 and has seen several reshufﬂings of the key post of economy minister since the beginning of the year, but the economy has yet to gain much traction. Any instability in the region could further unsettle the Argentine economy. Thus, although Argentina was one of the region’s leading internet innovators, the prolonged economic crisis has cast its ability to maintain this leadership position into doubt.

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Methodology Low-Cost Access Overview Argentine government involvement has had a positive effect on the Population and Economy

Technology Infrastructure country’s internet market. In addition to its efforts to provide lower-cost Internet Users and Access telecommunications services, thus facilitating wider internet usage, the Usage and Demographics government is continuing the rollout of its [email protected] eCommerce program, launched in 1998, designed to provide internet access to low- eAdvertising eFinance income and remote communities at state-sponsored “telecenters”

Argentina throughout the country. In addition, it has announced plans to provide Brazil internet access for all public schools, with funding support from the Inter- Mexico American Development Bank, and to link the country’s education centers Chile via the Educ.ar portal, which was launched last year with government and Colombia

Venezuela private-sector funds. The portal will also be the repository of educational

Index of Charts content for use in schools.

B. Technology Infrastructure

Fixed-Line Telephones Argentina was among the ﬁrst Latin American country to privatize its telecommunications market. The government granted a long period of exclusivity to Telefónica de Argentina and Telecom Argentina, effectively creating a duopoly in place of the previous government monopoly. It then introduced limited competition in the local, long-distance and international calling services markets in November 1999. Full liberalization of all areas of the basic telecommunications market occurred in November 2000. Argentina currently has one of the most modern telecommunications networks in the region. The cost of telecommunications remains a hindrance to internet growth. According to the US Department of Commerce, as of April 2000, a basic phone line in Argentina cost approximately $25 to $30 per month, not including per-minute usage fees. The Argentine government has taken active steps to boost internet usage. In 1999, it established special low- price telephone numbers for reduced-cost internet access, which has had the effect of raising the average online duration from approximately 15 to 24 minutes. As the effects of market liberalization are felt, call prices are likely to go down, perhaps as much as 20% to 40%. The government has also cut in half the interconnection rate, reducing the fee newcomers must pay incumbents for use of their networks from 2.35 cents per minute to 1.1 cents per minute, with additional 3% decreases mandated every 6 months.

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Methodology

Overview Comparative Estimates: Telephone Lines per 100

Population and Economy Inhabitants in Argentina, 1999-2005 Technology Infrastructure 1999 2000 2001 2002 2003 2004 2005 Internet Users and Access Gartner Dataquest – 23.1 ––––– Usage and Demographics eCommerce InfoAmericas – 23.4 24.9 26.3 27.9 – – eAdvertising ITU 20.1 21.5 ––––– eFinance Morgan Stanley – 20.8 21.5 22.3 23.2 24.1 25.0 Argentina

Brazil Source: Gartner Dataquest, International Telecommunication Union (ITU), 2001; various, as noted, 2000 Mexico

Chile Colombia Wireless Telephony Venezuela With Argentina’s telecommunications sector now completely open to Index of Charts competition, the market should see the entrance of new players offering enhanced services. Growth of the wireless market will depend largely on how long Argentina takes to climb out of its current recession. By the middle of the decade, the Yankee Group estimates that nearly 30% of the population will have a wireless subscription.

Wireless Subscribers in Argentina, 2001-2005 (in millions)

2001 7.7

2002 8.9

2003 10.0

2004 10.9

2005 11.8

Source: Yankee Group, 2000

Given that Argentina has one of the region’s most highly developed wireline infrastructures, InfoAmericas predicts that wireless teledensity will not begin to exceed ﬁxed-line teledensity until around 2006.

Wireless Subscribers and Fixed–Line Telephones in Argentina, 2000–2003 (as a % of population) 2000 2001 2002 2003 Wireless 14.1% 16.4% 19.0% 22.0% Fixed Telephones 23.4% 24.9% 26.3% 27.9% Source: InfoAmericas, 2000

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Methodology As of September 2000, Argentina’s cellular market was split on a relatively Overview even basis between four carriers. Expect this neat division to shift as Population and Economy competitors enter the marketplace. Among handset manufacturers, Nokia is Technology Infrastructure

Internet Users and Access the market leader, according to Morgan Stanley, with a 40% share, Usage and Demographics followed by Motorola with 30%. Ericsson, Qualcomm and Samsung round eCommerce out the top ﬁve. eAdvertising eFinance Wireless Operators in Argentina, by Market Share, Argentina September 2000 Brazil Mexico Personal Telecom (Analog/TDMA) Chile 29% Colombia

Venezuela Movicom (Analog/CDMA) Index of Charts 27%

Unifón (Analog/TDMA) 26%

Cia. de Teléfonos del Interior (Analog/CDMA) 18%

Source: Informa, 2001

Mobile Handset Manufacturers in Argentina, by Market Share, 2000

Samsung Qualcomm 6% 11%

Ericsson Nokia 15% 40%

Motorola 30%

Note: Does not add up to 100% due to rounding Source: Morgan Stanley, 2001

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Methodology Broadband Overview Limited availability of digital subscriber lines (DSL), coupled with the high Population and Economy

Technology Infrastructure price of broadband access, is an impediment to growth in Argentina’s Internet Users and Access broadband market. However, with companies such as IMPSAT Fiber Usage and Demographics Networks rolling out broadband networks through major cities in eCommerce Argentina and Brazil, opportunities for consumer broadband will increase. eAdvertising eFinance Ovum deﬁnes business data broadband as data communications by

Argentina business users at rates greater than 144 Kbps. The main services used are Brazil DSL, ISDN, data network services, leased circuits and cable modems. Ovum Mexico does not foresee a large market developing in Argentina for business Chile broadband. Colombia

Venezuela

Index of Charts Comparative Estimates: Residential Broadband Subscribers in Argentina, 2000-2004 (in thousands)

2000 41 59 38

2001 77 104

2002 164 125

2003 313 150 177

2004 469 179

InfoAmericas* Ovum Yankee Group* Note: *DSL and cable modem only Source: various, as noted, 2000

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Methodology

Overview Business Broadband Subscribers in Argentina,

Population and Economy 2000-2004 (in thousands of lines)

Technology Infrastructure

Internet Users and Access 2000 2

Usage and Demographics 2001 3 eCommerce eAdvertising 2002 4 eFinance 2003 5 Argentina Brazil 2004 7 Mexico

Chile Source: Ovum, 2000

Colombia

Venezuela Selected Broadband Access Plans in Argentina, 2000 Index of Charts Company Access Launch Price technology date including sales tax Cablevisión's Cable 1997 $85 per month FiberTel modem + $121 install Grupo Clarín's Cable 1998 $61 per month MultiCanal modem + $61 install Telefónica DSL November $61 per month Argentina 2000 to Telefónica + $61 per month to ISP + $121 install Telecom DSL November $57 per month Argentina 2000 to Telecom + $61 per month to ISP (approx) + $182 install Grupo Clarín Satellite 2001 Reportedly plan $85 per month Velocom Fixed May $71 per month wireless 2000 $121 install Millicom Fixed April $94 per month wireless 2000 + $182 install Source: Jupiter Research, 2000

Beyond its well-developed telecommunication network, Argentina has the highest rate of cable TV subscriptions in Latin America. According to Morgan Stanley, approximately 49% of Argentine households have cable subscriptions, and Argentina’s 5.16 million cable TV subscribers represent nearly 38% of all cable subscribers in Latin America. With this level of penetration, which rivals that of the US, Argentina is the only country in Latin America truly poised to offer broadband internet access over cable lines. However, many independent cable operators still need to upgrade their networks to permit two-way and high-speed data transmission.

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Methodology The cost of these upgrades is likely to prevent these operators from offering Overview lower access prices, which are necessary to boost demand for broadband Population and Economy services. Technology Infrastructure

Internet Users and Access Among cable operators, MultiCanal and Cablevisión dominate the Usage and Demographics market, each with an approximately 30% share, according to Morgan eCommerce Stanley. Independent operators have a major presence in Argentina, eAdvertising holding nearly one-fourth of the market. eFinance

Argentina

Brazil Cable Operators in Argentina, by Market Share, 2000

Mexico La Red Intercable

Chile 7% Colombia Supercanal Venezuela holdings 9% MultiCanal Index of Charts 31%

Independent operators 22%

Cablevisión 30%

Note: Does not add up to 100% due to rounding Source: Morgan Stanley, 2001

Leading Argentine cable companies Cablevisión and MultiCanal, which have cable networks in greater Buenos Aires, have found it difﬁcult to attract people to their cable internet offering. Jupiter Research suggests that as of November 2000 they had signed up only 30,000 customers, a disappointing ﬁgure considering the fact that the service has been available in some parts of the city for over 3 years. The high cost of broadband service remains a factor. Market leader Cablevisión’s FiberTel service costs $85 per month plus $121 installation cost.

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Methodology

Overview Comparative Estimates: Residential Cable Broadband

Population and Economy Subscribers in Argentina, 2000-2004 (in thousands)

Technology Infrastructure 2000 Internet Users and Access

Usage and Demographics 21 eCommerce 59 eAdvertising 30 eFinance

Argentina 2001

Brazil 37 Mexico 93 Chile 2002 Colombia

Venezuela 74 Index of Charts 99

2003 110 94 143

2004 165 81

InfoAmericas Ovum Yankee Group Source: various, as noted, 2000

The country’s two major telephone companies, Telefónica de Argentina and Telecom Argentina, both launched DSL service in late 2000. According to Jupiter Research, the service costs about $100 per month once ISP charges are factored in. Jupiter estimates that there were 1,000 DSL subscribers at most in the country as of January 2001. Given Argentina’s high cable penetration rates, it is not surprising that cable modems in operation will outnumber digital subscriber lines (DSL) in the near term.

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Methodology

Overview Comparative Estimates: Residential DSL Subscribers Population and Economy in Argentina, 2000-2004 (in thousands)

Technology Infrastructure 2000 Internet Users and Access

Usage and Demographics 20 eCommerce 1 eAdvertising 8 eFinance

Argentina 2001

Brazil 40 Mexico 13 Chile

Colombia 2002

Venezuela 90 Index of Charts 29

2003 203 94 34

2004 304 198

InfoAmericas Ovum* Yankee Group Note: *Residential and business Source: various, as noted, 2000

Cable Modems in Operation vs. Digital Subscriber Lines in Argentina, 2001-2003

2001 19,320 9,190

2002 34,240 14,990

2003 64,290 22,590

Cable modems DSL Source: Pyramid Research, 2000

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Methodology Fixed wireless access may offer a viable broadband alternative where there is Overview no existing cable or ﬁxed-line infrastructure. In 1999, the Argentine Population and Economy government allocated ﬁxed wireless spectra in a number of frequencies to Technology Infrastructure

Internet Users and Access both local and international operators. Diginet Americas led the process by Usage and Demographics formally launching a ﬁxed wireless telephony and data service in Buenos eCommerce Aires. Its plan is to provide alternative service in all of South America’s major eAdvertising urban centers matching or exceeding the quality of the incumbent carriers. eFinance

Argentina A couple of companies offer ﬁxed wireless access products in select areas

Brazil of Argentina. Velocom is offering a service for $71 per month with a $121 Mexico installation charge. Millicom offers a ﬁxed wireless solution for $94 per Chile month with a $182 installation charge. Although ﬁxed wireless services are Colombia predominately targeted at the business sector, as the networks develop, Venezuela

Index of Charts consumer services will become more readily available. New two-way satellite internet systems such as the service offered by DirecPC in the US may become available in a few years. As the satellites operate over the equator, they will provide a footprint that covers most of the Americas. A number of companies have announced their intention to offer such a service in South America. ISky has promised to launch its service this year. Grupo Clarín has plans to offer a satellite internet product in the ﬁrst quarter of 2001.

Residential Subscribers to Alternative Broadband Technologies in Argentina, 2000-2004 (in thousands)

2000 0

2001 0

2002 1

2003 5

2004 33

Source: Ovum, 2000

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Methodology C. Internet Users and Access Overview Population and Economy eMarketer estimates that 1 million Argentines 14 years or older were active Technology Infrastructure internet users in 2000, and expects that ﬁgure to increase to 1.5 million by Internet Users and Access the end of 2001. By 2004, 3.0 million Argentines will be actively using the Usage and Demographics eCommerce internet. Among the pool of active users, the internet penetration rate will eAdvertising be 5.3% in 2001, one of the highest rates in the region. The penetration rate eFinance will climb into the double digits by the middle of the decade, reaching Argentina 10.3% in 2004. Despite these predictions of growth, Argentina’s share of Brazil the region’s active internet users will decline from 9.7% in 2001 to 7.4% in Mexico

Chile 2004. This decline can be attributed to faster and more extensive growth in Colombia Brazil, Mexico and other countries across the region. Venezuela Index of Charts Internet Users in Argentina, 2001-2004 (in millions and as a % of population 14+)

2001 1.5 (5.3%)

2002 2.0 (7.1%)

2003 2.5 (8.6%)

2004 3.0 (10.3%)

Source: eMarketer, 2001

Comparative Estimates eMarketer’s projections are largely in line with estimates from Morgan Stanley, Jupiter Research, IDC and Pyramid Research. Media Metrix’s ﬁrst survey of the Argentine internet landscape netted a higher total − 2.5 million users.

Comparative Estimates: Internet Users in Argentina, 2001-2005 (in millions) 2001 2002 2003 2004 2005 eMarketer 1.5 2.0 2.5 3.0 – International Data Corp. (IDC) 1.5 1.8 2.2 – – Jupiter Research 2.1 3.0 4.2 5.6 7.0 Morgan Stanley 1.8 2.4 2.9 3.5 4.1 Pyramid Research 1.4 1.8 2.1 2.4 – Source: eMarketer, 2001; various, as noted, 2000

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Methodology Access Preferences Overview According to studies by both Media Metrix and Julio Aurelio Aresco, an Population and Economy

Technology Infrastructure Argentine consultancy and market research ﬁrm, an overwhelming Internet Users and Access percentage of Argentines access the internet from home. Usage and Demographics The interesting trend is the considerable number of users who get online eCommerce from cybercafes or public phone booths. Of the 4,432 internet users eAdvertising eFinance surveyed online by Aresco:

Argentina 47.3% also responded that they connect to the internet exclusively Brazil from their homes Mexico Only 14.4% responded they access the web solely from work Chile 28.6% replied that they access the internet from both locations Colombia

Venezuela

Index of Charts Internet Users in Argentina, by Access Location, 2000

Home 75.9%

Work 43.0%

School 14.9%

Phone booths 10.7%

Cybercafes/libraries 10.1%

Note: Multiple responses allowed Source: Aresco, 2000

A Media Metrix study of more than 6,700 Argentine internet users, conducted in 2001, reached similar results as the earlier Aresco survey. According to Media Metrix, 74% of Argentines access the internet from home. This ﬁgure is divided among 60% who go online exclusively from home and 14% who also access the internet from other locations. Worth noting is the fact that Media Metrix’s studies typically focus on home users.

Internet Users in Argentina, by Access Location, 2000 (as a % of total)

Other location 26%

Home 74%

Source: Media Metrix, 2001

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Methodology Morgan Stanley also believes that most Argentines access the internet from Overview home, but estimates that the balance between those getting online at home Population and Economy and work will begin to equalize by the middle of the decade. Morgan Technology Infrastructure

Internet Users and Access Stanley projects that the percentage of users getting online from the Usage and Demographics workplace will begin to exceed those gaining access from home by 2009. eCommerce eAdvertising Internet Users in Argentina, by Access Location, eFinance 2001-2005 (as a % of total) Argentina

Brazil 2001 Mexico 58.7% Chile 34.3% Colombia 7.0% Venezuela Index of Charts 2002 57.3% 36.4% 6.7%

2003 53.8% 40.2% 6.0%

2004 50.7% 43.4% 5.9%

2005 49.9% 44.2% 5.9%

Home Business Educational/governmental/ other institution Source: Morgan Stanley, 2000

Penetration rates for internet access in the home and workplace are similarly low, although Morgan Stanley predicts that both will rise to double-digit ﬁgures by 2005. Still, home computers are more likely to have an internet connection than workplace PCs, albeit by a small margin. Argentina’s relatively sophisticated telephone system and standard of living may explain in part why a larger percentage of Argentines access the internet from home. By 2003, more workplace computers will have internet connectivity than home computers.

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Methodology Meanwhile, a 2001 study by Argentine consulting ﬁrm Sossens Marketing Overview y Ventas found that 50% of households in Buenos Aires have a computer, Population and Economy

Technology Infrastructure and 61% of the computers have an internet connection. According to

Internet Users and Access Sossens, the percentage of upper-income households with an internet Usage and Demographics connection is double that of middle-income residences and triple that of eCommerce homes in the lower-income segment. eAdvertising eFinance Households/Workforce with Internet Access in Argentina Argentina, 2001-2005 & 2010 Brazil Mexico 2001 Chile 5.5% Colombia 5.1% Venezuela Index of Charts 2002 7.2% 7.6%

2003 8.4% 10.5%

2004 9.4% 13.8%

2005 10.4% 15.7%

2010 12.8% 26.6%

Households Workforce Source: Morgan Stanley, 2000

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Methodology

Overview Home and Business PCs in Argentina with Internet Population and Economy Connection, 2001-2005

Technology Infrastructure 2001 Internet Users and Access

Usage and Demographics 36.4% eCommerce 36.3% eAdvertising 2002 eFinance

Argentina 46.4%

Brazil 45.5%

Mexico 2003 Chile 50.4% Colombia

Venezuela 54.6%

Index of Charts 2004 54.4% 63.8%

2005 58.4% 67.3%

Households Workforce Source: Morgan Stanley, 2000

D. Usage and Demographics

Frequency of Sessions According to a survey taken by the Strategy Research Corporation (SRC), Argentines access the internet with relatively the same frequency as Mexican users, but considerably less often than users in Brazil. The Media Metrix study found that Argentines go online an average of 10.3 days per month, a frequency similar to that displayed by Australian, Italian and Spanish internet users, and well ahead of those in the UK. Given the high cost of internet access in Argentina relative to average GDP per capita, the Media Metrix ﬁgure is noteworthy.

Frequency of Internet Sessions in Argentina, Brazil and Mexico, 2000 (in number of times per week)

Brazil 4.71

Argentina 3.83

Mexico 3.79

Source: Strategy Resource Corporation, 2000

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Methodology Duration of Sessions Overview According to Media Metrix, Argentine internet users spend an average of Population and Economy

Technology Infrastructure 567.5 minutes online per month, again well ahead of the average in Internet Users and Access European countries like Denmark and the UK, which tend to have lower Usage and Demographics access costs and far higher internet penetration rates than Argentina. eCommerce Aresco found that the duration of daily sessions tend to rise in eAdvertising eFinance proportion with online experience. This ﬁnding is in line with trends in

Argentina other countries in Latin America and around the world. The Aresco study Brazil also revealed that men tend to be heavier users than women, and that usage Mexico increases according to the level of education level attained by the internet Chile user. In terms of age, usage is heaviest among Argentines in the 18- to 49- Colombia

Venezuela year-old segment.

Index of Charts Time Spent Online per Day in Argentina, by Experience Online, 2000

Less than 6 mos. 49% 33% 18%

6 mos.-1 yr. 46% 36% 18%

1-2 yrs. 37% 39% 24%

2-4 yrs. 29% 37% 34%

More than 4 yrs. 17% 35% 48%

Less than 1 hr. 1 hr.-2 hrs. 10 minutes 2 hrs. 10 minutes+ Note: Percentages are approximated from a bar chart Source: Aresco, 2000

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Methodology Usage Patterns Overview The SRC survey also found that Argentines tend to use the internet most Population and Economy

Technology Infrastructure often for research and information purposes, followed closely by e-mail. Internet Users and Access These preferences are consistent with those of the other Latin American Usage and Demographics users surveyed by SRC (although Argentines use the internet for these eCommerce purposes to a greater extent than either Brazilians or Mexicans), and eAdvertising eFinance indeed, with those of users worldwide. Argentina also leads Latin America

Argentina in using the internet for educational and entertainment purposes. However, Brazil Argentines shop online to a far lesser degree than Brazilians. Mexico The Aresco study likewise conﬁrms Argentine users’ preference for e- Chile mail and general surﬁng, although it places e-mail slightly higher. Colombia

Venezuela Moreover, it surveyed users about an additional range of activities,

Index of Charts including chat, newsgroups, online gaming and internet telephony. Some more business-oriented uses, such as videoconferencing were also part of the study. The fact that 6% of Argentine internet users are engaging in videoconferencing is an indication of high bandwidth availability, particularly in business applications.

Internet Activities in Argentina, Brazil and Mexico, 2000

Research/Information 82% 73% 72%

eMail 74% 69% 64%

Entertainment 50% 49% 44%

Education 63% 44% 62%

eCommerce 17% 27% 16%

Argentina Brazil Mexico Source: Strategy Resource Corporation, 2000

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Methodology

Overview Internet Activities in Argentina, 2000

Population and Economy eMail Technology Infrastructure

Internet Users and Access 94.5% Usage and Demographics Research/information eCommerce 86.8% eAdvertising eFinance Chat Argentina 44.6% Brazil

Mexico File transfer protocol (FTP) Chile 15.1% Colombia Online gaming Venezuela

Index of Charts 11.4%

Internet telephony 9.3%

Newsgroups 7.7%

Videoconferencing 5.8%

Source: Aresco, 2000

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Methodology Most Popular Websites Overview According to the Aresco study, Argentine internet users gravitate to search Population and Economy

Technology Infrastructure engines, webmail sites and newspapers, and also show a marked Internet Users and Access predilection for computer and music sites. The high ranking for newspapers Usage and Demographics is not surprising given the high indices of literacy in Argentina and the eCommerce country’s lively print media culture. eAdvertising eFinance

Argentina Frequently Visited Websites in Argentina, by Category, 2000 Brazil

Mexico Search engines 59.2% Chile Colombia Webmail 53.3% Venezuela

Index of Charts Newspapers 49.6% Computer 46.0%

Music 41.2%

Portals 39.0%

Services 37.8%

Culture 33.9%

Sports 24.0%

Market information 17.6%

Shopping 15.3%

Erotic 14.1%

Consultants 14.0%

Source: Aresco, 2000

Media Metrix, which began surveying the Argentine internet market in 2001, measures the popularity and reach of web properties by domain name as well as by host, which reﬂects the number of unique users of a group of sites. For the most part, Argentines remain drawn to foreign content, although some domestic sites, particularly those part of the Grupo Clarín media conglomerate, appeared in the top 10. The top three web properties, for example, are a familiar mixture of sites that are part of the Microsoft, AOL Time Warner and Yahoo! networks.

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Methodology

Overview Top 15 Internet Properties in Argentina, March 2001 Population and Economy Ranking Property Unique users Reach Technology Infrastructure (in millions) (%) Internet Users and Access 1 Microsoft sites 1.5 77.7% Usage and Demographics eCommerce 2 AOL Time Warner 1.3 68.1% network eAdvertising eFinance 3 Yahoo! sites 1.3 66.3% Argentina 4 Clarín Global sites 0.9 48.0% Brazil 5 Terra Lycos sites 0.9 47.5% Mexico 6 About The Human 0.7 35.2% Chile Internet Colombia

Venezuela 7 Altavista network 0.5 26.6% Index of Charts 8 StarMedia network 0.4 22.9% 9 Napster Digital 0.4 22.8% 10 UOL, Inc. 0.4 21.7% 11 Fortunecity sites 0.3 18.0% 12 Tutopia.com 0.3 18.0% 13 El Sitio sites 0.3 17.5% 14 NBC Internet sites 0.3 15.8% 15 Null.ru 0.3 14.3% Source: Media Metrix, 2001

Top 15 Internet Domains/Applications in Argentina, March 2001 Ranking Domain/ Unique users Reach Application (in millions) (%) 1 MSN.com 1.2 65.1% 2 yahoo.com 1.2 60.7% 3 ICQ applications 1.1 55.6% 4 passport.com 0.9 45.5% 5 microsoft.com 0.8 41.0% 6 yahoo.com.ar 0.7 37.5% 7 icq.com 0.6 30.8% 8 clarin.com 0.6 29.2% 9 terra.com.ar 0.5 27.7% 10 altavista.com 0.5 26.3% 11 MSN Messenger service 0.5 25.2% 12 ciudad.com.ar 0.5 24.3% 13 lycos.com 0.4 23.1% 14 uol.com.ar 0.4 19.2% 15 Napster applications 0.3 18.1% Source: Media Metrix, 2001

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Methodology In addition to ranking individual domains, Media Metrix also classiﬁed the Overview popularity of domains by category. Not surprisingly, portals captured the Population and Economy attention of most Argentine internet users, with a nearly 90% reach. A Technology Infrastructure

Internet Users and Access February 2001 Media Metrix study revealed that Argentines have a Usage and Demographics particular predilection for Napster, the music ﬁle-swapping application, eCommerce and used the application an average of 6.3 days per month, tying with eAdvertising Spain for the highest total among 13 countries surveyed by Media Metrix. eFinance

Argentina Although the total number of unique users in Argentina was not the

Brazil highest among the countries surveyed, Napster’s reach among Argentine Mexico internet users was the second highest behind Canada, at 25.0%. Chile Colombia Top Domains in Argentina, by Category, March 2001 Venezuela

Index of Charts Ranking Domains by category Reach (%) 1 Portals 89.6% 2 Services 81.7% 3 Applications 67.2% Source: Media Metrix, 2001

Gender The gender breakdown of the Argentine internet user population is about average for the region, according to surveys by Argentine consultancies Prince & Cooke and Aresco. The surveys, both conducted in 2000, show that men continue to dominate, with the Aresco research indicating a breakdown somewhat more biased towards male users. Media Metrix’s more recent ﬁndings indicate a slightly more balanced gender breakdown.

Comparative Estimates: Internet Users in Argentina, by Gender, 2000

Male 67.5% 58% 57%

Female 32.5% 42% 43%

Aresco Media Metrix Prince & Cooke Source: Media Metrix, 2001; Aresco, 2000; Prince & Cooke, 2000

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Methodology Age Overview The Media Metrix survey incorporates a combined segmentation by age Population and Economy

Technology Infrastructure and gender. It reveals that usage is particularly intense among both men Internet Users and Access and women between the ages of 18 and 44. According to Aresco, the Usage and Demographics median age of Argentine internet users is between 30 and 31. eCommerce eAdvertising Internet Users in Argentina, by Age and Gender, 2001 eFinance Argentina 2-11 Brazil 3.7% Mexico 3.0% Chile Colombia 12-17 Venezuela 10.4% Index of Charts 7.2%

18-24 14.5% 11.0%

25-34 11.6% 8.7%

35-44 9.9% 7.3%

45-44 4.8% 3.1%

55+ 3.6% 1.8%

Men Women Note: Does not add up to 100% due to rounding Source: Media Metrix, 2001

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Methodology Experience Online Overview According to Aresco, more than 50% of Argentina’s internet users have Population and Economy

Technology Infrastructure been online for over a year, and more than 30% have been online for more Internet Users and Access than 2 years. A study by Prince & Cooke found that men, on average, have Usage and Demographics been using the internet longer than women: 78% of men have been users eCommerce for more than 1 year, whereas the percentage among women is only 69%. eAdvertising eFinance The Aresco survey conﬁrms this trend. Argentines in the 25 to 29 age

Argentina bracket are the most experienced users – 82% have been accessing the Brazil internet for more than 1 year – closely followed by users in the 30 to 39 Mexico and 19 to 24 segments. Users in the top three socioeconomic strata are Chile likewise the most experienced with 57% accessing the internet for more Colombia

Venezuela than a year. Lower- to middle-class users, who comprise approximately 5%

Index of Charts of the Argentine user population, are the least experienced: 50% have been on the internet for more than a year. However, in comparison to other countries in the region, this ﬁgure is actually quite favorable, and is a telling indicator of the greater maturity of the Argentine internet market.

Internet Users in Argentina, by Number of Years Online, 2000

More than 4 yrs. Less than 6 8.4% mos. 18.1% 2-4 yrs. 23.1% 6 mos.-1 yr. 20.2%

1-2 yrs. 30.1%

Note: Does not add up to 100% due to rounding Source: Aresco, 2000

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Methodology

Overview Internet Users in Argentina, by Number of Years Online,

Population and Economy 2000 (by age, gender and socioeconomic strata) Technology Infrastructure Age < 1 Yr. 1–2 Yrs. 2–4 Yrs. 4 Yrs. + Internet Users and Access Up to 18 36% 50% 12% 2% Usage and Demographics eCommerce 19–24 28% 53% 14% 5% eAdvertising 25–29 18% 35% 35% 12% eFinance 30–39 21% 35% 35% 9% Argentina 40+ 31% 42% 22% 5% Brazil

Mexico Gender Chile Male 22% 39% 29% 10% Colombia Female 31% 44% 22% 3% Venezuela Socioeconomic Strata Index of Charts ABC1 23% 39% 28% C2 27% 47% 23% C3 41% 32% 18% Note: Percentages are approximated from bar charts Source: Prince & Cooke, 2000

Internet Users in Argentina, by Number of Years Online, 2000

< 6 mos. 55% 45%

6 mos.-1 yr. 61% 39%

1-2 yrs. 70% 30%

2-4 yrs. 72% 28%

4+ yrs. 82% 18%

Men Women Note: Percentages are approximated from a bar chart Source: Aresco, 2000

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Methodology Socioeconomic, Employment and Educational Status Overview Argentina’s internet users are very heavily concentrated in the nation’s top Population and Economy

Technology Infrastructure three socioeconomic segments, more so than even Brazil or Mexico. Note Internet Users and Access that in Argentina, socioeconomic status is determined by the occupation Usage and Demographics and level of education attained by the main income earner in each eCommerce household, the possession of consumer goods, and housing factors such as eAdvertising eFinance style, size, materials and appearance. The ABC1 strata represent the upper

Argentina and upper-middle classes, while C2 and C3 are equivalent to the middle and Brazil lower-middle classes. The two D strata represent the lowest income Mexico population in Argentina. Chile According to a Prince & Cooke study conducted in 2000, 95% of internet Colombia

Venezuela users fall in the three uppermost income strata. This percentage, which is

Index of Charts high in comparison to other major Latin American internet markets, reﬂects the fact that the average GDP per capita in Argentina is much greater than in most other countries in the region. It is also indicative of the proﬁle of the average Argentine user, who is well educated, urban and of considerable economic means. The more recent Media Metrix report, released in March 2001, displays a more balanced distribution across Argentina’s socioeconomic segments, a positive sign indicating the extension of internet use to a broader portion of the population.

Comparative Estimates: Internet Users in Argentina, by Socioeconomic Strata, 2001

ABC1 59% 42%

C2 36% 28%

C3 5% 23%

D1/D2 8%

Prince & Cooke Media Metrix Note: Does not add up to 100% due to rounding Source: Media Metrix, 2001; Prince & Cooke, 2000

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Methodology Media Metrix found that 58% of internet users in Argentina are part of the Overview economically active population. An additional 31% of users are students. Population and Economy Overall, Aresco found that 71% of Argentine internet users have attended Technology Infrastructure

Internet Users and Access or completed college (not all of the users in this category have actually Usage and Demographics graduated from a university, but all have attended for some period of time). eCommerce eAdvertising Internet Users in Argentina, by Employment Status, eFinance 2001 Argentina

Brazil Unemployed Retired 3.1% 0.4% Mexico

Chile Does not

Colombia work or study 0.1% Venezuela Housewife Index of Charts 7.2%

Student 31.4% Works 57.7%

Note: Does not add up to 100% due to rounding Source: Media Metrix, 2001

Internet Users in Argentina, by Educational Status, 2000 Completed primary education 3.2% No answer Completed 1.2% secondary education 24.7%

College 70.9%

Source: Aresco, 2000

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Methodology E. eCommerce Overview

Population and Economy Technology Infrastructure Total eCommerce Internet Users and Access Argentina’s per capita GDP is among the highest in Latin America and most Usage and Demographics eCommerce Argentines are highly literate. More than one-third of the population eAdvertising resides in the capital city of Buenos Aires, providing a highly concentrated eFinance potential market of online consumers. However, the recession that has been Argentina plaguing Argentina for over 2 years has had a negative impact on GDP, and Brazil has given businesses pause about investing in online sales technology as Mexico

Chile well as leading consumers to spend carefully on the internet, with the Colombia exception of key staple categories like food. Venezuela Thus, while B2C and B2B e-commerce revenues will increase in the years Index of Charts ahead, steeper growth in Mexico and Brazil, whose economies are currently more stable, will prevent Argentina’s share of total Latin American e- commerce from climbing past 11% at any point between 2001 and 2004.

eCommerce Revenues in Argentina, 2000–2004 (in billions and as a % of total Latin American e-commerce)

2000 $0.32 (9.0%)

2001 $0.87 (9.0%)

2002 $2.28 (11.0%)

2003 $3.91 (10.0%)

2004 $6.65 (10.0%)

Source: eMarketer, 2001

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Methodology Comparative Estimates Overview As with its other e-commerce estimates, Forrester Research’s predictions for Population and Economy

Technology Infrastructure Argentina are the highest, and are based on the notion of hypergrowth, Internet Users and Access which is scheduled to take place in 2005. Given the current economic Usage and Demographics conditions in Argentina, as well as the overall climate of uncertainty, eCommerce research ﬁrms have not produced revised e-commerce projections for eAdvertising eFinance Argentina.

Argentina

Brazil Comparative Estimates: eCommerce Revenues in

Mexico Argentina, 2001-2004 (in billions)

Chile 2001 Colombia

Venezuela $0.87

Index of Charts $1.20

2002 $2.28 $2.00

2003 $3.91 $4.40

2004 $6.65 $10.50

eMarketer Forrester Research Source: eMarketer, 2001; Forrester Research, 2000

B2C eCommerce Consumer-oriented e-commerce sites around the world suffered a considerable shakeout in 2000, and Argentina, thanks also to its ongoing recession, was hit harder than most countries in the region. Although pure plays will undoubtedly enter the market, brick-and-mortar retailers such as the supermarket chain Disco, the electrical goods chain Garbarino and music chain Musimundo are becoming class leaders in the B2C segment. They have been able to exploit their strong ofﬂine brands on the internet in large part because they have already garnered the trust of consumers, and have been able to offer them online experiences that are consistent with their ofﬂine shopping habits. In addition, a relatively high percentage (for the region) of Argentina’s population has a credit and/or debit card.

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Methodology

Overview B2C eCommerce Revenues in Argentina, 2001-2004

Population and Economy (in billions and as a % of total Latin American B2C

Technology Infrastructure e-commerce)

Internet Users and Access

Usage and Demographics 2001 $0.11 (6.4%) eCommerce 2002 $0.30 (8.9%) eAdvertising eFinance 2003 $0.43 (7.8%) Argentina 2004 $0.73 (9.0%) Brazil Mexico Source: eMarketer, 2001 Chile

Colombia

Venezuela Comparative Estimates

Index of Charts As with overall e-commerce revenues, leading research ﬁrms have not revised their predictions for the B2C segment, and forecasts of consumer e- commerce in Argentina show a high degree of convergence for the years ahead. Optimistic forecasts assume that Argentina will climb out of its current recession and that the economy will not be subject to further ﬂuctuations like that caused by the devaluation of the Brazilian real in 1999. Should another such incident take place, the likelihood is that it would have a dampening effect on consumer spending in general. Growth of online commerce would be adversely affected as well.

Comparative Estimates: B2C eCommerce Revenues in Argentina, 2001-2005 (in billions)

2001 $0.11 $0.08 $0.12

2002 $0.30 $0.15 $0.25

2003 $0.43 $0.31 $0.45

2004 $0.73 $0.75 $0.73

2005 $0 $1.09

eMarketer Forrester Research Jupiter Research Source: eMarketer, 2001; others, as noted, 2000

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Methodology Revenues from online retailing in Argentina are highly concentrated Overview among a limited number of e-commerce sites. According to a study by the Population and Economy Boston Consulting Group (BCG) and Visa International, Argentina’s top 50 Technology Infrastructure

Internet Users and Access sites took in 93% of the country’s B2C e-commerce revenues in 2000, while Usage and Demographics the top 10 garnered 79%. This uneven revenue distribution presents a clear eCommerce challenge to smaller players with more limited funding and lesser-known eAdvertising brands, particularly given the barriers to consumer e-commerce in eFinance

Argentina Argentina. Many online retailers will be hard pressed to survive the

Brazil pressures of such a competitive marketplace.

Mexico Chile Concentration of Online Retailing Revenues in Colombia Argentina, 2000 Venezuela Index of Charts Top 10 players 79%

Top 25 players 91%

Top 50 players 93%

All players 100%

Source: Boston Consulting Group (BCG)/Visa International, 2000

Transactions According to studies by Prince & Cooke and Jupiter Research, both of which were conducted and released in 2000, 23% of Argentine internet users have used the internet to make purchases. Aresco, in a study of 2,216 users conducted from December 2000 to January 2001 and released in February of this year, found a slightly higher percentage of internet users − 28% − who had made a purchase online in the year prior to the survey. Those who buy online tend to be among the country’s most experienced users with better understanding of online transactions. In light of the socioeconomic composition of Argentine internet users, they are also more likely to have credit cards and the disposable income required to make online purchases.

Comparative Estimates: Internet Users in Argentina Buying Online, 2000-2001 (as a % of total internet user population)

Aresco 28%

Jupiter Research 23%

Prince & Cooke 23%

Source: Aresco, 2001; various, as noted, 2000

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Methodology Most respondents to the Aresco survey made one to four online purchases Overview in 2000-2001. Repeat shoppers were a distinct minority, which is somewhat Population and Economy surprising given that the survey was conducted in part during the 2000 Technology Infrastructure

Internet Users and Access holiday shopping season, when buying activity, both online and off, tends Usage and Demographics to be more intense. eCommerce eAdvertising Frequency of Online Shopping in Argentina, 2000-2001 eFinance (in number of purchases in previous year) Argentina 9 Brazil 1.0% Mexico 8 10+ 2.5% Chile 12.8% 1 Colombia 7 30.0% 2.2% Venezuela 6 5.9% Index of Charts 5 7.2% 4 6.8% 2 3 19.4% 12.1%

Source: Aresco, 2001

Frequency of Online Shopping in Argentina, 2000-2001 (in number of purchases in previous year)

10+ 12.8%

5-9 1-4 18.9% 68.3%

Source: Aresco, 2001

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Methodology Payment Methods Overview On the whole, the level of credit card ownership and use in Latin America is Population and Economy

Technology Infrastructure low, which is one of several well-known impediments to the growth of Internet Users and Access consumer-based e-commerce in the region. Consumers in Argentina hold Usage and Demographics credit cards to a greater degree than most others in Latin America. New eCommerce research by Morgan Stanley indicates that the penetration rate for credit eAdvertising eFinance and debit cards, when grouped together, is 46%, second highest in Latin

Argentina America after Brazil, aided in large part by the rapid rise in the number of Brazil debit cards issued by banks. Mexico Chile Credit and Combined Credit/Debit Card Penetration Colombia in Argentina, 2000 (as a % of total population) Venezuela Index of Charts Credit 27%

Credit/Debit 46%

Source: Morgan Stanley, 2001

A survey by the market research ﬁrm D’Alessio/Harris revealed that Argentines would prefer to pay for products they buy online once they are delivered. However, only 28% of online consumers surveyed actually paid COD; most paid with a credit card. The overwhelming preference for paying COD indicates the general level of concern among Argentines about the security of online credit card transactions. However, the survey results reported by D’Alessio/Harris also suggest that alternative payment methods are not widely available, given that only one-third of Argentines paid by means other than a credit card.

Online Payment Methods vs. Payment Preferences in Argentina, 2000 Credit Card 78% 34% COD 28% 60% Bank Deposit 4% 18% Payment Method Payment Preference Note: Multiple responses allowed Source: D’Alessio/Harris, 2000

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Methodology Taxation Overview The Argentine government has yet to pass legislation governing e-commerce Population and Economy

Technology Infrastructure transactions. At present, therefore, e-commerce revenues are not taxed.

Internet Users and Access Usage and Demographics Residential Delivery eCommerce In terms of drop-off locations, the coverage of major international courier eAdvertising eFinance ﬁrms is largely limited to major cities throughout the country. A “shopping

Argentina test” performed by Boston Consulting Group (BCG) and Visa International Brazil as part of an evaluation of consumer e-commerce sites throughout Latin Mexico America found that 75% of products arrived on time in Argentina. Chile Returning goods ordered over the internet remains a challenge for Colombia

Venezuela consumers: according to Aresco, 29% of internet users surveyed did not

Index of Charts buy online due to the lack of guarantees or policies on returns.

Number of Drop-Off Locations of International Couriers in Argentina, 2001

DHL 12

FedEx 4

UPS 6

Source: various, as noted, 2001

Privacy and Security Security remains a concern for internet users in Argentina. Among those surveyed by Prince & Cooke, 42% cited security concerns as a reason for not buying online. The more recent Aresco study found that 55% of internet users chose not to buy online due to concerns about the security of the transaction. Consumer fears are well founded: only 0.2% of the servers surveyed by Netcraft earlier this year had either strong or weak encryption. A global online attitudes survey published by American Express in October 2000 found that more than three-quarters or 77% of Argentines expressed concern about the security and privacy of personal information when making purchases or financial transactions online. However, this figure is a projection based on those who are currently internet users as well as those who intend to become users, so the likelihood is that the Argentines who are not yet users accounted for this higher level of concern. Incidentally, the figure reported by American Express was below the average for the ten countries surveyed for the study.

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Methodology Consumer Attitudes and Preferences Overview Online shopping has yet to touch much of the Argentine population, Population and Economy

Technology Infrastructure particularly the newest internet users. According to Aresco, 72% of Internet Users and Access Argentine internet users did make a purchase online last year. Among those Usage and Demographics who have been using the internet for less than 6 months, the percentage of eCommerce non-shoppers was 92%. However, a comparison of the Prince & Cooke eAdvertising eFinance survey, conducted last year, and the Aresco survey, conducted in December

Argentina 2000-January 2001, shows that the percentage of inexperienced internet Brazil users who bought online has increased. Mexico Of greater concern to online merchants is Aresco’s ﬁnding that 58% of Chile those surveyed only use the internet to do research on products; they then Colombia

Venezuela make their purchases ofﬂine. One factor that may in part explain the

Index of Charts Argentines’ reluctance to buy online is that the country lacks a tradition of purchasing goods through the mail. Another potential hurdle to overcome is the rules and laws governing consumer protection, such as the ability to return unwanted, damaged or defective goods. At present, the laws remain unclear and there is no consensus as of yet on which country’s rules apply to cross-border electronic sales (i.e., who is responsible for warranty protection on items purchased on a US site, for example, and subsequently, delivered to a consumer in Argentina).

Comparative Estimates: Internet Users Shopping Online in the Previous Year in Argentina, 2000-2001

Shop Shop 28% 23%

Did not shop Did not shop 72% 77%

Aresco Prince & Cooke Source: Aresco, 2001; Prince & Cooke, 2000

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Methodology

Overview Internet Users Shopping Online in the Previous Year Population and Economy in Argentina, 2001 (by number of years online)

Technology Infrastructure Less than 6 mos. Internet Users and Access

Usage and Demographics 8.4% eCommerce 91.6% eAdvertising 6 mos.-1 yr. eFinance

Argentina 17.5%

Brazil 82.5%

Mexico 1-2 yrs. Chile

Colombia 31.2%

Venezuela 68.8%

Index of Charts 2-4 yrs. 40.7% 59.3%

More than 4 yrs. 53.1% 46.9%

Shop Did not shop Source: Aresco, 2001

Internet Users Shopping Online in Argentina, 2000 (by number of years online)

Less than 1 yr. 5% 95%

1-2 yrs. 21% 79%

2-4 yrs. 33% 67%

More than 4 yrs. 59% 41%

Shop Did not shop Source: Prince & Cooke, 2000

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Methodology Among both current and prospective internet users in Argentina, website Overview content in Spanish is a key factor in purchasing, followed closely by price Population and Economy and clear descriptions of the products and services offered. As with most Technology Infrastructure

Internet Users and Access present and future internet users surveyed by American Express, trust in Usage and Demographics the brand name of the retailer is also an important factor. eCommerce eAdvertising Important ePurchasing Factors among Current and eFinance Future Internet Users in Argentina, 2000 Argentina Brazil Website offered in local language 95% Mexico

Chile Price 93%

Colombia Good description/photos of products/services 93% Venezuela Index of Charts Trust in brand name of product 86%

Ease of navigating the site 83%

Trust in brand name of online retailer 76%

Attractive graphics 68%

Source: American Express, 2000

Argentines have already found considerable advantages to buying online. According to Prince & Cooke, 62% of active internet users cited convenience as the leading reason why they made purchases over the internet. An additional 23% found that buying online saved time, but only 12% found it to be less expensive than buying in brick-and-mortar establishments.

Reasons for Shopping Online in Argentina, 2001

Convenience 62%

Saves time 23%

Cheaper 12%

Source: Prince & Cooke, 2000

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Methodology On the other hand, Argentines surveyed expressed ample reasons for why Overview they do not shop on the internet. Security concerns, fear of credit card Population and Economy fraud, lack of credit cards and the need to see a product before buying are Technology Infrastructure

Internet Users and Access among the main deterrents to consumer e-commerce in Argentina.

Usage and Demographics eCommerce Reasons for Not Buying Online in Argentina, 2001 eAdvertising Use the internet only to research products eFinance

Argentina 58.3%

Brazil Lack of security in payment process Mexico 54.8% Chile Colombia Lack of return guarantee policies Venezuela 29.2% Index of Charts Could not see the product 28.7%

Distrust the website 28.5%

Lack credit card 28.0%

Already buy the same product offline 23.3%

Can get the same price elsewhere 21.6%

Delivery of products is unreliable 16.8%

No answer 4.5%

Note: Multiple responses allowed Source: Aresco, 2001

Reasons for Not Buying Online in Argentina, 2000

Security concerns 42% Lack credit card 12% Prefer to see item before buying 11% Provides no benefits 7%

Source: Prince & Cooke, 2000

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Methodology When making purchases online, Argentines’ preference for foreign sites Overview may be shifting. An InfoAmericas 2000 study found 37% of spending went Population and Economy to domestic sites and 63% to foreign sites. The Prince & Cooke survey Technology Infrastructure

Internet Users and Access showed that only 21% favored domestic sites, while 62% preferred buying Usage and Demographics at foreign e-commerce portals. An additional 17% made purchases at both eCommerce domestic and foreign sites. The more recent Aresco study revealed that 57% eAdvertising of internet users prefer to shop on Argentine sites. This discrepancy may be eFinance

Argentina the reﬂection of an increase in local product choice in the past year.

Brazil

Mexico Comparative Estimates: Online Consumers Shopping Chile at Domestic and Foreign Sites in Argentina, 2000-2001

Colombia Domestic Venezuela

Index of Charts 57.0% 37% 21%

Foreign 19.7% 63% 62%

Both 22.1% 0% 17%

No answer 1.2%

Aresco InfoAmericas Prince & Cooke Note: Does not add up to 100% due to rounding Source: Aresco, 2001; various, as noted, 2000

The American Express study conﬁrmed the popularity of music and books in Argentina. The ﬁndings also substantiate the untapped appeal of buying event tickets, electronic goods, appliances and groceries online. Given Argentina’s long tradition of home delivery of groceries, this is a promising segment for online merchants. In fact, Discovirtual, the online arm of the Disco supermarket chain, sold $40 million worth of groceries over the internet in 2000. Among the ten countries surveyed, Argentines indicated the greatest propensity to purchase books, electronics and household items by a considerable margin in each category.

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Methodology

Overview Anticipated Online Purchases in Argentina, 2000

Population and Economy

Technology Infrastructure Event Tickets

Internet Users and Access 58%

Usage and Demographics Books eCommerce 57% eAdvertising CDs, Videos or Computer Games eFinance 39% Argentina Electronics Brazil 35% Mexico Household Items (e.g. appliances) Chile 28% Colombia Groceries Venezuela 25% Index of Charts Toys 20% Clothes 10% Stocks and Shares 10% Jewelry/Watches 5% Source: American Express, 2000

In terms of the products that survey respondents have actually bought, music, books, computer hardware and software, consumer electronics and magazine subscriptions rank high on the list.

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Methodology Overview Consumers Buying Products Online in Argentina, 2001 Population and Economy

Technology Infrastructure Books

Internet Users and Access 35.8%

Usage and Demographics CDs eCommerce 26.4% eAdvertising Electronic products eFinance 22.8% Argentina

Brazil Computer hardware

Mexico 17.1% Chile Software Colombia 13.3% Venezuela Subscriptions Index of Charts 11.4% Travel/tourism/tickets 7.8% Food 6.1% Magazines 6.0% Video/photography equipment 5.8% Event tickets 5.6% Cosmetics/perfume 5.5% Beverages 4.2% Novelty items 3.4% Toys 2.7% Clothing 2.4% Pharmaceuticals 1.4% Reports/studies 1.3% Cigarettes 0.2% No answer 20.5% Note: Multiple responses allowed Source: Aresco, 2001

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Methodology

Overview Consumers Buying Products Online in Argentina, 2000 Population and Economy Books Technology Infrastructure 48% Internet Users and Access

Usage and Demographics CDs eCommerce 36% eAdvertising Software eFinance

Argentina 18% Brazil Magazine Subscriptions Mexico 10% Chile

Colombia Electronics Venezuela 8% Index of Charts Tickets 6%

Source: Prince & Cooke, 2000

B2B eCommerce As with optimistic predictions for growth in the B2C segment, development of the B2B market will depend on economic stability and the capacity of businesses to make the necessary ongoing investments to bring their operations online.

B2B eCommerce Revenues in Argentina, 2001-2004 (in billions and as a % of total Latin American B2B e-commerce)

2001 $0.75 (9.6%)

2002 $1.98 (11.4%)

2003 $3.48 (10.4%)

2004 $5.92 (10.1%)

Source: eMarketer, 2001

Comparative Estimates eMarketer and Forrester Research estimates show convergence through 2003, and then begin to diverge widely by 2004, as Argentina approaches what Forrester sees as the country’s period of hypergrowth.

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Methodology

Overview Comparative Estimates: B2B eCommerce Revenues in

Population and Economy Latin America, 2001-2004 (in billions)

Technology Infrastructure 2001 Internet Users and Access $0.75 Usage and Demographics eCommerce $1.06 eAdvertising 2002 eFinance $1.98 Argentina

Brazil $1.95 Mexico 2003 Chile $3.48 Colombia

Venezuela $4.08 Index of Charts 2004 $5.92 $9.76

eMarketer Forrester Research Source: eMarketer, 2001; Forrester Research, 2000

Business Internet Penetration According to a Prince & Cooke survey, 86.8% of small- and medium-sized enterprises (SMEs) have internet access. Other ﬁndings indicate that SMEs and large businesses are well represented online and are increasingly using the internet both for procurement and as a sales channel. Prince & Cooke predicts dramatic growth in the percentage of all Argentine businesses selling online by year-end 2001. Meanwhile, InfoAmericas estimates that just over 80% of Argentine companies have a computer in their purchasing department and/or upper management. Approximately 70% of purchasing departments have internet access, but just over 10% have actual experience with e-procurement.

Businesses with a Website in Argentina, 2000–2001 2000 2001 Large Businesses 68.2% 92.0% SMEs 36.8% 72.7% Source: Prince & Cooke, 2000

Businesses Buying Online in Argentina, 2000

Large businesses 20.9%

SMEs 17.3%

Source: Prince & Cooke, 2000

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Methodology

Overview Business Selling Online in Argentina, 2000–2001

Population and Economy 2000 Technology Infrastructure

Internet Users and Access 12.2%

Usage and Demographics 6.4% eCommerce 2001 eAdvertising eFinance 50.6%

Argentina 36.2%

Brazil Large businesses SMEs Mexico Chile Source: Prince & Cooke, 2000 Colombia

Venezuela Index of Charts F.eAdvertising Argentina has the highest rate of cable television penetration in Latin America and one of the highest rates in the world, so it is not surprising that television advertising dominates all other media. Zenith Media expects that internet advertising will constitute just 1% of total ad spending in Argentina in 2001, but expects that the internet’s share should increase to 5.8% by 2003. According to Goldman Sachs estimates, online advertising expenditures in Argentina represents 8.7% of the regional total, with Argentina trailing Brazil and Mexico, Latin America’s leaders in spending, by a considerable margin.

Comparative Estimates: Online Advertising Spending in Argentina, 2001-2004 (in millions)

2001 $27.0 $28.9

2002 $42.0 $69.7

2003 $56.0 $188.8

2004 $73.0

Goldman Sachs Zenith Media Source: Goldman Sachs, 2001; Zenith Media, 2000

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Methodology

I Overview

II Population and Economy

III Technology Infrastructure

IV Internet Users and Access

V Usage and Demographics

VI eCommerce

VII eAdvertising

VIII eFinance

IX Argentina X Brazil 173 A. Overview 174 B. Technology Infrastructure 177 C. Internet Users and Access 189 X D. Usage and Demographics 193 E. eCommerce 205 F.eAdvertising 237

XI Mexico

XII Chile

XIII Colombia

XIV Venezuela

Index of Charts

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Methodology Overview At a Glance: Brazil, 2001 Population and Economy Total population (in millions) (1) 174.5 Technology Infrastructure Population 14+ (in millions) (1) 128.1 Internet Users and Access

Usage and Demographics Population living in urban areas (1999) (2) 81% eCommerce GDP (PPP adjusted, in billions) (1999) (3) $1,057 eAdvertising GDP per capita (PPP adjusted) (1999) (3) $6,150 eFinance

Argentina PCs per 100 inhabitants (2000) (4) 4 Brazil Main telephone lines per 100 inhabitants (2000) (4) 15 Mexico Cellular subscribers per 100 Inhabitants (2000) (4) 14 Chile ISPs (1999) (3) 197 Colombia

Venezuela Internet users (in millions) 6.08 Index of Charts Internet users as % of Pop. 14+ 5% Compounded annual growth in users, 2001-2004 39% Total e-commerce (in billions) $6.55 Compounded annual growth in e-commerce, 2001-2004 83% B2B e-commerce (in billions) $5.30 B2C e-commerce (in billions) $1.24 Source: eMarketer, 2001; (1) US Census Bureau, 2000 (interpolated by eMarketer); (2) World Bank, 2000; (3) CIA World Fact Book, 2000; (4) International Telecommunication Union (ITU), 2001

A. Overview Among Latin America’s internet markets, Brazil’s is the most thriving. The country, with one-third of the region’s population, is the single largest market for internet services and e-commerce in Latin America and the Caribbean. Brazil accounts for 40% of the region’s internet users and nearly 70% of all e-commerce revenues. With a relatively large online population and robust e-commerce market, Brazil is the Latin American country best positioned to survive any shakeout in the internet market. In the course of the worldwide dip in the internet economy, Brazil was not hit as hard as many neighboring countries. Brazil’s demographic statistics are staggering: 81% of Brazil’s population is concentrated in urban areas, with the majority of them possessing well- developed telecommunications, banking, media and transportation infrastructures, and there are 13 cities which have more than 1 million inhabitants. The metropolitan regions of Brazil’s two largest cities, São Paulo and Rio de Janeiro, are home to 17.8 and 10.6 million residents, respectively. Not surprisingly, a large percentage of the country’s internet users resides in these two cities as well.

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Methodology In fact, considerable disparity exists in the nation’s population density in Overview general, with the highest concentration located in the Southeast and Population and Economy Southern regions, comprised of the states of São Paulo, Rio de Janeiro, Technology Infrastructure

Internet Users and Access Minas Gerais, Espírito Santo, Paraná, Santa Catarina and Rio Grande do Usage and Demographics Sul. The highly industrialized state of São Paulo alone represents nearly eCommerce one-ﬁfth of Brazil’s total population. Household incomes tend to be eAdvertising disproportionately higher and the infrastructure better developed than the eFinance

Argentina national average in these densely populated regions.

Brazil Mexico Low-Cost Access Chile Brazilians without computers and internet access at home or work will Colombia have more opportunities to get online at schools, public libraries and Venezuela

Index of Charts community centers than ever before. Recognizing that a population with more widespread access to computers is in the national interest, the Brazilian government, as part of an effort to boost nationwide internet usage, has announced plans to produce, sell and finance computers that include a modem, monitor, speakers, a mouse and simple internet browsing software that could cost as little as $300. The prototype will allow users unrestricted navigation of the internet right out of the box, but it is also designed to be modular, so that users can add components like printers, disk drives and CD-ROMs if they have the financial means. Should the government carry out its plans to build and sell the computer, it intends to offer lower-income Brazilians access to credit from the government savings bank and the option of paying in installments of around $10 per month. Like the government, some private-sector companies have begun offering their employees attractive financing on computers in order to stimulate use of information technology and the internet. According to the Economist Intelligence Unit (EIU), the direct-sales company Natura, gives its entire sales force the possibility of buying PCs at interest rates that are little over 1% per month. Banco Bradesco, Brazil’s largest commercial bank and a pioneer in offering free internet access to its customers, has also sold computers to many of its 67,000 employees at greatly reduced prices. In addition, the government, with financial assistance from private- sector and non-profit organizations, plans to connect thousands of schools to the internet and install internet kiosks throughout the country. In mid- 2000, the state-owned postal service, Empresa Brasileira de Correios e Telégrafos (ECT), launched Projeto Porta Aberta (Project Open Door), which gives the public free e-mail addresses and internet access through kiosks installed in select post offices (currently limited to the agencies in the city of Rio de Janeiro, the greater metropolitan area of São Paulo and the interior of São Paulo state).

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Methodology In a similar effort to bring internet access to places where lower-income Overview people congregate regularly, NetCash-PopBanco (the enterprise formed by Population and Economy startup NetCash, government bank Caixa Econômica Federal, cable internet Technology Infrastructure

Internet Users and Access provider GloboCabo, the business division of the Spanish-owned telephone Usage and Demographics company Telefônica Empresas, a bakery-industry labor union and a bread- eCommerce industry association) has focused on one of Brazil’s most venerable eAdvertising institutions - the neighborhood bakery (padaria). According to the Gartner eFinance

Argentina Group, NetCash-PopBanco has plans to install free internet kiosks in

Brazil padarias, which Brazilians typically visit every day and which are a vital Mexico link in the country’s retail economy. Gartner estimates that padarias Chile generate $10 billion per year in revenues, equivalent to 2% of the country’s Colombia GDP. Aimed particularly at the low-income consumers who have been left Venezuela

Index of Charts out of the online revolution, the kiosks will allow registered users to use banking services, send e-mail and access the internet for free. Fees for ﬁnancial services, commissions on e-commerce transactions and advertising will serve as the main revenue streams for the project. NetCash- PopBanco aims to have 2,500 kiosks in place by mid-2001, and install 400 per month thereafter. Telemar, the leading ﬁxed-line telephone operator for Rio de Janeiro and the Northeast region of Brazil, has installed experimental computer terminals in telephone booths in 30 locations in the city of Rio de Janeiro. The booths offer users high-speed (256 Kbps) access to the internet with phone cards, with a $0.90-cent card good for approximately 10 minutes of access. Inexpensive computers and public kiosks will not resolve all the problems associated with Brazil’s digital divide, but they are a step towards removing some of the principal barriers that keep much of the country’s population disconnected from the internet. Moreover, the ability to access the internet in school, at work or at a library or public kiosk may stimulate the demand for home computers and internet service by affording people the opportunity to experience the technology before they buy a PC themselves.

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Methodology B. Technology Infrastructure Overview

Population and Economy Technology Infrastructure Fixed-Line Telephones Internet Users and Access Accelerated development of the telecommunications infrastructure is Usage and Demographics eCommerce necessary to widen the pool of internet users in Brazil. The International eAdvertising Telecommunication Union (ITU) estimates that only 15% of Brazilians had eFinance a ﬁxed-line telephone in 2000, so extensive wiring is necessary before Argentina people can get online en masse. According to the US Department of Brazil Commerce, teledensity varies considerably throughout the country, with Mexico

Chile the most highly developed infrastructure (telecommunications and Colombia otherwise) concentrated in the South and Southeast regions. The disparity Venezuela is considerable: 23% of the population in the South has a fixed-line phone Index of Charts versus only 8% in the Northeast. Telebrás, the state-owned telephone monopoly, was privatized in 1998 and its properties divided into regional operators. Currently, both the fixed- line and wireless markets operate as duopolies, with the privatized incumbents competing against government-licensed “mirror companies.” However, full market liberalization is scheduled to take place in 2002. A positive outgrowth of privatization has been the strict performance quality and improvement guidelines imposed on both fixed-line and wireless licensees. On the down side, Brazil currently has some of the region’s highest metered local phone charges, averaging $0.028 per minute (per minute charge as opposed to charging per call), according to ebusinessforum.com. Taxes on local calls are also high, typically around 40%. The wireless sector is also experiencing rapid growth. In Brazil, as in other developing countries, the proliferation of wireless devices may become a key factor in expanding the internet user base. Given the country’s lagging fixed-line telecommunications infrastructure, wireless web applications may be the simplest, cheapest and quickest way to bring large numbers of new internet users online. In addition, many companies are looking to wireless technology and services to provide them with an online presence. Several cellular operators have already begun to offer mobile internet access, but high costs are likely to restrict the initial audience for the additional services to business users. Until the cost of access drops considerably and data transmission rates improve, mobile internet users will remain a small segment of the overall internet user population in Latin America. Over time, however, the trend towards greater competition promises to lower telecommunications costs for both businesses and consumers. According to the consultancy Frost & Sullivan, Brazil has been among the most successful Latin American countries at stimulating and maintaining competition in the telecommunications sector. Lower costs will facilitate wider use of the internet, and, in turn, spur the development of e-commerce markets.

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Methodology

Overview Comparative Estimates: Telephone Lines per 100 Population and Economy Inhabitants in Brazil, 1999-2005 Technology Infrastructure 1999 2000 2001 2002 2003 2004 2005 Internet Users and Access Agência Nacional – 20.9 23.9 26.3 28.5 30.6 32.6 Usage and Demographics de Telecomunicações eCommerce (ANATEL) eAdvertising Gartner Dataquest – 19.8 ––––– eFinance

Argentina InfoAmericas – 15.2 17.2 19.1 20.6 – – Brazil ITU 14.9 –––––– Mexico Morgan Stanley – 16.3 19.4 21.3 23.0 24.4 25.7 Chile

Colombia Source: Gartner Dataquest, various, as noted, 2000

Venezuela Index of Charts Wireless Telephony When the Brazilian government privatized Telebrás in 1998, it divided the wireless properties of the state-run telecommunications monopoly into ten regions. In each region, the government initially granted licenses to one incumbent operator and one competitor known as a “mirror company.” The next wireless spectrum auctions are scheduled to be completed in 2001. Agência Nacional de Telecomunicações (ANATEL), Brazil’s telecommunications regulator, has stated that it will deregulate interconnection fees for fixed-to-cellular calls, effectively transferring call receipts from wireless operators to fixed-line companies. According to Dow Jones, interconnection fees currently account for 20% of wireless revenues. In conjunction with changes in the interconnection fee structure, ANATEL has also ordered the deregulation of the wireless long-distance market. Cellular users will be able to select the long-distance carrier of their choice, which analysts expect will lead to an increase in network and billing expenses for cellular operators. In June 2000, the Brazilian government authorized the auction of nine new cellular licenses for PCS concessions, which will allow GSM operators to enter the market. This decision will also add another competing standard to the existing TDMA and CDMA platforms. The Brazilian government expects to complete auction licenses for the C-, D- and E-bands in 2001. Among Brazil’s ten cellular regions, TDMA is currently the dominant technology, although CDMA has made inroads in the populous and wealthy South and Southeast regions (comprised of Regions I, II, III and V which include the country’s two largest cities, São Paulo and Rio de Janeiro), as well as in the Northeast (Region IX which includes the populous state of Bahia). Not surprisingly, the operators in Regions I and II, particularly Telesp Celular, jointly owned by Portugal Telecom and Spain’s Telefónica, are the leaders in market share. According to EMC World Cellular Database, one of every five wireless subscribers in Brazil has an account with Telesp Celular.

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Methodology This gives Telefónica and Portugal Telecom, which agreed to merge their Overview Brazilian mobile telephony operations, control of approximately 50% of Population and Economy Brazil’s wireless market. Among handset manufacturers, Nokia is the market Technology Infrastructure

Internet Users and Access leader, according to Morgan Stanley, with a 40% share, followed by Motorola Usage and Demographics with 30%. Ericsson, Qualcomm and Samsung round out the top ﬁve. eCommerce eAdvertising Technology and Market Share in Brazil, by Operating eFinance Area, 2000 Argentina CDMA TDMA Analog Brazil

Mexico Regions I & II (São Paulo) 42.9% 36.9% 20.2% Chile Region III 43.5% 37.8% 18.7% Colombia (Espírito Santo,

Venezuela Rio de Janeiro

Index of Charts Region IV (Minas Gerais) 0.0% 75.6% 24.4% Region V (Paraná, Santa 19.5% 76.6% 3.9% Catarina Region VI (Rio Grande do Sul) 0.0% 85.1% 14.9% Region VII (Acre,Federal District, 0.0% 72.0% 28.0% Goiás, Mato Grosso, Mato Grosso do Sul, Rondônia, Tocantins) Region VIII (Amapá, 0.0% 70.7% 29.3% Amazonas, Maranhão, Pará Roraima) Region IX (Bahia Sergipe) 31.5% 39.5% 29.0% Region X (Alagoas, Ceará, 0.0% 78.9% 21.1% Paraíba, Pernambuco, Piauí, Rio Grande do Norte) Source: Yankee Group, 2000

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Methodology

Overview Wireless Operators in Brazil, by Market Share, Population and Economy September 2000

Technology Infrastructure Telesp Celular (Analog/CDMA) Internet Users and Access

Usage and Demographics 19% eCommerce TeleSudeste Celular (Analog/CDMA) eAdvertising 11% eFinance Argentina BCP Metropolitan São Paulo (TDMA) Brazil 9% Mexico

Chile Tele Centro Oeste Celular (TDMA) Colombia 7% Venezuela Tele Nordeste Celular (Analog) Index of Charts 7%

ATL Algar Telecom Leste (Analog/TDMA) 7%

Tele Celular Sul (Analog/TDMA) 6%

Companhia Riograndense de Telecomuniçacões (Analog) 6%

BCP (Northeast) (TDMA) 5%

Telecomuniçacões de Minas Gerais (Analog/TDMA) 5%

Tele Norte Celular Participações (Analog/TDMA) 3%

Tele Leste Celular (Analog/TDMA) 3%

Others 9%

Source: Informa, 2001

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Methodology

Overview Mobile Handset Manufacturers in Brazil, by Market Population and Economy Share, 2000

Technology Infrastructure Internet Users and Access Samsung Usage and Demographics Qualcomm 6% eCommerce 11% eAdvertising eFinance Ericsson Nokia Argentina 15% 40% Brazil

Mexico

Chile Motorola

Colombia 30%

Venezuela

Index of Charts Note: Does not add up to 100% due to rounding Source: Morgan Stanley, 2001

According to ANATEL, the number of wireless subscribers and ﬁxed-line telephones will equalize around 2005, bringing wireless and wireline teledensity to the same level. Assuming infrastructure investments continue at the same torrid pace and Brazil follows regional trends, the number of wireless subscribers should exceed the number of ﬁxed-line telephones in the second half of the decade.

Wireless Subscribers and Fixed-Line Telephones in Brazil, 2001-2005 (in millions and as a % of population)

2001 29.2 (17.2%) 40.5 (23.9%)

2002 37.5 (21.9%) 45.1 (26.3%)

2003 45.5 (26.2%) 49.6 (28.5%)

2004 52.5 (29.8%) 53.8 (30.6%)

2005 58.0 (32.6%) 58.0 (32.6%)

Wireless Subscribers Fixed-line telephones Source: ANATEL, 2000

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Methodology Because of Brazil’s uneven income distribution and low average GDP per Overview capita, Brazilians have embraced prepaid calling plans. The subscriber base Population and Economy has swelled and will continue to grow as more operators turn to the prepaid Technology Infrastructure

Internet Users and Access concept. At the same time, research by the Yankee Group has found that the Usage and Demographics average revenues per user (ARPU) and the average talk time per customer eCommerce per month (minutes of use or MOU) have been dropping and will likely eAdvertising continue this trend. The signiﬁcant fall in ARPU between 1997 and 1999 is eFinance

Argentina due in large part to a general fall in cellular phone charges in Brazil, which

Brazil resulted from greater competition between the incumbent carriers and Mexico “mirror companies” licensed following the privatization of Telebrás and the Chile ending of its monopoly over wireless services. The increasing popularity of Colombia prepaid plans has also driven ARPU and MOU down in Brazil (as has been Venezuela

Index of Charts the case in other Latin American countries where prepaid calling is available). Growth in the number of prepaid subscribers has occurred predominantly among lower-income consumers who, when paying by the minute, are likely to restrict usage of their wireless phones.

Average Revenue per Wireless User (ARPU) and Average Minutes of Use (MOU) per Month in Brazil, 1997-2001

1997 $101 209

1998 $73 204

1999 $35 165

2000 $31 132

2001 $29 125

ARPU MOU Source: Yankee Group, 2000

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Methodology

Overview Wireless Subscribers in Brazil, 2001-2005 (in millions) Population and Economy 2001 2002 2003 2004 2005 Technology Infrastructure Prepaid subscribers 18.9 24.5 29.4 33.6 37.4 Internet Users and Access

Usage and Demographics Contract subscribers 9.5 9.6 9.7 9.8 9.9 eCommerce Total Subscribers 28.4 34.1 39.1 43.3 47.3 eAdvertising Source: America's Network Telecom Investor Supplement, September 2000 eFinance

Argentina

Brazil America’s Network’s prediction of aggressive growth in the number of Mexico prepaid subscribers explains in part why its estimates are higher than those Chile of the Yankee Group. Forecasts by ANATEL and the Yankee Group indicate Colombia that mobile trunked radio, or trunking, will assume a signiﬁcant presence in Venezuela

Index of Charts the market over the next 5 years. Regulations now allow trunking operators to offer subscribers the same types of services as cellular and PCS operators.

Comparative Estimates: Wireless Subscribers in Brazil, 2001-2005 (in millions) 2001 2002 2003 2004 2005 ANATEL 29.2 37.5 45.5 52.5 58.0 Americas Network 28.4 34.1 39.1 43.4 47.3 Yankee Group 27.9 35.1 41.9 – – Source: various, as noted, 2000

Trunking Subscribers in Brazil, 2001-2005 (in millions)

2001 0.9

2002 1.2

2003 1.5

2004 1.7

2005 1.9

Source: ANATEL/Yankee Group, 2001

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Methodology Broadband Overview Cable and DSL services are available in limited areas in Brazil. Leading Population and Economy

Technology Infrastructure South American broadband network provider IMPSAT Fiber Networks is Internet Users and Access rolling out broadband networks through the major cities of Argentina and Usage and Demographics Brazil, so opportunities for consumer broadband should increase. eCommerce According to Ovum, the number of business broadband subscribers will eAdvertising eFinance remain modest. At present, Ovum notes that Brazil’s advanced

Argentina manufacturing industries rely on Virtual Private Networks (VPNs). Brazil The Yankee Group reported that Brazil had approximately 150,000 Mexico broadband subscribers in November 2000, but expects that number to Chile increase to 2 million by the end of 2003, with the residential and small- Colombia

Venezuela ofﬁce/home-ofﬁce markets leading the growth. According to Yankee Group

Index of Charts projections, ADSL has become and will remain the leading broadband technology in Brazil.

Comparative Estimates: Residential Broadband Subscribers in Brazil, 2000-2004 (in thousands)

2000 145 29 138

2001 303 122

2002 605 195

2003 1,059 308 1,827

2004 1,589 481

InfoAmericas Ovum Yankee Group* Note: *DSL and cable modem only Source: various, as noted, 2000

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Methodology

Overview Business Broadband Subscribers in Brazil, 2000-2004

Population and Economy (in thousands of lines)

Technology Infrastructure

Internet Users and Access 2000 8

Usage and Demographics 2001 12 eCommerce eAdvertising 2002 16 eFinance 2003 23 Argentina Brazil 2004 32 Mexico

Chile Source: Ovum, 2000

Colombia Venezuela Broadband Technologies in Brazil, by Market Share, Index of Charts 1999-2001

1999 8% 57% 35%

2000 41% 27% 32%

2001 57% 14% 29%

ADSL ISDN Pay TV internet Source: Yankee Group, 2000

As in Argentina, DSL, ISDN and cable modem access remain expensive in absolute terms. Telephone operators have initially targeted their DSL offerings at business and high-end residential customers, often at price points that may be beyond the reach of most Brazilian consumers. Operators charge on average $110 for installation and $35 per month for ADSL service, which provides data transmission at speeds of up to 256 Kbps. Installation charges are somewhat lower for ISDN, but because ISDN is not an “always on” technology, users must still dial up the internet and consequently, the monthly charges can be much higher. In addition, ISDN only allows data transmission at speeds up to 128 Kbps. The chart below includes a sampling of rates for ADSL, ISDN and broadband cable service. The prices do not include the monthly ISP cost.

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Methodology

Overview Sample ADSL, ISDN and Broadband Cable Service

Population and Economy Costs in Brazil, 2001 Technology Infrastructure ADSL ISDN Cable Cable Internet Users and Access Operator Telefônica Telefônica TVA NET Usage and Demographics eCommerce Installation $110 $40 $60 $35 eAdvertising Monthly Charge $35 $10+ phone $40 $45 eFinance charges for minutes Argentina spent Brazil online Mexico Transmission 256 Kbps 128 Kbps 256 Kbps 256 Kbps Chile rate Colombia

Venezuela Source: Telenexo, 2001

Index of Charts According to recent surveys by IBOPE, Brazil’s leading television audience- rating ﬁrm, an estimated 1.2 million households in Brazil’s nine largest metropolitan areas subscribe to pay TV service, which corresponds to a 10% penetration rate. IBOPE surveys indicate that approximately 84% of these homes belong to the upper-level A and B socioeconomic segments. Overall penetration of cable TV in Brazil is somewhat lower, according to Morgan Stanley. That penetration rates are higher among wealthy urbanites is not surprising, nor is the fact that the majority of cable subscribers is heavily concentrated in the country’s Southeast region. ANATEL projects a 33% penetration rate by 2005.

Comparative Estimates: Cable Broadband Subscribers in Brazil, 2000-2004 (in thousands)

2000 60 0 60 2001 90 44 2002 180 61 2003 315 83 827 2004 473 112

InfoAmericas Ovum Yankee Group Source: various, as noted, 2000

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Methodology

Overview Distribution of Brazilian Cable Subscribers, by Region, 2000 Population and Economy Center-West Technology Infrastructure 6% North Internet Users and Access 5%

Usage and Demographics South eCommerce 14% Southeast eAdvertising 55% eFinance

Argentina Northeast Brazil 20% Mexico

Chile

Colombia

Venezuela Source: ANATEL, 2000

Index of Charts Among cable operators, the cable internet provider, GloboCabo, which operates under the NET brand in Brazil’s major metropolitan areas, is far and away the market leader, according to Morgan Stanley.

Cable Operators in Brazil, by Market Share, 2000

C-Band 4% Canbras 3%

Tevecap TVA 15% 3%

GloboCabo 64%

Note: Does not add up to 100% due to rounding Source: Morgan Stanley, 2001

According to Pyramid Research, Brazil will lead Latin America in the number of cable modems in operation by 2002, outpacing both Argentina and Mexico. Brazil is already the region’s leader in DSL, and Pyramid Research expects the number of digital lines in operation to quadruple by 2003. This optimistic forecast notwithstanding, International Data Corporation (IDC) found that early in 2000, cable modems and DSL connections together accounted for only 6% of internet access in Brazil.

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Methodology

Overview Comparative Estimates: Residential DSL Subscribers

Population and Economy in Brazil, 2000-2004 (in thousands)

Technology Infrastructure 2000 Internet Users and Access

Usage and Demographics 85 eCommerce 32 eAdvertising 78 eFinance

Argentina 2001

Brazil 213 Mexico 87 Chile

Colombia 2002

Venezuela 425 Index of Charts 146

2003 744 504 1,000

2004 1,116 1,138

InfoAmericas Ovum* The Yankee Group Note: *Residential and business Source: various, as noted, 2000

Cable Modems in Operation vs. Digital Subscriber Lines in Brazil, 2001-2003

2001 73,150 109,560

2002 204,600 257,010

2003 409,540 473,850

Cable modems DSL Source: Pyramid Research, 2000

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Methodology Fixed wireless services are available in selected areas in Brazil, targeting Overview high-end business customers. The Yankee Group estimates that by the end Population and Economy of 2003, wireless local loop (WLL) lines will account for 8% of total Technology Infrastructure

Internet Users and Access mainlines in Brazil and more than 50% of all WLL lines in Latin America.

Usage and Demographics eCommerce Residential Subscribers to Alternative Broadband eAdvertising Technologies in Brazil, 2000-2004 (in thousands) eFinance Argentina 2000 0 Brazil 2001 0 Mexico Chile 2002 0 Colombia

Venezuela 2003 2

Index of Charts 2004 16

Source: Ovum, 2000

C. Internet Users and Access eMarketer estimates that 3.9 million Brazilians 14 years or older were active internet users in 2000. That ﬁgure is expected to increase to 6.1 million by the end of 2001. By 2004, 16.4 million Brazilians will be actively using the internet. Among the pool of active users, the internet penetration rate will be 4.8% in 2001, and will remain in the single digits until 2004, when it will rise to 12.3%. Throughout this period, Brazil will remain the internet powerhouse in Latin America, retaining approximately 40% of Latin America’s internet users and at least 60% of total regional e-commerce through 2004.

Internet Users in Brazil, 2001-2004 (in millions and as a % of population 14+)

2001 6.1 (4.8%)

2002 8.8 (6.8%)

2003 12.5 (9.5%)

2004 16.4 (12.3%)

Source: eMarketer, 2001

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Methodology Comparative Estimates Overview Morgan Stanley and Jupiter Research project user bases that are Population and Economy

Technology Infrastructure considerably higher than eMarketer’s estimates for the next 4 years – Internet Users and Access largely due to different deﬁnitions of users. Whereas eMarketer’s user Usage and Demographics estimates are based on the population age 14 and over, Morgan Stanley and eCommerce Jupiter look at the population as a whole. Compared with eMarketer’s eAdvertising eFinance projection of 16.4 million active internet users in 2004, Morgan Stanley

Argentina forecasts a user base of 19.9 million, while Jupiter’s estimate puts the Brazil number at 24.7 million. Morgan Stanley projects 32.5 million users in Mexico Brazil by 2010. Chile By contrast, IDC and Pyramid Research offer estimates that are fairly Colombia

Venezuela close to eMarketer’s projections through 2002. For example, eMarketer’s

Index of Charts estimate of 6.1 million active internet users in 2001 compares favorably to IDC’s projection of 5.4 million and Pyramid’s forecast of 7.1 million. By 2004, however, eMarketer projects a user base that exceeds the estimates of both IDC and Pyramid. Note that the Media Metrix ﬁgure comprises home users in Brazil’s ten largest metropolitan areas.

Comparative Estimates: Internet Users in Brazil, 2001-2005 (in millions) 2001 2002 2003 2004 2005

Computer Industry 10.4 –––– Almanac eMarketer 6.1 8.8 12.5 16.4 – Ernst & Young – 15.0 ––– IDC 5.4 6.5 7.5 – – IBOPE eRatings 9.8 –––– Media Metrix 5.8 –––– Jupiter Research 11.6 15.4 20.1 24.7 29.1 Morgan Stanley 8.4 10.9 13.9 17.1 19.9 Pyramid Research` 7.1 9.0 10.8 12.7 – Note: IBOPE recorded 5 million active users (those who accessed the internet at least once per month) in March 2001 Source: eMarketer, Computer Industry Almanac, IBOPE, Media Metrix, 2001; various, as noted, 2000

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Methodology Access Preferences Overview Most Brazilians continue to access the internet from home. A recent study Population and Economy

Technology Infrastructure commissioned by incumbent long-distance operator Embratel (owned by Internet Users and Access MCI WorldCom) found results similar to those of Morgan Stanley: that 54% Usage and Demographics of Brazilian internet users logged in from home. Not surprisingly, then, eCommerce leading market research ﬁrms in Brazil, such as IBOPE and Media Metrix, eAdvertising eFinance focus their internet surveys on home users. IBOPE bases its projections on

Argentina surveys administered in Brazil’s 9 largest cities, while Media Metrix surveys Brazil home users in Brazil’s 10 largest metropolitan regions. However, Morgan Mexico Stanley estimates that the balance will gradually shift to the workplace, Chile which, by 2004, will account for more than half of the total user population. Colombia

Venezuela

Index of Charts Internet Users in Brazil, by Access Location, 2001-2005 (as a % of total)

2001 54.4% 32.8% 12.8%

2002 51.4% 38.2% 11.4%

2003 47.6% 43.5% 8.9%

2004 44.3% 48.0% 7.7%

2005 42.9% 49.7% 7.4% Educational/Govt/ Home Business Other institution Source: Morgan Stanley, 2000

Home and workplace penetration rates for internet access are similarly low, although Morgan Stanley predicts that both will rise to double-digit ﬁgures by 2005. Still, home computers are much more likely to have an internet connection than workplace PCs. In part, this may explain why a larger percentage of Brazilians access the internet from home. By 2004, workplace computers will begin to close this connectivity gap.

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Methodology

Overview Households/Workforce with Internet Access in Brazil,

Population and Economy 2001-2005 & 2010

Technology Infrastructure 2001 Internet Users and Access

Usage and Demographics 5.5% eCommerce 4.1% eAdvertising 2002 eFinance 6.8% Argentina

Brazil 6.2%

Mexico 2003 Chile 7.8% Colombia

Venezuela 8.8% Index of Charts 2004 8.7% 11.9%

2005 9.6% 13.5%

2010 12.1% 23.2%

Households Workforce Source: Morgan Stanley, 2000

Home and Business PCs in Brazil with Internet Connection, 2001-2005

2001 68.6% 39.0%

2002 75.3% 47.3%

2003 79.3% 55.5%

2004 83.3% 63.8%

2005 87.3% 67.3%

Home Business Source: Morgan Stanley, 2000

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Methodology According to several studies aggregated for the Maximídia trade show held in Overview São Paulo in September 2000, most home users, who represent just over half Population and Economy of the Brazilian internet user population, opt to pay for their internet service: Technology Infrastructure

Internet Users and Access 40% select paid ISPs Usage and Demographics 25% choose free services eCommerce 22% utilize both eAdvertising eFinance

Argentina

Brazil D. Usage and Demographics

Mexico Chile Frequency of Sessions Colombia

Venezuela According to a survey taken by the Strategy Research Corporation (SRC),

Index of Charts Brazilians access the internet with greater frequency than users in Argentina and Mexico, Latin America’s other two leading internet markets. The Computer Industry Almanac estimates that 70% of Brazilian internet users access the web on a monthly basis, while 35% do so on a daily basis. IBOPE research has revealed that “heavy users” - those who access the web every day or almost every day and who constitute fully 50% of the user population in its study - tend to opt for paid service providers: 45% of heavy users prefer to pay for their internet service 21% favor free services 32% use both paid and free services

Frequency of Internet Usage in Brazil, 2001 (as a % of total internet user population)

Monthly 70%

Daily 35%

Source: Computer Industry Almanac, 2001

Frequency of Internet Sessions in Argentina, Brazil and Mexico, 2000 (in number of times per week)

Brazil 4.71

Argentina 3.83

Mexico 3.79

Source: Strategy Resource Corporation, 2000

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Methodology Media Metrix has noticed a steady decline in the frequency of sessions Overview (measured in the number of days of internet use per month) from Population and Economy September 2000 to February 2001. This period corresponds roughly to the Technology Infrastructure

Internet Users and Access Brazilian summer, when many people, particularly younger users, are likely Usage and Demographics to be on vacation, and turning their thoughts to the beach and preparations eCommerce for Carnival. eAdvertising eFinance Frequency of Internet Sessions in Brazil, September Argentina 2000-February 2001 (in number of days per month) Brazil

Mexico Sept 2000 10.7 Chile Colombia Oct 2000 10.7 Venezuela Nov 2000 10.5 Index of Charts Dec 2000 10.0

Jan 2001 9.4

Feb 2001 8.1

Source: Media Metrix, 2001

Duration of Sessions The seventh edition of IBOPE’s regularly performed internet survey, undertaken in the second half of May 2000, revealed usage patterns that were largely consistent with the frequency with which users accessed the internet. On the whole, greater frequency generally resulted in longer surﬁng sessions.

Frequency of Access and Time Spent Online in a Week in Brazil, 2000 Every Almost At least At least Rarely day every day once a once week a month Less than 7% 9% 22% 29% 23% 30 min. 30 min.-1hr 11% 19% 29% 13% 16% 1-2 hrs. 15% 24% 26% 15% 9% 2-5 hrs. 23% 25% 13% 7% 4% 5-10 hrs. 19% 13% 4% 3% 1% 10-20 hrs. 12% 4% 0% 0% 0% 20+ hrs. 12% 2% 0% 2% 0% Did not use 0% 4% 7% 31% 47% Source: IBOPE, 2000

194 ©2001 eMarketer, Inc. Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published, publicly available information. Latin America Online

Methodology A more recent study by IBOPE eRatings, a partnership created by IBOPE Overview and Nielsen//NetRatings, indicates that in January 2001, men on average Population and Economy spent 8 hours, 4 minutes per month online, while women restricted their Technology Infrastructure

Internet Users and Access surﬁng to 5 hours, 50 minutes. In March, Brazilians (both men and women) Usage and Demographics spent an average of 7 hours, 31 minutes online and visited 15 sites per eCommerce session. eAdvertising According to Media Metrix, monthly usage (measured in number of eFinance

Argentina minutes per day) has declined since January, again, most likely due to the

Brazil onset of the summer holidays and Carnival. Note the chart above that Mexico indicates the average number of days spent online per month by Brazilian Chile internet users. Daily usage is based on these ﬁgures for the average number Colombia of days spent online per month. Venezuela

Index of Charts Average Time Spent Online per Month in Brazil, by Gender, January 2001 Hours Minutes Men 8 04 Women 5 50 Source: IBOPE eRatings and Nielsen//NetRatings, 2001

Average Time Spent Online per Day in Brazil, September 2000-February 2001 (in number of minutes per day)

Sept 2000 67.9

Oct 2000 69.4

Nov 2000 65.1

Dec 2000 68.0

Jan 2001 68.2

Feb 2001 64.5

Source: Media Metrix, 2001

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Methodology Usage Patterns Overview The SRC survey also found that Brazilians tend to use the internet most Population and Economy

Technology Infrastructure often for research and information purposes, followed closely by e-mail. Internet Users and Access These preferences are consistent with those of the Argentine and Mexican Usage and Demographics users surveyed by SRC, and indeed, with those of users worldwide. eCommerce Brazilians shop online more than Argentines and Mexicans, while they use eAdvertising eFinance the internet far less frequently than either Argentines or Mexicans for

Argentina educational purposes.

Brazil Mexico Internet Activities in Argentina, Brazil and Mexico, Chile 2000 Colombia

Venezuela Research/Information

Index of Charts 82% 73% 72%

eMail 74% 69% 64%

Entertainment 50% 49% 44%

Education 63% 44% 62%

eCommerce 17% 27% 16%

Argentina Brazil Mexico Source: Strategy Resource Corporation, 2000

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Methodology Most Popular Websites Overview Media Metrix measures the popularity and reach of web properties by Population and Economy

Technology Infrastructure domain name as well as by host, which reﬂects the number of unique users Internet Users and Access of a group of sites. In the past, Brazilian users had been drawn mostly to Usage and Demographics local content. The May 2000 eMarketer report on Latin America, for eCommerce example, revealed that an overwhelming 84% of Brazilians preferred eAdvertising eFinance domestic webpages, and Brazil’s Universo Online (UOL) is still the

Argentina dominant domain and web property, with a staggering 82.3% reach. Brazil However, the Media Metrix report revealed that many Brazilian internet Mexico users are tending to move away from domestic websites. In December, the Chile US versions of Yahoo! and Microsoft’s MSN.com were among the ten most Colombia

Venezuela popular domains, and among overall hosts, non-Brazilian properties

Index of Charts (which include versions of foreign sites with Brazilian domain names) dominated the top ﬁve spots. To secure a Brazilian (“.br”) domain name, ABRANET, Brazil’s domain name administrator, requires internet companies to establish a local ofﬁce.

Top 10 Internet Properties in Brazil, February 2001 Ranking Property Unique users Reach (in millions) 1 UOL, Inc. 4.2 73.2% 2 AOL-Time Warner 3.4 59.4% network 3 Microsoft sites 3.1 54.2% 4 StarMedia network 2.5 43.6% 5 Yahoo! sites 2.5 43.5% 6 IG sites 2.4 42.3% 7 Terra Lycos 2.4 41.6% sites 8 Webforce network- 2.0 35.2% HPG 9 Globo.com 1.9 33.6% sites 10 ZipNet sites 1.7 30.0% Source: Media Metrix, 2001

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Methodology

Overview Top 10 Internet Domains/Applications in Brazil,

Population and Economy February 2001 Technology Infrastructure Ranking Domain/ Unique users Reach Internet Users and Access Application (in millions) Usage and Demographics 1 uol.com.br 3.6 63.0% eCommerce 2 ICQ applications 2.6 45.2% eAdvertising eFinance 3 bol.com.br 2.4 42.1% Argentina 4 yahoo.com 2.2 39.0% Brazil 5 cade.com.br 2.2 38.2% Mexico

Chile 6 ig.com.br 2.1 36.8% Colombia 7 terra.com.br 2.0 34.7% Venezuela 8 hpg.com.br 2.0 34.3% Index of Charts 9 MSN.com 1.9 33.8% 10 Zip.net 1.7 28.8% Source: Media Metrix, 2001

IBOPE eRatings came up with lower trafﬁc numbers and a slightly different list of the top 10 domains in Brazil than Media Metrix, even though IBOPE/Nielsen’s survey measured usage for March 2001, while Media Metrix’s study reported February trafﬁc patterns.

Top 10 Domains in Brazil, March 2001 Ranking Domain Unique users Reach (in millions) 1 uol.com.br 3.2 63.1% 2 bol.com.br 2.1 41.2% 3 cade.com.br 1.9 38.4% 4 terra.com.br 1.8 35.2% 5 ig.com.br 1.6 32.5% 6 hpg.com.br 1.6 32.4% 7 geocities.com 1.5 30.2% 8 zip.net 1.5 29.9% 9 globo.com 1.4 28.8% 10 cjb.net 1.3 25.1% Source: IBOPE eRatings, 2001

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Methodology In addition to ranking individual domains, both Media Metrix and IBOPE Overview eRatings also ranked the popularity of domains by category. Not Population and Economy surprisingly, search engines and portals captured the attention of most Technology Infrastructure

Internet Users and Access Brazilians, with a reach of over 90%.

Usage and Demographics eCommerce Reach of Top Domains in Brazil, by Category, eAdvertising September 2000-February 2001 eFinance Sept Oct Nov Dec Jan Feb Argentina 2000 2000 2000 2000 2001 2001 Brazil Portals 94.2% 98.9% 95.4% 95.9% 95.5% 91.7% Mexico

Chile Education 24.2% 33.6% 46.7% 30.7% 34.5% 31.3% Colombia Community 15.3% 21.9% 24.6% 19.5% 25.1% 17.4% Venezuela Sports 17.3% 16.7% 16.1% 16.6% 16.6% 13.4% Index of Charts Source: Media Metrix, 2001

Top Domains in Brazil, by Category, January 2001 Ranking Domains by Unique users Reach category (in millions) (%) 1 Search engines/portals 4.3 94.6% 2 Telecommunications 2.4 53.2% 3 Communities/Chat 2.0 43.7% Source: IBOPE eRatings, 2001

Trafﬁc to sites in the shopping category has ﬂuctuated considerably in the past 7 months, according to a study by IBOPE eRatings. The number of unique users and the overall reach of shopping sites in March represent the highest totals to date, even as the number of visits per month and the time spent per user on shopping sites declined from the preceding 2 months.

Popularity of Sites in Shopping Category in Brazil, September 2000-March 2001 Month Unique Reach Visits per Duration users user per per user (in millions) month per month Mar 2001 1.3 25.0% 1.8 6h 55 minutes Feb 2001 0.8 17.3% 1.9 9h 13 minutes Jan 2001 0.9 20.5% 1.8 9h 13 minutes Dec 2000 1.0 21.0% 1.7 7h 41 minutes Nov 2000 1.0 19.7% 1.8 10h 11 minutes Oct 2000 1.0 18.7% 1.8 9h 38 minutes Sept 2000 1.1 22.3% 1.7 9h 47 minutes Source: IBOPE eRatings, 2001

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Methodology Gender Overview Brazil is one of the more gender-equal internet markets in Latin America. Population and Economy

Technology Infrastructure Surveys by both Media Metrix and IBOPE found that 57% of internet users Internet Users and Access in Brazil are male, while 43% are female. On the other hand, IBOPE Usage and Demographics research undertaken in 2000 indicated that the breakdown was 53% male eCommerce and 47% female. eAdvertising eFinance

Argentina Comparative Estimates: Internet Users in Brazil, by

Brazil Gender, 2000 Mexico Male Chile 57% Colombia

Venezuela 57% Index of Charts Female 43% 43%

Media Metrix IBOPE Source: Media Metrix, 2000; IBOPE, 2001

Age Brazil’s internet market is also notable for its youth. The Media Metrix survey revealed that 69% of Brazil’s internet users are age 34 and under, with the majority (33%) concentrated in the 18 to 24 segment. However, IBOPE’s survey of users in January 2001 indicates that surfers in the 35 to 49 segment make up the majority of users, at 27%. According to IBOPE, those in the 25 to 34 segment represent 20% of users. Ovum, meanwhile, estimates that 60% of all internet users in Brazil are less than 25 years old, while 97% of Brazilians who use the internet at work are under 45. The relative youth of at-work users, Ovum explains, is due to the fact that most dot-com and new economy companies have young staffs.

Internet Users in Brazil, by Age, 2000

55+ 2–11 45–54 4.6% 4.9% 12–17 12.7% 13.8%

35–44 13.9%

18–24 25–34 32.5% 17.5%

Note: Does not add up to 100% due to rounding Source: Media Metrix, 2000

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Methodology

Overview Internet Users in Brazil, by Age, 2000

Population and Economy

Technology Infrastructure 50+ Internet Users and Access 10% 17 and Usage and Demographics under eCommerce 24% eAdvertising 35-49 eFinance 27% Argentina

Brazil 18-24 21% Mexico 25-34 Chile 18% Colombia Venezuela Source: IBOPE, 2001 Index of Charts

Another Media Metrix survey, conducted in December 2000 and released in January 2001, incorporates a combined segmentation by age and gender and displays trends over a 3-month period. It reveals that usage has been increasing among young children, adolescents, and particularly among women over the age of 18. Most notably, the latest survey found that among the population over 18, the percentage of male and female users is nearly equal. Usage dropped precipitously among men over 18 from November to December 2000.

Internet Users in Brazil, by Age and Gender, 2000

2-11 5.0% 5.1% 6.1%

12-17 15.1% 14.4% 19.3%

Men 18+ 53.5% 56.7% 39.3%

Women 18+ 26.4% 23.8% 35.2%

October November December Note: Figures do not add up to 100% due to rounding Source: Media Metrix, 2001

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Methodology Experience Online Overview Relative to the rest of the region, Brazil’s internet users are fairly Population and Economy

Technology Infrastructure experienced surfers: Media Metrix found that 73% had been accessing the Internet Users and Access internet for at least 1 year. By comparison, a 1999 Nazca Saatchi & Saatchi Usage and Demographics study found that on average, 42% of all Latin Americans and 54% of all eCommerce Brazilians had been online for only a year or less. In the Media Metrix eAdvertising eFinance study, 24% had been online for 2 to 3 years, and an additional 28% had

Argentina been accessing the internet for 1 to 2 years.

Brazil Mexico Internet Users in Brazil, by Number of Years Online, 2000 Chile More than Colombia 5 yrs. Venezuela 4–5 yrs. 6.5% 6.7% Less than Index of Charts 3–4 yrs. 1 yr. 7.2% 27.1%

2–3 yrs. 23.7% 1–2 yrs. 27.7%

Note: Does not add up to 100% due to rounding Source: Media Metrix, 2000

Socioeconomic and Employment Status The Media Metrix and IBOPE studies confirm that Brazil’s internet users are heavily concentrated in the nation’s top three socioeconomic segments. Note that Brazil’s National Association of Research Organizations defines socioeconomic levels based on a head of household’s educational achievements as well as the number of consumer goods (TVs, vacuum cleaners, washing machines, radios), domestic helpers and bathrooms in each household. Media Metrix estimates that a staggering 97% of internet users fall in the three uppermost income strata, while the IBOPE survey puts the percentage at a similarly colossal 96%. The Media Metrix study is based on interviews conducted in Brazil’s ten largest metropolitan regions, while the IBOPE survey is based on the nine largest metropolitan areas. The survey commissioned by Embratel revealed similar results, finding that 72% of Brazilian users belonged to the highest-income strata, 20% were middle class, and 8% came from lower-income segments.

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Methodology

Overview Comparative Estimates: Internet Users in Brazil, by

Population and Economy Socioeconomic Strata, 2000 Technology Infrastructure A/B Strata Internet Users and Access 63% Usage and Demographics 80% eCommerce eAdvertising C Stratum eFinance 17%

Argentina 16% Brazil D/E Strata Mexico 10% Media Metrix IBOPE Chile 4% Colombia

Venezuela Source: various, as noted, 2000

Index of Charts Media Metrix found that 55% of internet users are part of the economically active population, with 38.3% of respondents working full time and 16.2% part time. An additional 22% of users are students.

Internet Users in Brazil, by Employment Status, 2000 Housewife 4.9% Retired Unemployed 5.2% 3.8% Freelancer 9.6% Works full time Works 38.3% part time 16.2% Student 22%

Source: Media Metrix, 2000

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Methodology Geography Overview Brazil’s internet users are further segmented by geographical location of Population and Economy

Technology Infrastructure access. According to Media Metrix, which surveys internet users in Brazil’s Internet Users and Access ten largest markets, the metropolitan area of São Paulo and the interior of Usage and Demographics the state are home to over one-third of the country’s internet users. Given eCommerce the concentration of technology, population and resources in the city and eAdvertising eFinance state of São Paulo, this concentration of users is unsurprising. Rio de

Argentina Janeiro, Brazil’s second largest metropolitan region, accounts for the Brazil second highest convergence of internet users, although São Paulo leads by Mexico a margin of nearly two to one. For the most part, the remaining results are Chile consistent with the size of each city’s population. The only surprising Colombia

Venezuela ﬁnding is the low percentage of users in Belo Horizonte, the capital of

Index of Charts Minas Gerais, Brazil’s most populous state and a major industrial center.

Internet Users in Brazil, by Location, 2000 Belo Horizonte 5% São Paulo Porto Curitiba Alegre Interior 7% 8% 2%

São Paulo Federal District 28% 8% Salvador Rio de 8% Janeiro 15% Fortaleza Recife 8% 11% Source: Media Metrix, 2001

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Methodology E. eCommerce Overview

Population and Economy Technology Infrastructure Total eCommerce Internet Users and Access Despite a relatively low per capita GDP (based on purchasing power parity) Usage and Demographics eCommerce of $6,150, Brazil’s highly unequal income distribution means that the eAdvertising wealthy have enough income to create a sizeable e-commerce market. eFinance eCommerce revenues totaled $2.5 billion in 2000 and will reach $6.5 Argentina billion by the end of 2001. Brazil’s revenues in both the consumer and Brazil business segments are far and away the highest in Latin America. Through Mexico

Chile 2004, Brazil will retain at minimum a staggering 60% of total Latin Colombia American e-commerce revenues. Venezuela The B2B sector will continue to account for the majority of e-commerce Index of Charts revenues generated in Brazil. Revenues in the B2C segment will also increase, but a familiar set of factors - low credit card, PC and telephone penetration rates, fragile infrastructure, limited parcel delivery systems, and high internet access costs - will continue to hinder B2C growth in Brazil as well as across the region. With only 18% of the country holding credit cards, buying online is feasible only for a small (albeit wealthy) segment of the population. While prepaid debit cards and other mechanisms for transacting business online are in the process of being developed, they will not penetrate the population until 2 to 3 years down the road. In fact, a study conducted for DHL Worldwide Express among companies in 12 countries concluded that at 4.3%, Brazil had one of the lowest percentages of sales via the internet. Only Japan (at 1.1%) and Singapore (at 4.0%) produced lower results. By contrast, 20% of sales in Hong Kong took place over the internet, followed by 13.9% in the United States. On the other hand, the DHL study found that Brazil was among the most successful countries at converting site visits to sales: approximately 11% of visitors to Brazilian e-commerce sites actually made an online purchase. Only Finland and the US showed slightly higher conversion rates and more signiﬁcantly, the percentage of site visitors who bought online in Brazil far exceeded that of Germany, the UK and Japan.

eCommerce Revenues in Brazil, 2000–2004 (in billions and as a % of total Latin American e-commerce)

2000 $2.47 (69.1%)

2001 $6.55 (68.0%)

2002 $12.63 (61.0%)

2003 $24.25 (62.0%)

2004 $39.90 (60.0%) Source: eMarketer, 2001

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Methodology Comparative Estimates Overview eMarketer and Forrester Research estimates converge through 2003, and then Population and Economy

Technology Infrastructure begin to diverge widely by 2004, as Brazil enters its period of “hypergrowth,” Internet Users and Access which Forrester contends will take place when online trade reaches 10% of its Usage and Demographics full potential. In order to move into the period of rapid technology adoption eCommerce associated with hypergrowth, Forrester maintains that each nation must eAdvertising eFinance reach its “commerce threshold,” a building period of 12 to 18 months in

Argentina which four principal factors − regulatory openness, technology Brazil infrastructure, global supply chain linkages and trading-bloc activity − fuse Mexico with opportunities for private- and public-sector action and investment. Chile Colombia Comparative Estimates: eCommerce Revenues in Venezuela Brazil, 2001-2004 (in billions) Index of Charts 2001 2002 2003 2004 eMarketer $6.55 $12.63 $24.25 $39.90 Forrester $4.77 $10.07 $24.25 $63.96 Research Source: eMarketer, 2001; Forrester Research, 2000

B2C eCommerce Brazil, with the largest internet user population and the most robust e- commerce market in Latin America, was not hit as hard as many neighboring countries by the shakeout in online retailing. Although pure plays will undoubtedly continue to enter the market, brick-and-mortar retailers such as the Pão de Açúcar supermarket chain, the Lojas Americanas discount retail chain, and booksellers like Saraiva and Livraria Siciliano have been among the pioneers and class leaders in the B2C segment. They have been able to exploit their strong offline brands on the internet in large part because they have offered consumers online experiences that are consistent with their offline shopping habits. On the basis of its already successful online grocery order and delivery service (in operation in major urban areas since 1996), Pão de Açúcar, for example, has launched a portal under a new name, Amelia (www.amelia.com.br), that aims to offer consumers integrated content, community and commerce. Users can search for recipes and order the groceries needed to prepare them. In addition to groceries, Amelia sells approximately 15,000 products in categories such as consumer products and home appliances, and also offers delivery of items ranging from flowers to pharmaceutical products to dry cleaning. Amelia plans to increase the number of products to 25,000 this year. The new company has been able to capitalize on the supermarket chain’s highly integrated supply chain and efficient logistics operations, and although Amelia posted a loss in 2000, company officials are optimistic about the prospect of breaking even by 2002.

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Methodology Americanas.com, the online subsidiary of Lojas Americanas, has also built Overview up its operation with a logistics focus. For example, it allows buyers to see Population and Economy only those items that are in stock and track their orders online. The online Technology Infrastructure

Internet Users and Access store can also leverage the considerable presence of the brick-and-mortar Usage and Demographics operation through in-store advertising, internet kiosks and product returns. eCommerce On the other hand, Ponto Frio, an even larger, middle-market appliance eAdvertising retailer, currently uses the internet as an additional sales channel. eFinance

Argentina eCommerce is also becoming increasingly important for portal sites,

Brazil especially as they ﬁnd they cannot survive solely on the limited amount of Mexico online advertising funds. Companies like UOL are enhancing their content Chile offerings by making available a wide range of merchandise in conjunction Colombia with both online and brick-and-mortar retailers. By offering popular Venezuela

Index of Charts products such as CDs, books and computer equipment, portals can effectively leverage their considerable traffic and generate additional revenue streams at their “online malls.” Meanwhile, banks, like market leader Banco Bradesco, which pioneered the free ISP in Brazil, have launched their own portals that allow bank customers to shop at a variety of bank-approved partner sites. The chief benefit to consumers is that the banks handle the back end of the transaction process and guarantee the security of the purchase. This is a significant value add in a country where one of the greatest impediments to consumer e-commerce is fear of credit card fraud.

B2C eCommerce Revenues in Brazil, 2001-2004 (in billions and as a % of total Latin American B2C e-commerce)

2001 $1.24 (70.9%)

2002 $2.15 (64.8%)

2003 $3.64 (66.2%)

2004 $5.19 (63.9%)

Source: eMarketer, 2001

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Methodology Comparative Estimates Overview Despite the fact that a relatively small percentage of the population Population and Economy

Argentina merchants will flock to Brazil for the same reason. Brazil eMarketer’s estimates for consumer e-commerce exceed those of all other Mexico research firms, again in part because we foresee a “network effect” taking Chile place in Brazil. Estimates from other firms display relative convergence. Colombia

Venezuela Jupiter Research forecasts brisk growth in Brazilian B2C e-commerce

Index of Charts over the next 5 years. However, even as revenues increase, Brazil’s share of total e-commerce spending will decline, from 58% in 2001 to 51% in 2005. In Jupiter’s model, Mexico and Argentina will see sizeable gains, while the share of other countries in the region will remain largely static. Note that estimates from Forrester and Jupiter have not been revised since 2000 and do not reﬂect changes in market conditions.

Comparative Estimates: B2C eCommerce Revenues in Brazil, 2001-2005 (in billions) 2001 2002 2003 2004 2005 eMarketer $1.24 $2.15 $3.64 $5.19 – Forrester $0.34 $0.71 $1.72 $4.54 – Research Jupiter $0.67 $1.22 $2.01 $3.04 $4.26 Research Source: eMarketer, 2001; various, as noted, 2000

Revenues from online retailing in Brazil are highly concentrated among a limited number of e-commerce sites. According to a study by the Boston Consulting Group (BCG) and Visa International, Brazil’s top 50 sites take in 98% of the country’s B2C e-commerce revenues, while the top 10 garner 57%. This uneven revenue distribution presents a clear challenge to smaller players with more limited funding and lesser-known brands, particularly given the barriers to consumer e-commerce in Brazil. Many online retailers will be hard pressed to survive the pressures of such a competitive marketplace.

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Methodology

Overview Concentration of Online Retailing Revenues in Brazil,

Population and Economy 2000

Technology Infrastructure

Internet Users and Access Top 10 Players 57%

Usage and Demographics Top 25 Players 84% eCommerce eAdvertising Top 50 Players 98% eFinance All Players 100% Argentina Brazil Source: Boston Consulting Group (BCG)/VISA International, 2000 Mexico

Chile

Colombia

Venezuela Transactions Index of Charts According to Jupiter Research, 23% of Brazilian internet users will buy online in 2001 − the highest percentage in Latin America (tied with Argentina). In Jupiter’s model, this translates to 2.7 million online buyers. More recently, IBOPE has found that only 15% of Brazilian internet users in the country’s nine largest metropolitan regions have made purchases online. Cap Gemini Ernst & Young’s “Global Online Retailing” study of e- commerce in 12 countries, released earlier this year, found that Brazilians spent an average of $493 online in 2000. This amount was the second lowest among shoppers in any of the 12 countries surveyed (South African shoppers returned the lowest average ﬁgure, at $486), but not far behind the average ﬁgures for countries like the Netherlands ($511) and Spain ($523). In addition, Ernst & Young’s research showed that the average annual expenditure per person rose somewhat or greatly in relation to the year before for a remarkable 80% of respondents. Only 7% responded that their average annual expenditure decreased, while 13% maintained the same level of spending online.

Annual Online Spending per Internet User in Brazil, 2000

Less than $20 5%

$21-$49 12%

$50-$99 15%

$100-$299 29%

$300-$499 21%

$500-$999 11%

$1,000-$4,999 5%

$5,000+ 2%

Source: Cap Gemini Ernst & Young, 2001

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Methodology

Overview Shopping Trends in Brazil among Survey Respondents

Population and Economy in the Previous 12 Months, 2000

Technology Infrastructure

Internet Users and Access Amount spent increased somewhat or greatly 80%

Usage and Demographics Amount spent stayed the same 13% eCommerce eAdvertising Amount spent decreased somewhat or greatly 7% eFinance

Argentina Source: Cap Gemini Ernst & Young, 2001

Brazil Mexico Respondents to the Ernst & Young survey made an average of nine online Chile purchases in 2000. For the majority of consumers, this number represented Colombia an increase of their online shopping activity over the previous year. Venezuela

Index of Charts Frequency of Online Shopping in Brazil, 2000 (in number of purchases per year)

1-2 17%

3-4 29%

5-9 27%

10-24 17%

25-49 4%

50+ 2%

Don’t know or refuse to answer 2%

Other* 2%

Note: Only purchases were financial services, travel tickets, reservations and/or magazine subscriptions Source: Cap Gemini Ernst & Young, 2001

Trends in the Number of Purchases among Survey Respondents in the Previous 12 Months in Brazil, 2000

Number of purchases made increased somewhat or greatly 79%

Number of purchases stayed the same 14%

Number of purchases decreased somewhat or greatly 7%

Source: Cap Gemini Ernst & Young, 2001

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Methodology Research by e-bit, a Brazilian ﬁrm that evaluates online merchants, Overview surveyed consumers’ online buying habits in the 6 months prior to October Population and Economy 2000 and reached similar results. First-time buyers represented one-quarter Technology Infrastructure

Internet Users and Access of those who made a purchase online in 2000. Although the e-bit study Usage and Demographics found the average number of purchases per person to be lower than in the eCommerce Ernst & Young survey, it clearly indicated a growing frequency of online eAdvertising purchasing among Brazilian consumers, particularly among women. The eFinance

Argentina most intense shopping takes place between the hours of 9 pm and

Brazil midnight, when most people are at home (Brazilians’ preferred location for Mexico accessing the internet), dial-up charges are reduced and many paid ISPs Chile offer no-cost access. Colombia Venezuela Frequency of Online Shopping in Brazil, 2000 (in six– Index of Charts month period)

1 25% 31%

2-3 28% 28%

4-5 18% 13%

6-10 12% 9%

11+ 12% 10%

No Answer 3% 6%

Last purchase more than six months ago 2% 3%

October 2000 May 2000 Source: e-bit, 2000

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Methodology

Overview Frequency of Online Shopping in Brazil, by Gender,

Population and Economy 2000

Technology Infrastructure 1 Internet Users and Access

Usage and Demographics 27% eCommerce 24% eAdvertising 2-3 eFinance 30% Argentina

Brazil 28%

Mexico 4-5 Chile 18% Colombia

Venezuela 18% Index of Charts 6-10 12% 12%

11+ 10% 13%

Women Men Source: e-bit, 2000

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Methodology

Overview Hourly Distribution of Online Shopping in Brazil, 2000

Population and Economy

Technology Infrastructure 12am-1am 5.4%

Internet Users and Access

Usage and Demographics 1am-2am 3.7% eCommerce 2am-3am 1.7% eAdvertising eFinance 3am-4am 1.0% Argentina

Brazil 4am-5am 0.5% Mexico Chile 5am-6am 0.2% Colombia Venezuela 6am-7am 0.3% Index of Charts 7am-8am 0.8%

8am-9am 2.4%

9am-10am 3.7%

10am-11am 4.3%

11am-12pm 5.9%

12pm-1pm 5.3%

1pm-2pm 5.3%

2pm-3pm 6.1%

3pm-4pm 5.8%

4pm-5pm 5.9%

5pm-6pm 5.7%

6pm-7pm 5.0%

7pm-8pm 5.2%

8pm-9pm 5.1%

9pm-10pm 6.4%

10pm-11pm 7.2%

11pm-12am 7.2%

Note: Figures do not add up to 100% due to rounding Source: e-bit, 2000

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Methodology Payment Methods Overview According to the study conducted for DHL Worldwide Express, 51% of Population and Economy

Technology Infrastructure businesses surveyed regarded online payment as a barrier to the Internet Users and Access development of e-commerce markets in Brazil. In particular, the generally Usage and Demographics low level of credit card ownership and use in Brazil is a well-known eCommerce impediment to the growth of consumer-based e-commerce. Only the eAdvertising eFinance wealthy in Brazil hold credit cards to any signiﬁcant degree. Among upper-

Argentina income Brazilians (those in the A, B and top half of the C strata), Brazil penetration rates are 37%, while among the population as a whole, the Mexico proportion of people with credit cards is substantially lower. However, new Chile research by Morgan Stanley indicates that the penetration rate for credit Colombia

Venezuela and debit cards, when grouped together, is 50%, the highest in Latin

Index of Charts America, aided in large part by the rapid rise in the number of debit cards issued by banks.

Comparative Estimates: Credit Card Penetration in Brazil, 2000 (as a % of total population)

Morgan Stanley 18%

Yankee Group 14%

Source: Morgan Stanley, 1999; Yankee Group, 2000

Credit and Combined Credit/Debit Card Penetration in Brazil, 2000

Credit 18%

Credit/Debit 50%

Source: Morgan Stanley, 1999/2001

For the past 4 years, Brazil has been experimenting with two card-based digital cash systems (commonly referred to as “electronic purses”), one associated with Visa and the other with SIBS, a Portuguese company. Both systems allow cardholders to load cash from their bank accounts onto their cards using home-based PCs. Between the two systems, over 135,000 cards had been issued by year-end 1999. Nevertheless, the average daily transaction volume and the average transaction value remain low, although the latter is consistent with average transaction values reported by other countries around the world, including Canada, Hong Kong and several Western European nations. In addition, several software companies have pioneered online wallets that store and protect consumers’ personal data with 256-bit encryption. This type of solution should ease consumer fears about the security of buying online and will facilitate (and further automate) the transaction process.

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Methodology

Overview Number and Usage of eMoney Products in Brazil, 1999 Population and Economy Name of Type Number of Volume Value of Average Technology Infrastructure System cards issued/ of daily value of Internet Users and Access number of daily purchases trans-

Usage and Demographics home PC transactions users using actions eCommerce product eAdvertising eFinance VISA Cash Card-based 95,000 334 $1,477 $4.42

Argentina SIBS Card-based 40,100 960 $3,073 $3.20 Brazil Source: Bank for International Settlements (BIS), 2000 Mexico

Chile

Colombia Jupiter Research has found that “banking tickets” (boletos bancários),

Venezuela printable bar-coded bills, account for between 10% and 30% of online Index of Charts consumer transactions. Banking tickets function similarly to bank deposits, but they have the added advantage of being payable at any major bank, not just the merchant’s bank. In addition, COD and check-based store credit (whereby consumers purchase goods on an installment plan) remain popular forms of payment. Research by e-bit bears out Jupiter’s assertion of the growing popularity of banking tickets: 17% of online shoppers paid for their holiday season purchases with banking tickets (although despite the low level of credit card penetration, an overwhelming 72% of consumers still paid with credit cards).

Taxation Brazil does not currently have any tax legislation specific to online commerce nor has the government appointed any regulatory agency to oversee internet commerce. At present, online transactions are subject to the same taxes as offline transactions. The most commonly imposed duty is a value-added tax on goods and services, the rate of which is defined by each state. However, unlike offline transactions, taxes on online purchases are imposed according to the state in which the e-commerce firm is located, as opposed to the state in which the buyer resides or the good in question is produced. Because most of the Brazilian internet industry is based in São Paulo, many people making online purchases end up paying taxes to a state in which they do not reside. In addition, a study by ebusinessforum.com reveals that the Brazilian government imposes a flat 60% tax on the declared value of goods arriving in the country via express-delivery services like Federal Express, United Parcel Service and DHL Worldwide Express. However, this tax does not apply if shipments arrive by traditional, non express-delivery services. InfoAmericas estimates that 61% of Brazilian B2C purchases originate within the country, largely due to high import tariffs and customs fees.

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Methodology Residential Delivery Overview At present, Brazil lacks advanced domestic courier companies along the Population and Economy

Technology Infrastructure lines of Federal Express, DHL Worldwide Express and UPS, and the existing Internet Users and Access distribution system is unreliable at best. Ebusinessforum.com estimates that Usage and Demographics the federal post (Empresa Brasileira de Correios e Telégrafos or ECT) eCommerce handles 70% of e-commerce deliveries within the country. In an effort to eAdvertising eFinance capitalize on ECT’s market dominance, the federal government is investing

Argentina in technology to meet the challenge of foreign couriers. SEDEX, ECT’s Brazil express delivery division, has rolled out a service designed speciﬁcally for Mexico e-commerce deliveries. Like other international couriers, it offers door-to- Chile door delivery, online order tracking, delivery on Sundays and holidays, and Colombia

Venezuela a COD payment option. The e-SEDEX service was initially available only in

Index of Charts the São Paulo metropolitan region, which is understandable given the city’s concentration of people, spending power and e-commerce firms. ECT has announced plans to extend the coverage area to the Rio de Janeiro metropolitan region, Curitiba, Belo Horizonte and the interior of the state of São Paulo beginning in March 2001. That most other Brazilian courier companies tend to be regional and not national complicates the development of e-commerce for Brazilian retailers, especially considering that an estimated 61% of Brazilian B2C purchases originate within the country. Nevertheless, the performance of the couriers and the federal post seems to be improving. A “shopping test,” performed by Boston Consulting Group (BCG) and Visa International as part of an evaluation of consumer e-commerce sites throughout Latin America, found that 62% of products ordered from 40 online merchants arrived on time in Brazil. An e-bit survey concluded in November 2000 reached similar findings: consumers received 66% of their orders on time. However, investment in delivery systems clearly paid off during the holiday season, when online shopping intensified: e-bit found that 72% of holiday purchases arrived on time. Delivery performance was better in the South and Southeast regions of the country as well as the Federal District and the state of Bahia, where 75% of orders arrived on time; in the rest of the country, the average was 60%.

Comparative Estimates: Products Ordered Online Arriving on Time in Brazil, 2000

e-bit 66%

BCG/Visa International 62%

Source: various, as noted, 2000

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Methodology In terms of drop-off locations, the coverage of major international courier Overview ﬁrms is largely limited to major cities throughout the country, although Population and Economy they do serve more locations in Brazil than in any other South American Technology Infrastructure

Internet Users and Access country (Mexico, due to its proximity to the US, leads the way). In terms of Usage and Demographics residential delivery, however, the coverage areas of DHL, FedEx and UPS eCommerce are somewhat more extensive, thanks to partnerships with authorized eAdvertising agents around the country. Still, the high cost of residential delivery eFinance

Argentina remains an impediment to more widespread e-commerce in Brazil: 49% of

Brazil those surveyed by Ernst & Young cited shipping costs as the reason for not Mexico completing an online purchase − the highest percentage among the 12 Chile countries in the study. Ernst & Young found that all online merchants in Colombia Brazil charge for delivery, a practice consistent with that of most e- Venezuela

Index of Charts commerce companies around the world.

Number of Drop-Off Locations of International Couriers in Brazil, 2001

DHL 24

FedEx 7

UPS 5

Source: various, as noted, 2001

Privacy and Security The American Express global online attitudes survey found that 86% of Brazilians expressed concern about the security and privacy of personal information when making purchases or financial transactions online. This figure is a projection based on those who are currently internet users as well as those who intend to become users, so the likelihood is that the many Brazilians who are not yet regular internet users pushed the level of concern higher. Jupiter Research, for example, classifies 49% of Brazilian internet users as “newbies” (those who have been online for less than 1 year). Still, 30% of Brazilians responding to the Ernst & Young survey were worried that their credit card information would be stolen if they used it to make an online purchase. This concern was among the leading reasons why respondents were reluctant to shop on the internet. Consumer fears are well founded: only 0.9% of the servers surveyed by Netcraft earlier this year had either strong or weak encryption. Brazil has the highest number and percentage of servers with some level of encryption in Latin America, but both figures are still low by world standards. At present, Brazil, like most countries in Latin America, has no legislation validating digital signatures.

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Methodology Nevertheless, Brazilian e-commerce sites have not been effective at Overview communicating to consumers how they handle personal and ﬁnancial data. Population and Economy According to a study by the US consultancy PricewaterhouseCoopers Technology Infrastructure

Internet Users and Access (PwC), 83% of Brazilian B2C sites have not adequately disclosed their Usage and Demographics privacy policy. Research by e-bit revealed similar results. Moreover, few eCommerce provide clear mechanisms for returning or exchanging damaged or eAdvertising defective products and for getting refunds, in part because local standards eFinance

Argentina for consumer protection are still evolving. In an effort to improve

Brazil consumer conﬁdence in online buying sites, PwC is offering (for a fee) to Mexico provide its BetterWeb seal of approval to those B2C sites that meet its Chile established standards for privacy, security and customer service. Colombia

Venezuela

Index of Charts Brazilian eCommerce Websites with and without Adequate Disclosure of Privacy Policies, 2000

Disclose privacy policy 19%

Do not disclose privacy policy 81%

Source: e-bit, 2000

On the security front, Visa has been making efforts to expand usage of the Secure Electronic Transaction (SET) protocol among Brazilian online merchants and expects that 500 e-businesses will have adopted the technology by year-end 2000. Banks like Banco Bradesco, Brazil’s largest commercial ﬁnancial institution, have also been quick to realize that security concerns inhibit e-commerce, and have positioned themselves as intermediaries in the B2C segment. Due to heavy investment in information technology in the 1990s, particularly in secure encryption systems, banks were well positioned to provide the transaction “backbone” for other online merchants.

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Methodology Consumer Demographics Overview The proﬁle of the online consumer in Brazil is reﬂective of the gender, age, Population and Economy

Technology Infrastructure income and geographic concentration of the internet user population as a Internet Users and Access whole. According to Ernst & Young, the average online shopper in Brazil is Usage and Demographics young (age 34), male (75%), married (40%), has an annual household eCommerce income of $39,700 and has attended the equivalent of a 4-year college eAdvertising eFinance (67%). Clearly, then, in most respects, both the average online consumer

Argentina and the average internet user in Brazil are not indicative of the country’s Brazil population as a whole, especially given that estimates put the average GDP Mexico per capita under $3,700 in 2000. Chile Studies by IBOPE and e-bit found a more even gender balance among Colombia

Venezuela online shoppers, one that correlates more closely with the overall internet

Index of Charts user population.

Comparative Estimates: Online Consumers in Brazil, by Gender, 2000 & 2001

Cap Gemini Ernst & Young 25% 75%

IBOPE 40% 60%

e-bit 41% 59%

Female Male Source: Cap Gemini Ernst & Young, 2001; IBOPE, 2001; e-bit, 2000

The three studies are in greater agreement with regard to the average age of internet shoppers in Brazil. Most fall in the 25 to 49 age bracket, a reasonable conclusion given the income and experience required to become regular internet users and consistent online consumers. IBOPE puts the greatest concentration of online shoppers (24%) in the 30 to 49 segment.

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Methodology Overview Online Shoppers in Brazil, by Age, 2000 Population and Economy 50 and over Technology Infrastructure 4% 25 Internet Users and Access and 40–49 Usage and Demographics under 16% eCommerce 13% eAdvertising 26–29 eFinance 28% Argentina Brazil 30–39

Mexico 39%

Chile

Colombia

Venezuela Source: Cap Gemini Ernst & Young, 2001

Index of Charts Online Shoppers in Brazil, by Age, 2000

17 and under 1.4%

18-24 18.9%

25-34 41.4%

35-49 30.7%

50-64 6.3%

64+ 1.4%

Note: Figures do not add up to 100% due to rounding Source: e-bit, 2000

Not surprisingly, Brazilians who shop online are better educated and far wealthier than the majority of the population. According to IBOPE, 90% of internet shoppers come from the A and B income segments, an even greater concentration in the upper-income strata than the internet user population as a whole. Most are college graduates and one-quarter hold graduate degrees. 40% of those surveyed by Ernst & Young had annual household incomes above $30,000, while the average household income was $39,700.

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Methodology

Overview Online Shoppers in Brazil, by Education, 2000

Population and Economy Some high school Technology Infrastructure 3% Internet Users and Access Usage and Demographics High school graduate eCommerce 12% eAdvertising eFinance Some college, no degree Argentina 17% Brazil

Mexico 4-year college graduate

Chile 42%

Colombia Graduate/law school graduate Venezuela

Index of Charts 20% Doctoral/medical program graduate 5%

Other 1%

Note: Education level is of the member of the household with the highest income Source: Cap Gemini Ernst & Young, 2001

Annual Household Income of Online Shoppers in Brazil, 2000 $100,000+ Did not 4% $50,000 report –$69,000 3% 8%

$70,000–$99,000 $30,000 4% –$49,000 24% Under $30,000 57%

Source: Cap Gemini Ernst & Young, 2001

The geographic distribution of online shoppers in Brazil reﬂects the concentration of the internet user population in the country’s two largest metropolitan regions. According to e-bit, nearly two-thirds of Brazilians who have bought online reside in the states of São Paulo and Rio de Janeiro.

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Methodology Overview Online Shoppers in Brazil, by Location, 2000 Population and Economy Rio Grande do Sul Technology Infrastructure 4% Others Internet Users and Access Bahia 12% Usage and Demographics 5% eCommerce São Paulo eAdvertising Paraná 44% eFinance 6% Argentina Minas Gerais Brazil 8%

Mexico Rio de Janeiro

Chile 21%

Colombia

Venezuela Source: e-bit, 2000

Index of Charts Consumer Attitudes and Preferences Although Brazil’s B2C market is the most robust in Latin America, online shopping has yet to touch much of the population. According to e-bit, 44% of Brazilian internet users have never made a purchase online, while Ernst & Young found the percentage to be a similar 45%. Of greater concern to online merchants is IBOPE’s finding that 63% of those who have not yet shopped on the internet do not intend to do so in the next 3 months. According to Market Analysis Brasil’s “Brazilian Omnibus Survey,” released in December 2000, 42% of Brazilian internet users responded that they had visited a commercial website in the previous month. Most, however, were surfing to find information on specific products and services; only 6% of those who visited a commercial site actually purchased goods or services online, while 13% bought offline and 23% did not buy anything at all. One potential hurdle to overcome is the rules and laws governing consumer protection, such as the ability to return unwanted, damaged or defective goods. At present, the laws are not defined. Moreover, there is no consensus as of yet on which country’s rules apply to cross-border electronic sales (i.e., who is responsible for warranty protection on items purchased on a US site, for example, and subsequently delivered to a consumer in Brazil). Still, e-bit’s research on the holiday shopping season indicates that the great majority of consumers were satisfied with their shopping experiences: 97% responded that they would continue to buy online. Ernst & Young’s survey found that 98% of existing online shoppers intend to make another purchase in the next 12 months, while 80% of those who have yet to buy online plan to do so in the year ahead. Both percentages were the highest among respondents in 12 countries who participated in the survey.

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Methodology

Overview Comparative Estimates: Internet Users Shopping Online Population and Economy in Brazil, 2000

Technology Infrastructure

Internet Users and Access

Usage and Demographics eCommerce Do not Do not eAdvertising shop shop eFinance 45% 44%

Argentina

Brazil Shop Shop Mexico 55% 56% Chile

Colombia

Venezuela Cap Gemini e-bit Index of Charts Ernst & Young Source: Cap Gemini Ernst & Young, 2001; e-bit, 2000

Respondents to the Ernst & Young survey cited competitive prices, selection of products and convenience as the three leading reasons for shopping online. Convenience also ranked high among respondents to the e-bit survey on the holiday shopping season. However, some reasons for shopping online, such as avoiding traffic and long lines in stores, may have been amplified by the intensity of offline shopping in the weeks immediately prior to Christmas. In terms of the factors involved in choosing a particular shopping site, IBOPE eRatings and e-bit found that prior experience is the key. Brazilian consumers have also been drawn to online retailers by offline advertising.

Reasons for Shopping Online in Brazil, 2000 1 Competitive prices 2 Good selection of items 3 Convenience Source: Cap Gemini Ernst & Young, 2001

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Methodology

Overview Factors Involved in Choosing an Online Retailer in

Population and Economy Brazil, 2000

Technology Infrastructure Already familiar with store Internet Users and Access

Usage and Demographics 47% eCommerce Offline advertisement eAdvertising 12% eFinance Argentina Banner ad or website information Brazil 11% Mexico

Chile Personal recommendation

Colombia 10%

Venezuela Found via search engine Index of Charts 4%

Found via virtual shopping mall 3%

eMail promotion 2%

Other 8%

Do not remember/no answer 3%

Note: Does not add up to 100% due to rounding Source: IBOPE eRatings/e-bit, 2001

Among both current and prospective internet users in Brazil, price is the key purchasing factor, followed closely by website content in Portuguese. As with most present and future internet users surveyed by American Express, trust in the brand name of the product and the retailer is also an important factor. Note that the results returned for Brazil were the highest among the ten countries surveyed in all categories.

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Methodology

Overview Important ePurchasing Factors among Current and

Population and Economy Future Internet Users in Brazil, 2000

Technology Infrastructure

Internet Users and Access Price 98%

Usage and Demographics Website offered in local language 97% eCommerce eAdvertising Trust in brand name of product 96% eFinance Trust in brand name of online retailer 96% Argentina Brazil Good description/photos of products/services 95% Mexico

Chile Ease of navigating the site 90%

Colombia Attractive graphics 84% Venezuela Index of Charts Source: American Express, 2000

On the other hand, Brazilians surveyed expressed ample reasons for not shopping on the internet. Shipping costs, concerns about merchants’ ability to deliver on time, fear of credit card fraud and the need for personal sizing were the main deterrents to consumer e-commerce in Brazil. In addition, 87% of Brazilians abandoned their cybershopping carts, the highest share among the 12 countries in the Ernst & Young survey. High shipping costs was the main reason for failing to complete the purchase process. According to Ernst & Young, three-quarters of survey respondents declared that lower prices would encourage them to shop online more often, while 58% cited lower shipping costs as an incentive to buy on the internet.

Reasons for Not Shopping Online in Brazil, 2000 Personal sizing/fit are important 60% Shipping costs are too high 45% Product cost is too high 33% Concern that credit card info will be stolen 30% Source: Cap Gemini Ernst & Young, 2001

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Methodology

Overview Reasons for Abandoning Shopping Carts in Brazil,

Population and Economy 2000 Technology Infrastructure Shipping costs too high Internet Users and Access 49% Usage and Demographics eCommerce Price check eAdvertising 43% eFinance Price to high Argentina 30% Brazil Check out process was long/unclear Mexico

Chile 23% Colombia Changed mind Venezuela 20% Index of Charts Source: Cap Gemini Ernst & Young, 2001

Online consumers in Brazil are the lone exception in Latin America in that they shop predominantly at domestic sites. Several factors explain this preference for homegrown e-commerce sites: Brazil has the largest consumer market in the region The majority of Latin American B2C e-commerce sites are located in Brazil Cumbersome import tariffs and customs fees make buying at home more cost effective

By contrast, only 41% of Latin Americans, on average, shop at domestic sites. There is little wonder, then, why Brazil has the most robust B2C segment in the region.

Online Consumers Shopping at Domestic and Foreign Sites in Brazil, 2000

InfoAmericas 61% 39%

Cap Gemini Ernst & Young 55% 45%

Domestic Foreign Source: Cap Gemini Ernst & Young, 2001; InfoAmericas, 2000

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Methodology The Ernst & Young study found that a slightly higher percentage of Overview Brazilians (45%) shop at foreign sites. Most respondents cited greater Population and Economy availability of products as the main reason they navigated abroad. Only Technology Infrastructure

Internet Users and Access 26% found better deals at foreign sites.

Usage and Demographics eCommerce Top Reasons for Brazilians Purchasing at Foreign eAdvertising Sites, 2000 eFinance

Argentina Product not available in my country 71% Brazil

Mexico Product cheaper 26%

Chile Source: Cap Gemini Ernst & Young, 2001 Colombia

Venezuela

Index of Charts For Brazilians, shopping for food, books, music or clothes, is an imminently social (and often family-oriented) activity, as it is for many Latin Americans. As such, seeing and being able to handle actual products, talking to salespeople and gathering information in person are rather important components of the shopping experience. Consequently, these cultural factors may impede the development of e-commerce in the short term. In the American Express global online attitudes survey, 90% of respondents said they would be likely to use the internet for research purposes, but preferred to make their purchases offline. This figure was the highest among the ten countries surveyed. 92% also said that they prefer to deal with a live person. In addition, Brazilians have high expectations about what kinds of products and pricing they will encounter online. Over half of the internet users surveyed by Ernst & Young responded that they expect to find not only the same number of products as in retail stores, but also specials. They also expect products in five major retail categories − clothing, consumer electronics, toys, food and beverage, and health and beauty − to cost less online than in comparable brick-and-mortar outlets. Although Brazilians are not as experienced at shopping online as internet users in the United States and Europe, their responses were consistent with those of more seasoned online shoppers around the world.

Consumer Expectations in Brazil of Lower Prices for Online Merchandise, 2000

Clothing 63%

Consumer electronics 88%

Toys 75%

Food and beverage 63%

Health and beauty 72%

Source: Cap Gemini Ernst & Young, 2000

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Methodology

Overview Consumer Expectations of Online Merchandise

Population and Economy Assortment in Brazil, 2000

Technology Infrastructure About the same number of products available as retail stores Internet Users and Access

Usage and Demographics 25% eCommerce About the same number of products, but also specials that are eAdvertising not available at retail stores eFinance 57% Argentina

Brazil More products than at the retail store or catalog Mexico 14% Chile Entirely different range of products Colombia

Venezuela 2%

Index of Charts Source: Cap Gemini Ernst & Young, 2001

Despite the many hurdles, Brazil still has Latin America’s largest online consumer market. Books, music and food are among the most sought-after products, but recent trends indicate that home appliances and electronic goods, from televisions to refrigerators to computers, are rising in popularity. The American Express study confirmed the popularity of music and books in Brazil. The findings also substantiate the untapped appeal of buying electronic goods and appliances online. Among the ten countries surveyed, Brazilians indicated the greatest propensity to purchase CDs by a considerable margin, but they were also the least likely to trade securities online. The latter figure undoubtedly reflects the fact that in comparison to US citizens, proportionally far fewer Brazilians have stock portfolios or trade securities either on- or offline. On the other hand, 50% of Brazilians surveyed by American Express thought that banking and doing other financial transactions on the internet was more convenient. This figure is unsurprising given that performing transactions at bank branches typically involves waiting in long lines. Banking online will increasingly allow Brazilians to take advantage of the high level of automation in their country’s banking system.

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Methodology

Overview Anticipated Online Purchases in Brazil, 2000

Population and Economy

Technology Infrastructure CD’s, videos or computer games 58%

Internet Users and Access Books 47% Usage and Demographics eCommerce Event Tickets 42% eAdvertising eFinance Electronics 28% Argentina Household items (e.g. appliances) 21% Brazil

Mexico Toys 18%

Chile Clothes 15% Colombia

Venezuela Groceries 11%

Index of Charts Jewelry/Watches 5%

Stocks and shares 4%

Source: American Express, 2000

In terms of the products that survey respondents have actually bought, music, books, computer hardware and software, consumer electronics and toys rank high on the list. Of particular note is the growing importance of online purchases of food and beverages. Given Brazil’s long tradition of home delivery of groceries, this is a promising segment for online merchants.

Consumers Buying Products Online in Brazil, 2000

CDs, recorded music 70% Books 60% Computers and computer-related products 36% Videos, filmed entertainment 22% Electronic products 22% Financial services 16% Toys 13% Food, drink 12% Flowers 11% Other 11% Source: Cap Gemini Ernst & Young, 2001

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Methodology According to Ernst & Young’s “Global Online Retailing” report, Brazilians Overview favored Submarino.com for their online purchases, followed by Population and Economy Americanas.com, the internet arm of Rio de Janeiro-based discount retailer Technology Infrastructure

Internet Users and Access Lojas Americanas, Saraiva.com.br, Amazon.com and Siciliano.com.br, Usage and Demographics another leading book vendor. Aside from Amazon, Barnes & Noble was the eCommerce only other US site on the list. However, it was far less popular than its main eAdvertising rival, being cited by just 4% of those surveyed. IBOPE eRatings and e-bit eFinance

Argentina came up with similar results.

Brazil Mexico Favorite Websites for Purchasing in Brazil, 2000 Chile

Colombia Submarino.com 34%

Venezuela Americanas.com 26% Index of Charts Saraiva.com.br 20%

Amazon.com 18%

Siciliano.com.br 14%

Source: Cap Gemini Ernst & Young, 2001

Favorite Websites for Purchasing in Brazil, December 2000 Ranking Website Reach (%) Duration 1 Submarino.com.br 6.5% 8 min. 51 sec. 2 Shopping.bol.com.br 5.9% 1 min. 35 sec. 3 Americanas.com.br 5.6% 11 min. 05 sec. Source: IBOPE eRatings/e-bit, 2001

Research by e-bit and other ﬁrms reached several important conclusions from the attitudes and behaviors of Brazilians shopping on the internet. Online merchants should consider the product and service needs and expectations of Brazilian consumers in order to best accommodate their target market. In addition, merchants must offer: Convenient and swift online shopping experiences Clear navigation and excellent website usability Range of payment options 24-hour customer service and support via e-mail and/or telephone Variety in product mix and competitive pricing Protection of customers’ privacy and personal data Secure transaction environments and perception of security Conﬁrmation/receipt of purchase

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Methodology B2B eCommerce Overview The high level of fragmentation characteristic of Brazil’s supply chains Population and Economy

Technology Infrastructure means that tremendous opportunities exist in the B2B segment of the e- Internet Users and Access commerce market. For that reason, eMarketer expects B2B revenues to Usage and Demographics grow rapidly over the next few years. Although the process of bringing eCommerce procurement, operational and transaction activities online will initially be eAdvertising eFinance burdensome, particularly for small- and medium-sized enterprises (SMEs),

Argentina the savings from lower purchasing prices, transaction costs and inventory Brazil levels and the prospect of using the internet to sell to a broader audience Mexico could dramatically increase overall operating margins for companies of all Chile sizes. Colombia

Venezuela An additional factor is the vast potential of business-to-government

Index of Charts (B2G) e-commerce. The Brazilian state is large and, according to the World Bank, government expenditures accounted for 16% of GDP in 2000. By 2004, the Brazilian government expects to bring all of its procurement online, not only to cut costs but also as part of an effort to inject greater transparency in public expenditures. Based on increased business and government involvement in e- procurement and sales, eMarketer predicts dramatic growth in Brazilian B2B e-commerce, with revenues soaring from $1.95 billion in 2000 to nearly $35 billion in 2004.

B2B eCommerce Revenues in Brazil, 2001-2004 (in billions and as a % of total Latin American B2B e-commerce)

2001 $5.30 (67.4%)

2002 $10.48 (60.3%)

2003 $20.62 (61.3%)

2004 $34.72 (59.5%)

Source: eMarketer, 2001

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Methodology Comparative Estimates Overview eMarketer and Forrester Research estimates show convergence through Population and Economy

Technology Infrastructure 2003, and then begin to diverge widely by 2004, as Brazil enters its period Internet Users and Access of hypergrowth. The Yankee Group expects B2B e-commerce to reach levels Usage and Demographics similar to those forecast by Forrester, but anticipates that growth will take eCommerce place at a more incremental pace. In addition, the Yankee Group has eAdvertising eFinance segmented B2B revenues into three categories: e-marketplaces, electronic

Argentina data interchange (EDI) made through private value-added networks (VANs) Brazil and direct corporate-to-corporate sales. By 2005, the Yankee Group Mexico estimates that B2B transactions made through e-marketplaces will produce Chile revenues of $8.8 billion, accounting for 17% of total B2B e-commerce in Colombia

Venezuela Brazil.

Index of Charts Assessments of Brazil’s potential, which vary widely from extreme optimism to deep pessimism, in part account for the divergence in e- commerce projections. Cautious optimism is warranted given that Brazilian companies still have to take considerable steps to bring their operations online; eMarketer believes that the pace of this process will intensify as ﬁrms realize the cost savings and increased margins they stand to achieve.

Comparative Estimates: B2B eCommerce Revenues in Brazil, 2001-2005 (in billions)

2001 $5.30 $15.30 $4.43

2002 $10.48 $21.80 $9.36

2003 $20.62 $30.90 $22.53

2004 $34.72 $40.80 $59.42

2005 $51.70

eMarketer Yankee Group Forrester Research Source: eMarketer, 2001; various, as noted, 2000

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Methodology B2B eCommerce (by Industry) Overview A couple of years ago, the US consultancy Booz-Allen & Hamilton Population and Economy

Technology Infrastructure performed an assessment of Brazil’s B2B potential, sorting each major Internet Users and Access industry by its e-business readiness. Not surprisingly, the automotive, Usage and Demographics construction, agribusiness, real estate and food industries got high marks. eCommerce The automotive industry (particularly Volkswagen) has been successful in eAdvertising eFinance building e-procurement systems and mechanisms for purchasing cars

Argentina online. It now does all of its sourcing for its Brazilian and Argentine Brazil operations over the internet. Supermarket chains have also been very Mexico active in this sector. Pão de Açúcar, for example, is in the process of Chile integrating its supplier network in proprietary or third-party ventures or Colombia

Venezuela online consortia (often joining with other large international chains in the

Index of Charts same market segment). In order to achieve maximum efﬁciency and cost- savings, other large manufacturers will likely follow suit and require their second-tier suppliers to bring their operations online as well.

Future B2B Potential in Brazil High Medium Limited Automotive Car parts – Civil construction Transport Textile Agribusiness Chemistry/Petrochemicals Steel Real estate Pharmacy Mining Food and drinks Health Electronic appliances Source: Booz-Allen & Hamilton, 1999

According to Symnetics, a Brazilian consultancy associated with US-based Surgency, sales of industrial products constitute the bulk (or 70%) of the B2B market, while services, including MRO (Maintenance, Resources and Operations) and logistics account for approximately 30% of B2B transactions. The exact size of the market for industrial products is difﬁcult to estimate, given that many B2B ﬁrms are still privately held. However, Symnetics research has found that 37% of B2B portals in Brazil serve the construction industry, 18% are dedicated to textiles and the remaining 45% are split evenly among the automotive, metals, mining, chemicals and consumer-packaged goods industries. While not an exact portrait, this breakdown at least provides an outline of the overall B2B market, as the concentration of portals presumably represents opportunities for online procurement systems.

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Methodology

Overview Distribution of Industrial B2B Portals, in Brazil by Population and Economy Industry, 2000 Technology Infrastructure Chemicals/ Internet Users and Access Petrochemicals 9% Consumer Usage and Demographics packaged eCommerce goods 9% eAdvertising Mining eFinance 9% Argentina Construction Brazil Metals 37% Mexico 9% Chile Textiles Colombia 18% Automotive Venezuela 9%

Index of Charts Source: Symnetics, 2000

According to Yankee Group estimates, EDI and other VANs, direct corporate sales, and e-marketplaces will be the three main drivers of B2B e-commerce in Brazil. Revenues from e-marketplace transactions will grow most steeply from 2001 to 2005, even though they will continue to account for the smallest share of total B2B e-commerce proceeds.

Distribution of B2B eCommerce Revenues in Brazil, 2001-2005 (in billions) 2001 2002 2003 2004 2005 EDI and other VANs $9.9 $12.8 $16.3 $18.0 $19.1 Direct corporate IP $4.7 $7.4 $11.3 $16.9 $23.8 e-Marketplaces $0.7 $1.6 $3.3 $5.9 $8.8 Total $15.3 $21.8 $30.9 $40.8 $51.7 Source: Yankee Group, 2000

Banks, although active and innovative in the consumer e-commerce segment, have been slower to bring their own procurement processes online. However, most of Brazil’s leading banks, from Banco Bradesco to BankBoston to Unibanco, are moving to automate their supplier operations and some are even seeking to establish portals for their clients of large businesses. As in the consumer segment, banks are well positioned to offer the back-end services that underlie large business-to-business transactions.

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Methodology B2G eCommerce Overview Brazil’s president, Fernando Henrique Cardoso, has pledged to invest $5 Population and Economy

Technology Infrastructure billion on e-government projects over the next 2 years, and has promised to Internet Users and Access have all over-the-counter government services available on the Usage and Demographics government’s web portal by the end of 2002. According to the business eCommerce newsletter Latincom, 81% of Brazil’s 12.5 million taxpayers ﬁled their returns eAdvertising eFinance online in 2000. That number is expected to rise to 13 million in 2001.

Argentina As with private-sector banks in the consumer e-commerce segment, Brazil Brazil’s state-owned banks have been among the pioneers in online Mexico procurement. Banco do Brasil (BB) has launched its own purchasing site, Chile which the bank expects to use for at least one-quarter of its procurement in Colombia

Venezuela 2001. The portal will also be available to other government entities, and

Index of Charts will handle requests for proposals and the entire bidding process, with contracts going to the lowest bidder. The online system will be open to all companies currently registered in the government’s supplier database, and has the advantage of allowing for instant payments to companies with BB accounts. Caixa Econômica Federal, Brazil’s federal savings and loan bank, has also begun limited online procurement (of purchases up to approximately $8,000). BB is even getting into B2B e-commerce through its agri-business website, Agronegócios-e. BB will offer a line of credit to producers and agricultural cooperatives that purchase raw materials from the Agronegocios site’s auction channel. State governments are also beginning to enter the e-government segment, with the state of São Paulo, home to Brazil’s most advanced industrial complex, leading the way. Tremendous opportunities exist in this segment for content and commerce partnerships with government entities.

Business Internet Penetration A survey by Andersen (formerly Arthur Andersen) of 102 of Brazil’s 500 largest corporations indicated that 55% of Brazil’s large companies perform online transactions. If the experience of other countries with more mature e-commerce markets is any indication, the likelihood is that more companies are buying online than selling. InfoAmericas estimates that approximately 90% of Brazilian companies have a computer in their purchasing department and/or upper management. Just over 60% of purchasing departments have internet access, but fewer than 20% have actual experience with e-procurement. A survey of 1,250 mid-sized and large companies conducted by the Getúlio Vargas Foundation (FGV) in 2001 revealed that 95% already have a functioning website. The study found that only 5% of the companies surveyed are currently using the internet to conduct transactions.

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Methodology Exchanges and Marketplaces Overview Many B2B operations are in the early phases of development. Given the Population and Economy

Technology Infrastructure expectations for B2B e-commerce in Brazil, exchanges are generally in a Internet Users and Access phase of expansion. Many are expected to launch in the year ahead, with Usage and Demographics retail companies leading the way. eCommerce eAdvertising B2B Exchanges in Brazil eFinance

Argentina Exchange Industry Brazil Agro1 Agribusiness Mexico Agronegócios-e Agribusiness Chile MegaAgro Agribusiness Colombia

Venezuela Atacado Virtual Commodities/

Index of Charts raw materials Clicon Construction SuperObra.com Construction Transora Consumer goods/ food and beverage Mercado Eletrônico Electronic marketplace Mercador.com Food and beverage Connectmed Healthcare/medical Genexis Healthcare/medical Medcenter Healthcare/medical Promedical Healthcare/medical Adquira Indirect goods Latinexus Indirect goods e-imoveis Real estate Pd@Net Retail Texlinea Textiles Source: eMarketer, 2001; Economist Intelligence Unit (EIU), 2000

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Methodology F.eAdvertising Overview Population and Economy Advertising expenditures, both online and off, dropped sharply in the wake Technology Infrastructure of the devaluation of the real. Because Brazil is Latin America’s largest Internet Users and Access advertising market, the drop in expenditures had a dampening effect on Usage and Demographics eCommerce advertising in the region as a whole. However, with the economy having eAdvertising rebounded and showing strong signs of growth, ad spending should eFinance increase accordingly over the next few years. Argentina A major challenge for online advertisers (as well as for internet Brazil companies in general) will be to garner the attention of Brazil’s large Mexico

Chile television audience. Television is by far the most popular medium in Brazil, Colombia and, according to Zenith Media, will account for 57% of Brazil’s total Venezuela advertising spending (not including internet advertising) in 2001. Index of Charts Internet companies themselves will spend less on advertising (in all forms of media) this year than in 2000, according to the Association of Brazilian Advertising Agencies (Associação Brasileira de Agências de Publicidade or ABAP). ABAP predicts that internet companies will invest $404 million in 2001, down from $505 million in 2000, and will reduce their promotion of television and print media in particular. Low return on advertising dollars and a more cautious investment climate are largely responsible for this drop in spending by internet companies. Accenture foresees an increase in channel shift this year, with internet advertising increasing from 1.1% of total spending in 2000 to 2.8% in 2001. Accenture predicts that online advertising spending will represent 5.7% of total spending by 2003. According to Goldman Sachs estimates, online advertising spending in Brazil represents 39% of the regional total, and Brazil’s share will rise to 42% by 2004. Both Zenith Media and Forrester Research forecast precipitous increases in online advertising expenditures in Brazil. However, note that Forrester Research and Zenith Media, whose estimates indicate among the most aggressive growth in online advertising spending, released their projections early in 2000, well before the downturn in the online advertising sector.

Online Advertising Expenditures in Brazil, 2001-2004 (in millions)

2001 $122.0

2002 $214.0

2003 $364.0

2004 $536.0

Source: Goldman Sachs, 2001

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Methodology

Overview Online Advertising Expenditures in Brazil, 2001 & 2003

Population and Economy (in millions)

Technology Infrastructure

Internet Users and Access 2001 $190.4

Usage and Demographics 2003 $444.6 eCommerce eAdvertising Source: Accenture, 2001 eFinance

Argentina

Brazil Online Advertising Expenditures in Brazil, 2001-2004

Mexico (in millions)

Chile 2001 $145.0 Colombia Venezuela 2002 $283.0 Index of Charts 2003 $509.0

2004 $890.0

Source: Forrester Research, 2000

Online Advertising Expenditures in Brazil, 2001-2003 (in millions and as a % of total Brazilian advertising expenditures)

2001 $169.8 (1.7%)

2002 $341.8 (3.3%)

2003 $732.4 (6.8%)

Source: Zenith Media, 2000

Comparative Estimates: Online Advertising Spending in Brazil, 2001-2004 (in millions) 2001 2002 2003 2004

Accenture $190.4 – $444.6 – Brazilian Association of $80.0 ––– Interactive Media Forrester Research $145.0 $283.0 $509.0 $890.0 Goldman Sachs $122.0 $214.0 $364.0 $536.0 IBOPE $200.0 ––– Zenith Media $169.8 $341.8 $732.4 – Source: Accenture, Goldman Sachs, 2001; various, as noted, 2000

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Methodology

I Overview

II Population and Economy

III Technology Infrastructure

IV Internet Users and Access

V Usage and Demographics

VI eCommerce

VII eAdvertising

VIII eFinance

IX Argentina

X Brazil XI Mexico 239 A. Overview 240 B. Technology Infrastructure 241 C. Internet Users and Access 250 XID. Usage and Demographics 254 E. eCommerce 263 F.eAdvertising 278

XII Chile

XIII Colombia

XIV Venezuela

Index of Charts

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Methodology

Overview At a Glance: Mexico, 2001 Population and Economy Total population (in millions) (1) 101.9 Technology Infrastructure Population 14+ (in millions) (1) 70.2 Internet Users and Access

Usage and Demographics Population living in urban areas (1999) (2) 74% eCommerce GDP (PPP adjusted, in billions) (1999) (3) $866 eAdvertising GDP per capita (PPP adjusted) (1999) (3) $8,500 eFinance PCs per 100 inhabitants (2000) (4) 5 Argentina

Brazil Main telephone lines per 100 inhabitants (2000) (4) 13 Mexico Cellular subscribers per 100 inhabitants (2000) (4) 14 Chile ISPs (1999) (3) 167 Colombia

Venezuela Internet users (in millions) 2.25 Index of Charts Internet users as % of Pop. 14+ 3% Compounded annual growth in users, 2001-2004 105% Total e-commerce (in billions) $1.54 Compounded annual growth in e-commerce, 2001-2004 105% B2B e-commerce (in billions) $1.26 B2C e-commerce (in billions) $0.28 Source: eMarketer, 2001; (1) US Census Bureau, 2000 (interpolated by eMarketer); (2) World Bank, 2000; (3) CIA World Fact Book, 2000; (4) International Telecommunication Union (ITU), 2001

A. Overview Mexico’s poorly developed infrastructure is a major impediment to growth in its internet market. Recent reports have indicated that Mexicans would happily spend more time online, but they are frustrated by the slow service and frequent technological lapses of ISPs and Telmex, the predominant incumbent telephone operator as well as the country’s largest ISP. Meanwhile, other operators remain frustrated by what they regard as Telmex’s anti-competitive, monopolistic practices. Beyond technological issues, poverty and income inequality remain signiﬁcant barriers to the growth of the internet in Mexico. Approximately 43% of Mexicans live on a subsistence income, while 20% of the population controls nearly 60% of the country’s wealth.

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Methodology Low-Cost Access Overview The government of President Vicente Fox has ambitious plans to increase Population and Economy

Technology Infrastructure internet access and usage in Mexico. The e-Mexico project, a 5-year Internet Users and Access initiative designed to improve the country’s communications Usage and Demographics infrastructure, may receive as much as $200 to $300 million in funds in eCommerce 2002, although it appears that technology spending for government eAdvertising eFinance employees and administration will be signiﬁcantly lower in 2001 than

Argentina originally planned. Not surprisingly, given President Fox’s extensive Brazil business experience, a portion of the funding will come from the private Mexico sector. Part of the program involves transforming community telecenters Chile into internet access points, complete with the requisite computer Colombia

Venezuela equipment that can connect rural and lower-income populations to online

Index of Charts government services. The government’s goal is to have 2,000 of these telecenters in operation by 2003. Meanwhile, individual states are also rolling out their own e-government initiatives. The state of Puebla, for example, has established an online tax payment system that allows users to pay income and other taxes with credit cards. The next step is to bring other over-the-counter government services and processes online. In addition, Telmex, the nation’s largest incumbent telephone operator, has begun to install public internet terminals in Mexico’s largest cities as part of its Lad@net project. Telmex is installing the terminals in locations that traditionally have a high concentration of people - airports, bus terminals, exposition centers, commercial centers, government ofﬁces, hospitals, restaurants and leisure centers. The company’s goal is to install 2,000 terminals throughout the country by the end of 2001.

B. Technology Infrastructure Mexico is one of the few Latin American countries with unmetered local loops. Residential telephone subscribers receive 100 local calls as part of their monthly line rental. According to the “Local Access Pricing and E- Commerce” study by the Organization for Economic Cooperation and Development (OECD), unmetered local calling generally serves to increase internet usage by lowering access costs. Mexico has a low number of access lines per capita, particularly when compared to other OECD countries. However, when measuring the number of internet hosts in Mexico relative to the number of access lines, Mexico’s performance is better than many other OECD nations. From 1998 to 1999, growth in the number of hosts per 1,000 access lines was better than that of 13 other OECD nations, including Japan, Germany, France, Spain and Italy, all of which have much higher PC penetration rates (Mexico’s PC penetration is the lowest of any OECD nation). Unmetered pricing has unmistakably beneﬁted the growth of the internet in Mexico.

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Methodology Although growth in the telecommunications sector has been brisk Overview (teledensity rose from 11% in 1999 to 13% in 2000, according to the ITU), Population and Economy Mexico’s telephone operators have not been able to keep up with the pent- Technology Infrastructure

Internet Users and Access up demand for ﬁxed-line and wireless phone service. For example, Select- Usage and Demographics IDC estimates that 72% of all business spending on telecommunications eCommerce goes towards basic voice services. The result has been a saturation of the eAdvertising nation’s routing capacity. Moreover, with a majority of cellular phones still eFinance

Argentina operating on analog technology, most Mexican users will not be able to

Brazil access the internet on their mobile devices, at least not until telephone Mexico operators complete upgrades to the cellular network. Expect tier 1 and 2 Chile cities to be the ﬁrst beneﬁciaries of enhanced services. Colombia

Venezuela Comparative Estimates: Telephone Lines per 100 Index of Charts Inhabitants in Mexico, 1999-2005 1999 2000 2001 2002 2003 2004 2005 Gartner – 13.3 ––––– Dataquest InfoAmericas – 12.0 13.2 14.4 15.7 – – ITU 11.2 12.5 ––––– Morgan Stanley – 11.6 12.5 13.5 14.5 15.7 16.9 Source: Gartner Dataquest, International Telecommunication Union (ITU), 2001; various, as noted, 2000 Wireless Telephony The Mexican wireless market has been growing at a phenomenal pace. The ITU estimates that 7.9% of the population had some type of wireless subscription in 1999; by year-end 2000, the figure was nearly 14%. Calling Party Pays and prepaid monthly service account in part for the explosive growth in the number of cellular subscribers in Mexico. Prepaid plans and decreasing cellular call costs have allowed many lower-income Mexicans to turn to wireless as an alternative to fixed-line telephone service. As PCS operators enter the market in the coming year, consumers will have a wider array of choices, with upper-level segments the first to benefit from enhanced, 2.5G technologies. Currently, Select-IDC estimates that only 17% of Mexico’s wireless subscribers are on digital systems (analog devices cannot support wireless internet access). MUND’s estimate is more optimistic, although by adding a further breakdown by type of service, its study reveals that only 3% of Mexican wireless subscribers have the type of handset and service plan necessary to become wireless internet users.

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Methodology

Overview Wireless Subscribers in Mexico, 2001-2006 (in Population and Economy millions)

Technology Infrastructure

Internet Users and Access 2001 19.8

Usage and Demographics 2002 24.7 eCommerce eAdvertising 2003 28.7 eFinance

Argentina 2004 31.8 Brazil 2005 34.0 Mexico

Chile 2006 35.6

Colombia Source: Yankee Group, 2001 Venezuela

Index of Charts Wireless Subscribers in Mexico, by Technology, 2001

Digital 17%

Analog 83%

Source: Select-IDC, 2001

Wireless Subscribers in Mexico, by Technology and Type of Service, 2000

Analog 74%

Digital without monthly contract 15%

Digital with monthly contract but no browser 8%

Digital with monthly contract and browser 3%

Source: MUND, 2000

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Methodology According to Mexico’s telecommunications regulator, COFETEL, the Overview number of mobile phone subscribers has now surpassed the number of Population and Economy ﬁxed telephone lines installed. Likewise, wireless teledensity now exceeds Technology Infrastructure

Internet Users and Access ﬁxed-line teledensity, and the disparity should accelerate as more operators Usage and Demographics enter the market and network upgrades take effect. The Yankee Group eCommerce predicts that wireless adoption will grow precipitously from 2001 to 2004, eAdvertising and then begin to level off by 2005-2006. Select-IDC also expects rapid eFinance

Argentina growth, with the number of subscribers increasing to 33.4 million by 2004.

Brazil COFETEL, like Brazil’s ANATEL, assembles its estimates based on data Mexico provided by wireless operators. Chile Colombia Wireless Subscribers and Fixed-Line Telephones per Venezuela 100 Inhabitants in Mexico, 2000 Index of Charts Wireless subscribers 13.3

Fixed-Line Telephones 12.5

Source: COFETEL, 2000

Wireless Subscribers and Fixed-Line Telephones per 100 Inhabitants in Mexico, 2001-2003

2001 13.3 13.2

2002 15.7 14.4

2003 17.8 15.7

Wireless subscribers Fixed-Line telephones Source: InfoAmericas, 2000

Wireless Subscribers per 100 Inhabitants in Mexico, 2001-2006

2001 20

2002 24

2003 28

2004 30

2005 32

2006 33

Source: Yankee Group, 2001

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Methodology As of September 2000, Telcel (now part of América Móvil), Telmex’s Overview wireless subsidiary, was the overwhelmingly dominant force in Mexico’s Population and Economy

Technology Infrastructure cellular market. Iusacell was a distant second. However, the entrance of

Internet Users and Access new PCS operators and powerful, deep-pocketed multinational companies Usage and Demographics like the UK’s Vodaphone (which has taken a large stake in Iusacell) and eCommerce Spain’s Telefónia Móviles (which has acquired Motorola’s former Mexican eAdvertising holdings − Baja Celular, CedeTel, Movitel, Norcel and Portatel) will present eFinance

Argentina continued challenges to Telmex’s dominance. Among handset

Brazil manufacturers, Nokia is the market leader, according to Morgan Stanley, Mexico with a 40% share, followed by Motorola with 30%. Ericsson, Qualcomm Chile and Samsung round out the top ﬁve. According to ﬁgures released by Colombia Ericsson, Mexico has become the company’s fourth largest market after the Venezuela

Index of Charts US, China and the UK.

Wireless Operators in Mexico, by Market Share, September 2000

Telcel (Telmex) (Analog/TDMA) 72%

Iusacell (Analog/CDMA) 13%

CedeTel (Analog/CDMA) 4%

Pegaso (CDMA-1900) 3%

Baja Celular Mexicana (Analog/CDMA) 2%

Movitel del Noroeste (Analog/CDMA) 2%

Telefonia Celular del Norte (Analog/CDMA) 2%

Portatel del Sureste (Analog) 2%

Source: Informa, 2001

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Methodology

Overview Mobile Handset Manufacturers in Mexico, by Market Population and Economy Share, 2000

Technology Infrastructure

Internet Users and Access

Usage and Demographics Samsung eCommerce Qualcomm 6% 11% eAdvertising eFinance Ericsson Argentina 15% Nokia Brazil 40%

Mexico

Chile Motorola 30% Colombia

Venezuela Index of Charts Note: Does not add up to 100% due to rounding Source: Morgan Stanley, 2001

Broadband As in Brazil and many other countries in Latin America, a limited ﬁxed-line and cable infrastructure will prevent many Mexicans in both the consumer and business segments from acquiring a broadband internet connection.

Comparative Estimates: Residential Broadband Subscribers in Mexico, 2000-2004 (in thousands)

2000 86 0 18

2001 172 35

2002 406 123

2003 837 399 211

2004 1,255 1,043

InfoAmericas Ovum Yankee Group* Note: *Cable and DSL only Source: various, as noted, 2000

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Methodology

Overview Business Broadband Subscribers in Mexico, 2000-2004

Population and Economy (in thousands of lines)

Technology Infrastructure

Internet Users and Access 2000 1

Usage and Demographics 2001 1 eCommerce eAdvertising 2002 2 eFinance 2003 2 Argentina Brazil 2004 3 Mexico

Chile Source: Ovum, 2000

Colombia Venezuela Given Mexico’s limited cable infrastructure, Ovum does not expect that Index of Charts cable internet access will garner a mass audience in the next few years. Among cable operators, MultiCanal and Cablevisión dominate the market, each with approximately a 30% share, according to Morgan Stanley. Independent operators have a major presence in Argentina, holding nearly one-fourth of the market.

Comparative Estimates: Residential Broadband Cable Subscribers in Mexico, 2000-2004 (in thousands)

2000 44 0 15

2001 88 24

2002 154 76

2003 270 210 177

2004 404 460

InfoAmericas Ovum Yankee Group Source: various, as noted, 2000

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Methodology

Overview Cable Operators in Mexico, by Market Share, 2000

Population and Economy

Technology Infrastructure MVS Multivisión 30%

Internet Users and Access Cablevisión 18% Usage and Demographics eCommerce Megacable 15% eAdvertising CableMas 10% eFinance Argentina Cablevisión (Monterrrey) 5% Brazil

Mexico Others 22%

Chile Note: Does not add up to 100% due to rounding Colombia Source: Morgan Stanley, 2001 Venezuela

Index of Charts Given the slow rollout of DSL in Mexico, cable modem access will continue to exceed the number of digital subscriber lines in operation. Over the long term, DSL is likely to prevail as the more common means of broadband access in Mexico.

Comparative Estimates: Residential DSL Subscribers in Mexico, 2000-2004 (in thousands)

2000 42 0 3

2001 84 12

2002 252 49

2003 567 189 34

2004 851 674

InfoAmericas Ovum* Yankee Group Note: *Residential and business Source: various, as noted, 2000

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Methodology

Overview Cable Modems in Operation vs. Digital Subscriber

Population and Economy Lines in Mexico, 2001-2003

Technology Infrastructure 2001 Internet Users and Access 100,260 Usage and Demographics eCommerce 37,410 eAdvertising 2002 eFinance 159,180 Argentina

Brazil 110,630

Mexico 2003 Chile 237,050 Colombia

Venezuela 230,310

Index of Charts Cable modems DSL Source: Pyramid Research, 2000

Fixed wireless services are available in select areas in Mexico, targeting high-end business customers. The Yankee Group estimates that by the end of 2003, wireless local loop (WLL) lines in Mexico will account for more than 30% of all WLL lines in Latin America.

Residential Subscribers to Alternative Broadband Technologies in Mexico, 2001-2004 (in thousands)

2001 0

2002 2

2003 2

2004 20

Source: Ovum, 2000

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Methodology C. Internet Users and Access Overview Population and Economy eMarketer estimates that 1.5 million Mexicans 14 years or older were active Technology Infrastructure internet users in 2000, and expects that ﬁgure to increase to 2.3 million by Internet Users and Access the end of 2001. By 2004, 6.4 million Mexicans will be actively using the Usage and Demographics eCommerce internet. Among the pool of potential users, the internet penetration rate eAdvertising will remain in the single digits for the next few years, rising from 3.2% in eFinance 2001 to 8.6% in 2004. Similarly, Mexico’s share of the Latin American Argentina internet market will remain unchanged through 2004, hovering at close to Brazil 15% of the region’s total active users. Mexico

Chile

Colombia Internet Users in Mexico, 2000–2004 (in millions and

Venezuela as a % of population 14+)

Index of Charts 2000 1.5 (2.2%)

2001 2.3 (3.2%)

2002 3.2 (4.5%)

2003 4.6 (6.3%)

2004 6.4 (8.6%)

Source: eMarketer, 2000

Comparative Estimates In the short term, the lack of network capacity will hinder growth in Mexico’s internet user population, but as infrastructure enhancements begin to bear fruit, the user population should swell accordingly. The availability of low-rate ﬁnancing on personal computers will also help to make the internet more accessible to Mexico’s population, 43% of which exists on the equivalent of $2 per day. Most estimates show a considerable degree of convergence, with Morgan Stanley and Jupiter Research coming on the high end of the scale. COFETEL’s estimate for 2004 is based on the government’s expected investment in e-Mexico, the national internet project. Meanwhile, NetValue’s estimate is based on a panel of households connected to the internet in Mexico City, Guadalajara and Monterrey.

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Methodology

Overview Comparative Estimates: Internet Users in Mexico,

Population and Economy 2001-2005 (in millions) Technology Infrastructure 2001 2002 2003 2004 2005 Internet Users and Access COFETEL –––9.5 – Usage and Demographics eCommerce eMarketer 2.3 3.2 4.6 6.4 – eAdvertising IDC 2.3 3.2 3.9 – – eFinance Jupiter Research 3.4 5.1 7.6 10.1 12.7 Argentina Morgan Stanley 4.3 5.9 7.4 9.1 10.8 Brazil

Mexico MUND 2.2 3.5 5.0 – – Chile NetValue 1.5 –––– Colombia Pyramid Research 1.9 2.6 3.4 4.3 – Venezuela

Index of Charts Source: eMarketer, COFETEL, NetValue, 2001; various, as noted, 2000

Access Preferences According to a study by MUND, an overwhelming percentage of Mexican internet users connect from home but, as in Argentina, a signiﬁcant percentage of Mexicans also go online from cybercafes. A previous MUND study released in August 2000 found that, among users in the 15 to 24 age bracket, 17% of users in this key youth segment were connecting to the internet from cybercafes.

Internet Users in Mexico, by Access Location, 2001

Home 59%

Work 38%

School 30%

Cybercafes 15%

Note: Multiple responses allowed Source: MUND, 2001

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Methodology Morgan Stanley also believes that most Mexicans access the internet from Overview home, but expects fairly rapid growth in the number of business users in Population and Economy the next few years. By 2004, Morgan Stanley projects that the percentage Technology Infrastructure

Internet Users and Access of users going online from the workplace will exceed the percentage of Usage and Demographics users gaining access from home. eCommerce eAdvertising Internet Users in Mexico, by Access Location, eFinance 2001-2005 (as a % of total) Argentina

Brazil 2001 Mexico 52.1% Chile 39.1% Colombia 7.8% Venezuela Index of Charts 2002 51.9% 40.4% 7.7%

2003 49.0% 43.7% 7.3%

2004 46.4% 46.6% 7.0%

2005 45.5% 47.8% 6.7% Educational/govt./ Home Business other institution Source: Morgan Stanley, 2000

Penetration rates for internet access in the home and workplace are similar in Mexico, and the household figures are among the highest in Latin America, according to Morgan Stanley, aided no doubt in part by attractive PC financing and promotional tie-ins between computer retailers and ISPs. Morgan Stanley predicts that both will rise to double-digit figures by 2003. By 2003, more workplace computers will have internet connectivity than will home computers.

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Methodology

Overview Households/Workforce with Internet Access in

Population and Economy Mexico, 2001-2005 & 2010

Technology Infrastructure 2001 Internet Users and Access

Usage and Demographics 6.8% eCommerce 5.4% eAdvertising 2002 eFinance

Argentina 9.3%

Brazil 7.8%

Mexico 2003 Chile 11.0% Colombia

Venezuela 10.6%

Index of Charts 2004 12.6% 13.8%

2005 14.0% 15.7%

2010 17.7% 26.6%

Households Workforce Source: Morgan Stanley, 2000

Home and Business PCs in Mexico with Internet Connection, 2001-2005

2001 36.9% 38.0% 2002 46.9% 46.6% 2003 50.9% 55.2% 2004 54.9% 63.8% 2005 58.9% 67.3%

Households Workforce Source: Morgan Stanley, 2000

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Methodology D. Usage and Demographics Overview

Population and Economy Technology Infrastructure Frequency of Sessions Internet Users and Access According to a survey taken by the Strategy Research Corporation (SRC), Usage and Demographics eCommerce Mexicans rank lowest among Latin America’s leading internet user eAdvertising populations in the number of times they go online each week. eFinance Argentina Frequency of Internet Sessions in Argentina, Brazil Brazil and Mexico, 2000 (in number of times per week) Mexico Chile Brazil 4.71 Colombia

Venezuela Argentina 3.83 Index of Charts Mexico 3.79

Source: Strategy Resource Corporation, 2000

NetValue has focused on the online behavior of Mexican youths, speciﬁcally users in the 15 to 24 age bracket as it is rapidly becoming one of the most dynamic segments in the country’s internet market. Overall, users in this segment go online an average of 10.9 times per month, but 50.1% access the internet up to 20.9 days per month − a far greater frequency than moderate and low users, who average 7.4 and 1.7 days online per month, respectively. According to NetValue, 47.7% of young internet users are moderate users, while those at the low end represent 36.9%. Overall, in March NetValue found that Mexican internet users connected an average of 10 days. Men connected with greater frequency than women, and visited a higher number of domains (47.6 versus 31.8).

Frequency of Internet Sessions in Mexico, by Gender, March 2001 (in number of times per month)

Men 9.9

Women 8.8

Source: NetValue, 2001

Select-IDC considers 20% of Mexicans who are online to be “mature” users. The average mature user is 44 years old and male. Mature users have been online for at least a year-and-a-half and connect to the internet six times per week on average.

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Methodology Duration of Sessions Overview According to a study of 2,183 internet users conducted last year by Population and Economy

Technology Infrastructure Greenﬁeld Online Mexico on behalf of Mexico’s internet advertising and Internet Users and Access commerce association AMIPCI (using pop-ups or banners on 15 of the Usage and Demographics association’s member sites), 38% of Mexican internet users spend between eCommerce 4 and 10 hours online per week. The average weekly session is 11.4 hours. eAdvertising eFinance The mature users identiﬁed by Select-IDC spend an average of 2 hours

Argentina online per internet usage session. Mexico is one of the few Latin American Brazil countries with unmetered phone charges, which may help to boost the Mexico duration of internet usage sessions. Chile Colombia Time Spent Online per Week in Mexico, 2000 Venezuela

Index of Charts No response 1%

More than 20 hrs 3 hrs. or less 18% 23%

11-20 hrs. 20%

4-10 hrs. 38%

Source: Greenfield Online/AMIPCI, 2000

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Methodology Usage Patterns Overview The SRC survey also found that Mexicans tend to use the internet most Population and Economy

Argentina degree than either Brazilians or Argentines. The favorite activities of Brazil mature internet users in Mexico mirror those of the larger user population. Mexico Chile Internet Activities in Argentina, Brazil and Mexico, Colombia 2000 Venezuela

Index of Charts Research/Information 82% 73% 72%

eMail 74% 69% 64%

Entertainment 50% 49% 44%

Education 63% 44% 62%

eCommerce 17% 27% 16%

Argentina Brazil Mexico Source: Strategy Resource Corporation, 2000

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Methodology

Overview Internet Activities of “Mature” Internet Users in

Population and Economy Mexico, 2001

Technology Infrastructure

Internet Users and Access eMail 85.5%

Usage and Demographics Research 83.3% eCommerce eAdvertising Entertainment 70.9% eFinance

Argentina Source: Select-IDC, 2001

Brazil Mexico NetValue likewise found that Mexicans are spending most of their online Chile time surﬁng the web and sending e-mail. Note that NetValue measures e- Colombia mail usage only for services based on the POP3 and SMTP protocols, not Venezuela

Index of Charts webmail or proprietary mail services. Use of instant messaging services in Mexico continues to climb, particularly in the youth segment.

Internet Activities in Mexico, February 2001

Surfing 97.5%

Instant messaging 50.7%

Audio-video 38.4%

eMail 31.1%

Chat 9.1%

News 7.2%

Source: NetValue, 2001

According to NetValue, Mexican internet users send an average of 13.2 e- mail messages per month and receive an average of 20.3 (again referring to mail services based on the POP3 and SMTP protocols). Heavy users send and receive 30.3 and 49.1 messages per month, respectively.

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Methodology

Overview Average Number of eMail Messages Sent and Population and Economy Received per Month in Mexico, by Level of Internet Technology Infrastructure Usage, February 2001

Internet Users and Access Low Usage and Demographics eCommerce 1.5 eAdvertising 1.6 eFinance Moderate Argentina

Brazil 4.7

Mexico 7.7

Chile Heavy Colombia

Venezuela 30.3

Index of Charts 49.1

Average 13.2 20.3

Sent Received Source: NetValue, 2001

Most Popular Websites As in other Latin American countries, internet users in Mexico are migrating to non-domestic domains. According to NetValue, MSN.com was the domain with the greatest reach (73.8%) and the highest number of unique visitors among Mexican users, no doubt spurred in large part by the strategic alliance between Microsoft and Telmex, the largest incumbent telephone company and ISP in Mexico. What is interesting is that Mexicans preferred the US, English-language versions of big brand sites such as MSN.com and yahoo.com to their Mexican, Spanish-language counterparts by a significant margin. For example, the reach of MSN.com was significantly greater than that of T1msn.com, the fourth-ranked domain. Like Media Metrix, NetValue measures the popularity and reach of web properties by domain name as well as by host, which reflects the number of unique users of a group of sites. NetValue determines overall (as opposed to absolute) rankings by reaching the mathematical average of the reach, number of days connected to the site per internet user, unique pages viewed, time spent and user-sessions per internet user. Sessions include all internet connections that last more than 10 minutes.

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Methodology

Overview Top 10 Internet Properties and Domains in Mexico,

Population and Economy March 2001 Technology Infrastructure Overall ranking Property Domain Internet Users and Access 1 MSN MSN.com Usage and Demographics eCommerce 2 Yahoo! yahoo.com eAdvertising 3 AOL Time Warner yahoo.com.mx eFinance 4 Microsoft passport.com Argentina

Brazil 5 StarMedia T1msn.com.mx Mexico 6 starmedia.com t1msn.com.mx Chile 7Terraterra.com.mx Colombia 8 CMGI network altavista.com Venezuela

Index of Charts 9 Lycos gob.mx 10 Excite@Home aol.prop Source: NetValue, 2001

Top 10 Internet Properties in Mexico, by Unique Users and Reach, March 2001 Overall Property Unique users Reach (%) ranking (in millions) 1 MSN 1.1 74.3% 2 Yahoo! 1.1 72.2% 4 Microsoft 1.1 70.5% 6 T1msn(.com.mx) 0.8 53.8% 3 AOL Time Warner 0.8 50.1% 7 Terra 0.7 48.8% 5 Starmedia 0.5 35.2% 9 Lycos 0.5 32.1% 8 CMGi Network 0.5 31.3% 16 Napster(.com) 0.4 26.1% Source: NetValue, 2001

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Methodology

Overview Top 10 Internet Domains in Mexico, by Unique Users

Population and Economy and Reach, March 2001 Technology Infrastructure Overall Domain Unique users Reach (%) Internet Users and Access ranking (in millions) Usage and Demographics 1 msn.com 1.1 73.8% eCommerce 2 yahoo.com 1.1 68.8% eAdvertising eFinance 4 passport.com 0.9 60.6% Argentina 5 t1msn.com.mx 0.8 53.8% Brazil 3 yahoo.com.mx 0.6 41.1% Mexico

Chile 7 terra.com.mx 0.5 33.3%

Colombia 19 microsoft.com 0.5 33.1% Venezuela 8 altavista.com 0.5 31.1% Index of Charts 6 starmedia.com 0.5 30.9% 11 lycos.com 0.4 27.2% Source: NetValue, 2001

Gender The gender breakdown of the Mexican internet population is slightly more skewed towards male users than the regional average. According to NetValue’s March 2001 data, 62.5% of Mexican users are men. Note that NetValue ﬁndings are based on panel surveys of home users who have accessed the internet at least once per month. New panelists are added regularly, which may have an effect on the panel’s gender balance. For example, in September 2000, the gender breakdown was 58% male, 42% female. Among the group of mature users identiﬁed by Select-IDC, the division is 60% male, 40% female.

Internet Users in Mexico, by Gender, March 2001

Female 37.5% Male 62.5%

Source: NetValue, 2001

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Methodology

Overview “Mature” Internet Users in Mexico, by Gender, 2001

Population and Economy

Technology Infrastructure

Internet Users and Access

Usage and Demographics eCommerce Female eAdvertising 40% Male eFinance 60% Argentina

Brazil

Mexico

Chile

Colombia Venezuela Source: Select-IDC, 2001 Index of Charts Age Like internet users in Argentina and Brazil, the Mexican user population is young: more than 65% are age 34 and under, with 37% concentrated in the 15 to 24 segment. According to the Greenﬁeld Online/AMIPCI study, 39% of male users are between the ages of 25 and 34, while 37% of female users are between 18 and 24.

Internet Users in Mexico, by Age, 2000

45+ 13-17 9% 8% 35-44 16% 18-24 30%

25-34 37%

Source: Greenfield Online/AMIPCI, 2000

Internet Users in Mexico, by Age, 2000 65+ 1% 50-64 14 and 9% under 7%

35-49 15-24 24% 37%

25-34 23%

Note: Does not add up to 100% due to rounding Source: NetValue, 2000

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Methodology Socioeconomic Status Overview NetValue’s data reveal socioeconomic division among Mexico’s internet Population and Economy

Technology Infrastructure users, although the distribution is more balanced than in other Latin Internet Users and Access American countries. Note that the criteria the Mexican national marketing Usage and Demographics association uses to deﬁne socioeconomic segments are different than the eCommerce criteria used in Argentina or Brazil. The point-scoring scheme in Mexico is eAdvertising eFinance based on the educational achievement and occupation of the head of

Argentina household, the ownership of consumer goods, the number of light bulbs Brazil and rooms in the home (excluding bathrooms) and the number of domestic Mexico helpers. NetValue found that only 46% of Mexican internet users pertain to Chile the top two levels. The remaining 54% belong to the third socioeconomic Colombia

Venezuela segment. The Greenﬁeld Online/AMIPCI study reached similar results.

Index of Charts Internet Users in Mexico, by Socioeconomic Strata, 2000

A/B Strata 46%

C1 Stratum 21%

C2 Stratum 33%

Source: NetValue, 2000

Internet Users in Mexico, by Socioeconomic Strata, 2000

D+/D Strata 13%

A/B Strata 47%

C+/C Strata 40%

Source: Greenfield Online/AMIPCI, 2000

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Methodology E. eCommerce Overview

Population and Economy Technology Infrastructure Total eCommerce Internet Users and Access In the near term, Mexico’s underdeveloped infrastructure should keep Usage and Demographics eCommerce e-commerce revenues modest, particularly in the consumer segment. eAdvertising Online merchants will have to work to overcome Mexicans’ reluctance to eFinance buy products over the internet, and they must continue to offer a variety of Argentina payment options until a greater portion of the population has a credit card Brazil or other forms of e-money. As in other Latin American countries, many of Mexico

Chile the new entrants into the online space will be traditional, brick-and-mortar Colombia companies. In the B2B segment, given the proximity of Mexico to the US Venezuela and Mexico’s involvement in assembly operations, companies of all sizes – Index of Charts large ﬁrms in particular – are feeling the pressure to invest in automation and update their technologies in order to compete in the global economy.

eCommerce Revenues in Mexico, 2000–2004 (in billions and as a % of total e-commerce in Latin America)

2000 $0.55 (15.3%)

2001 $1.54 (16.0%)

2002 $4.14 (20.0%)

2003 $7.43 (19.0%)

2004 $13.30 (20.0%)

Source: eMarketer, 2001

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Methodology Comparative Estimates Overview Forrester Research believes that Mexico will be the ﬁrst Latin American Population and Economy

Technology Infrastructure country to experience hypergrowth in e-commerce, which is scheduled to Internet Users and Access occur in 2003. Forrester also maintains that e-commerce revenues in Usage and Demographics Mexico will be greater than those in Brazil, Latin America’s leading eCommerce industrial power. Other ﬁrms have not issued revised e-commerce eAdvertising eFinance projections for Mexico.

Argentina

Brazil Comparative Estimates: eCommerce Revenues in

Mexico Mexico, 2001-2004 (in billions)

Chile 2001 Colombia

Venezuela $1.54

Index of Charts $6.60

2002 $4.14 $15.90

2003 $7.43 $42.26

2004 $13.30 $107.04

eMarketer Forrester Research Source: eMarketer, 2001; Forrester Research, 2000

B2C eCommerce Online shopping remains a rariﬁed activity among Mexican internet users. Cultural factors and preferences, such as the ability to see and handle actual products, talk to salespeople and gather information in person, may impede the development of consumer-oriented e-commerce in the short term. A Select-IDC study also points out that the lack of brand recognition among consumers for online retailers, both online and off, may limit transactions. Less expensive computers, offered with free internet access by leading ISPs, may help to increase PC and internet penetration rates, which should, in turn, offer a boost to consumer-based e-commerce. However, slow connection speeds, which prevail across Mexico, may frustrate users who visit image-rich online shopping sites. As in other Latin American markets, traditional brick-and-mortar retailers are becoming a large force in the consumer B2C segment. According to an IDC survey of Mexican companies doing business online, 56% of the ﬁrms are traditional businesses, while 44% are pure plays, all of which are part of the SME segment.

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Methodology

Overview B2C eCommerce Revenues in Mexico, 2001-2004 (in

Population and Economy billions and as a % of total Latin American B2C

Technology Infrastructure e-commerce)

Internet Users and Access

Usage and Demographics 2001 $0.28 (15.8%) eCommerce 2002 $0.62 (18.8%) eAdvertising eFinance 2003 $0.97 (17.6%) Argentina 2004 $1.46 (18.0%) Brazil

Mexico Source: eMarketer, 2001 Chile

Colombia

Venezuela Comparative Estimates

Index of Charts As with overall e-commerce revenues, leading research ﬁrms have not released revised predictions for the B2C segment in Mexico. Much like Argentina and Brazil, revenues from online retailing in Mexico are highly concentrated among a small group of e-commerce sites. In fact, according to the study by BCG and Visa, the concentration of revenues in Mexico is the highest in Latin America.

Comparative Estimates: B2C eCommerce Revenues in Mexico, 2001-2005 (in billions) 2001 $0.28 $0.47 $0.13 $0.17 2002 $0.62 $1.13 $0.28 $0.35 2003 $0.97 $3.00 $0.64 2004 $1.46 $7.59 $1.05 2005 $1.54

eMarketer Forrester Research IDC Jupiter Research Source: eMarketer, International Data Corp. (IDC), 2001; various, as noted, 2000

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Methodology

Overview Concentration of Online Retailing Revenues in

Population and Economy Mexico, 2000

Technology Infrastructure

Internet Users and Access Top 10 players 80%

Usage and Demographics Top 25 players 94% eCommerce eAdvertising Top 50 players 98% eFinance

Argentina Source: Boston Consulting Group (BCG)/Visa International, 2000

Brazil Mexico Transactions Chile According to studies by MUND, IDC and Greenﬁeld Online, a small Colombia percentage of Mexican internet users have used the web to make purchases. Venezuela

Index of Charts Those who buy online tend to be among the country’s most experienced users with better understanding of online transactions. The mature internet users identiﬁed by Select-IDC are more likely than less seasoned users to complete their purchases, including payment, entirely online. In light of the socioeconomic composition of Mexican internet users, they are also more likely to have credit cards and the disposable income required to make online purchases.

Comparative Estimates: Internet Users in Mexico Buying Online, 2000 (as a % of total internet user population)

Greenfield Online 36%

IDC 19%

MUND 16%

Source: International Data Corp. (IDC), 2001; various, as noted, 2000

Most respondents in the Greenﬁeld Online study made only one online purchase in the 90 days prior to the survey. Repeat shoppers remained in the minority. However, 55% of the respondents stated that they intended to make a purchase online in the upcoming 12 months.

Frequency of Online Shopping in Mexico, 2000 (in number of purchases in the previous 90 days)

1 12% 2 8%

None 3 64% 6% 4 or more 10%

Source: Greenfield Online/AMIPCI, 2000

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Methodology Payment Methods Overview On the whole, the level of credit card ownership in Mexico is low. Population and Economy

Technology Infrastructure According to Morgan Stanley, the penetration of credit and debit cards Internet Users and Access combined is only 13%, one of the lowest rates in the region, and certainly Usage and Demographics well behind those of Argentina, Brazil, Chile, Colombia and Venezuela. eCommerce However, as in other Latin American countries, where the internet market eAdvertising eFinance tends to be concentrated in the ABC1 socioeconomic segments, internet

Argentina users in Mexico are more likely to have credit cards than the rest of the Brazil population. Select-IDC estimates that 55% of Mexican internet users hold Mexico credit cards. Still, according to MUND, many online consumers opt for Chile alternative payment methods, with COD being one of the most common. Colombia

Venezuela For example, small businesses that offer 1-hour delivery of items like

Index of Charts snacks and movies and which allow consumers to pay for their purchases in cash have been successful in the consumer e-commerce market. Concerns about security may also affect the payment methods Mexican consumers choose to utilize. Like Brazil, Mexico has two e-money pilot programs under way, one associated with Visa and promoted by a group of banks, and the other with Inbursa, a Mexican bank. Both systems allow cardholders to load cash from their bank accounts onto their cards using home-based PCs. Between the two systems, 27,500 cards had been issued by year-end 1999. As in Brazil, the average daily transaction value is low, although again, it is consistent with average transaction values reported by other countries around the world, including Canada, Hong Kong and several Western European nations. Cardholders can use their “electronic purses” at participating merchants, vending machines and more than 1,000 public phones.

Number of eMoney Products in Mexico, 1999 Name of System Type Number of Cards Average Issued/ Number of Value of Home PC Users Transactions Using Product VISA Cash Card–based 25,000 $1.30 Monedero Card–based 2,500 $0.37 (vending Electronico machines) Inbursa $4.39 (merchants) Source: Bank for International Settlements (BIS), 2000

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Methodology Taxation Overview Like Brazil, Mexico does not currently have any tax legislation speciﬁc to Population and Economy

Technology Infrastructure online commerce. According to the Economist Intelligence Unit, e- Internet Users and Access commerce transactions are classiﬁed by the underlying activity. Therefore, Usage and Demographics B2C transactions, for example, are considered retail activities. eCommerce eAdvertising eFinance Residential Delivery

Argentina According to the “shopping test” that BCG and Visa conducted on 40 e- Brazil commerce sites, Mexico had the worst delivery record of any Latin Mexico American country: only 35% of products ordered arrived on time. Some Chile consumer e-commerce sites, like decompras.com, offer their own Colombia

Venezuela nationwide delivery services in addition to the services of international

Index of Charts logistics carriers like UPS and DHL. In terms of the coverage of international courier ﬁrms, Mexico has more drop-off locations widespread than any other country in Latin America, no doubt thanks to its proximity to the US.

Number of Drop-Off Locations of International Couriers in Mexico, 2001

DHL 121

FedEx 25

UPS 28

Source: various, as noted, 2001

Privacy and Security Most Mexican internet users are not confident about buying on the internet. Only 46% of Mexicans surveyed last year by MUND expressed trust in online purchasing. In general, MUND also found that women tend to be less confident than men, but this may be due to the fact that male internet users in Mexico have more online experience than female users. Trust and confidence tend to rise in accordance with time spent online. Select-IDC indicates that the level of consumer confidence is often directly proportional to the level of information consumers have about the online buying process. Online merchants can diffuse information both on the internet and through traditional media, which is more likely to reach a wider audience of Mexican consumers and which may include current and prospective internet users. Still, consumer fears about buying online are not without basis: only 0.2% of the servers surveyed by Netcraft earlier this year had either strong or weak encryption. However, the Mexican government has taken legislative steps to facilitate and protect online transactions.

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Methodology For example, in May 2000, it passed legislation that validates digital Overview signatures for online purchases, making Mexico one of the few countries in Population and Economy the region with this type of protective regulation. Technology Infrastructure

Internet Users and Access

Usage and Demographics Confidence in the Security of Buying Online in eCommerce Mexico, 2000 eAdvertising eFinance Yes 46% No 54%

Argentina Source: MUND, 2000 Brazil

Mexico Chile Consumer Attitudes and Behavior Colombia Online shopping has yet to touch much of the Mexican population. Venezuela

Index of Charts According to the Greenfield Online/AMIPCI study, 36% of Mexican internet users did make a purchase online in the 90 days prior to the survey. However, Greenfield’s surveys tend to focus on heavy internet users, which may yield inflated results in relation to the country’s overall internet user population. MUND and Select-IDC, for example, found that a far smaller percentage of Mexicans have bought online. In addition, Select-IDC research revealed that only 4% of the Mexican internet user population were repeat buyers in 2000. Still, MUND research indicates that the percentage of internet users buying online is increasing, if slowly: it rose three points from August to December 2000.

Comparative Estimates: Internet Users Shopping Online in Mexico, 2000

Shop 16% Shop 36% Did not shop 64% Did not shop 84%

Greenfield Online/ MUND AMIPCI

Shop 19%

Did not shop 81%

Select-IDC Source: Select-IDC, 2001; various, as noted, 2000

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Methodology

Overview Internet Users Shopping Online in Mexico, August & Population and Economy December 2000

Technology Infrastructure August 2000 Internet Users and Access

Usage and Demographics 13% 87% eCommerce December 2000 eAdvertising 16% 84% eFinance Argentina Shop Did not shop Brazil

Mexico Source: MUND, 2000

Chile Colombia According to both MUND and Select-IDC, men represent a larger share of Venezuela online consumers in Mexico. Again, this may be due to the fact that men, Index of Charts as a group, have been online for longer than women in Mexico.

Comparative Estimates: Internet Users Shopping Online in Mexico, by Gender, 2000

MUND Men 18% 82%

Women 14% 86%

Select-IDC Men 24% 76%

Women 11% 89%

Shop Did not shop Source: Select-IDC, 2001; MUND, 2000

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Methodology According to the Greenﬁeld Online/AMIPCI study, Mexicans have found Overview considerable advantages to buying online, with saving time being the chief Population and Economy beneﬁt. Only 30% found shopping on the internet to be less expensive than Technology Infrastructure

Internet Users and Access buying in traditional retail establishments.

Usage and Demographics eCommerce Reasons for Shopping Online in Mexico, 2000 eAdvertising eFinance Saves time 57% Argentina

Brazil More information about products 49% Mexico Avoid lines and crowds 43% Chile

Colombia Locate hard-to-find products 36%

Venezuela Lower prices 30% Index of Charts Greater variety 27%

Good gift ideas 27%

Ease of delivery 19%

Source: Greenfield Online/AMIPCI, 2000

Select-IDC research indicates several reasons why Mexican internet users do not make purchases on the internet: Lack of familiarity with name/brand of online merchants Concerns about security and perception of security Lack of interest in product selection Lack of information about the online buying process (from product selection to payment)

As in the other markets, the process of making Mexican consumers comfortable with buying online is one that involves education on the part of web merchants. Consumers, for their part, tend to become more accustomed with the buying process over time, but as with all internet user populations, the initial experience can be a key factor in shaping future habits.

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Methodology When making purchases online, Mexicans tend to prefer foreign sites, Overview which is not altogether surprising given the proximity of the US market Population and Economy and the multiplicity of B2C sites offered. Both InfoAmericas and Select-IDC Technology Infrastructure

Internet Users and Access found that 60% of Mexican internet users prefer buying at foreign e- Usage and Demographics commerce portals. eCommerce eAdvertising Online Consumers Shopping at Domestic and Foreign eFinance Sites in Mexico, 2000 Argentina

Brazil

Mexico

Chile

Colombia Domestic Domestic

Venezuela 40% 40%

Index of Charts

Foreign Foreign 60% 60%

InfoAmericas Select-IDC Source: Select-IDC, 2001; InforAmericas, 2000

The Greenﬁeld Online/AMIPCI report also revealed that Mexicans, like Argentines, are more likely to use the internet to compare prices and research the availability of their favorite products than to buy them. For example, of the 41% of internet users who logged onto the internet to check the price of a compact disc, only 10% bought the CD online, while 28% made their purchase in a traditional brick-and-mortar outlet.

Online Product Research vs. Purchases in Mexico, 2000

CDs 41% 10% 28%

Books 40% 10% 26%

Event tickets 33% 7% 24% Researched Bought Bought online online offline Source: Greenfield Online/AMIPCI, 2000

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Methodology Research by Greenﬁeld and MUND resulted in a similar list of the products Overview most popular with online consumers. The list includes those items − Population and Economy computer software and hardware, compact discs, books, home electronics, Technology Infrastructure

Internet Users and Access event tickets and magazine subscriptions − that are popular with Usage and Demographics consumers across Latin America. MUND research into the buying habits of eCommerce Mexican women online likewise resulted in a familiar mix of products. eAdvertising eFinance Consumers Buying Products Online in Mexico, 2000 Argentina

Brazil Hardware/software 51% Mexico Chile CDs 41% Colombia

Venezuela Books 40% Index of Charts Home electronics 37%

Event tickets 33%

Magazine subscriptions 31%

Travel/ticket purchasing 29%

Cars/auto parts and accessories 28%

Videos 28%

Office furniture 25%

Source: Greenfield Online/AMIPCI, 2000

Consumers Buying Products Online in Mexico, 2000 Ranking Product 1 Music 2 Software 3 Books 4 Hardware 5 Event tickets Source: MUND, 2000

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Methodology

Overview Women Buying Products Online in Mexico, 2000

Population and Economy

Technology Infrastructure Music (CDs, tapes, tec.) 70%

Internet Users and Access Books 40% Usage and Demographics eCommerce Tickets 30% eAdvertising Software 20% eFinance Argentina Hardware 15% Brazil

Mexico Health and beauty products 12%

Chile Note: Percentages are approximated from a bar chart; multiple responses Colombia allowed Venezuela Source: MUND, 2000 Index of Charts B2B eCommerce The large number of US firms operating in or doing business with Mexican industries bodes well for e-commerce, particularly in the B2B sector. Mexico’s assembly industry, particularly in the automotive and electronics segments, is closely integrated with US and Asian supply operations that do much of their procurement online. As other global components of the supply chain become digitized, the Mexican divisions have been compelled to follow suit. Consequently, in terms of its share of Latin American B2B e- commerce, Mexico will show the greatest increase in the upcoming 4 years. Nevertheless, the country’s ample potential aside, making e-commerce work well in a country like Mexico requires overcoming serious obstacles. Antiquated back-office computer systems, inefficient distribution networks, and pervasive credit card fraud are enough to dissuade even the most ambitious entrepreneurs from moving their businesses online.

B2B eCommerce Revenues in Mexico, 2001-2004 (in billions and as a % of total Latin American B2B e-commerce)

2001 $1.26 (16.0%)

2002 $3.52 (20.2%)

2003 $6.47 (19.2%)

2004 $11.84 (20.3%)

Source: eMarketer, 2001

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Methodology Comparative Estimates Overview As with Brazil, assessments of Mexico’s potential for B2B e-commerce vary Population and Economy

Technology Infrastructure widely, with some remarkably optimistic and others tending to be quite Internet Users and Access pessimistic. This lack of consensus in part accounts for the divergence in Usage and Demographics B2B e-commerce forecasts. Indeed, Mexico’s proximity to, and strong ties eCommerce with, US markets may in part account for why ﬁrms such as Forrester eAdvertising eFinance predict greater B2B revenues in Mexico than even in Brazil, which is

Argentina generally considered the economic powerhouse of Latin America. Cautious Brazil optimism is warranted given that Mexican companies are among the Mexico pioneers in building digital exchanges and marketplaces and are both well- Chile positioned and sufﬁciently capitalized to help make e-procurement a Colombia

Venezuela reality, in Mexico as well as across the region. In addition, Select-IDC notes

Index of Charts that Mexican businesses’ long and successful experience with Electronic Data Interchange (EDI) has laid the groundwork for IP-based commercial exchanges.

Comparative Estimates: B2B eCommerce Revenues in Mexico, 2001-2005 (in billions)

2001 $1.26 $6.13

2002 $3.52 $14.77

2003 $6.47 $39.26

2004 $11.84 $99.45

2005 $0 $5.00

eMarketer Forrester Research IDC Source: eMarketer, International Data Corp. (IDC), 2001; Forrester Research, 2000

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Methodology Business Internet Penetration Overview According to Select-IDC, 74% of Mexico’s largest businesses − those with Population and Economy − Technology Infrastructure 5,000 or more employees have a functioning website. However, the Internet Users and Access percentage of micro and small enterprises − those with 1 to 15 and 16 to Usage and Demographics 100 employees, respectively − with an internet presence is only 27%. eCommerce Select-IDC also observes that the majority of internet-only (pure-play) eAdvertising eFinance ﬁrms in Mexico fall into the micro- and small-business segments.

Argentina Only 13% of all businesses surveyed by Select-IDC have a website that Brazil permits electronic transactions. Of the 87% that have a functioning Mexico website, but which does not permit transactions, 45% plan to implement Chile online transaction capabilities in the coming year. 40.5% of the businesses Colombia

Venezuela surveyed by Select-IDC regard the internet principally as a means of

Index of Charts expanding to a new sales channel. 13% also see the internet as an effective marketing vehicle. However, only 12% view the potential for cost-cutting as the chief beneﬁt of doing business online.

Businesses in Mexico with a Website, 2001 (as a % of businesses in that size range)

Micro/small businesses (0-100 employees) 27%

Large (5,000+ employees) 74%

Source: Select-IDC, 2001

Furthermore, IDC has found that 52% of Mexican companies of all sizes remain unfamiliar with enterprise resource management (ERM) software applications, and almost two-thirds have little knowledge of supply chain management (SCM) applications. An even greater percentage (70%) are not familiar with CRM, currently one of the leading business applications. Use of application software is higher in larger businesses, particularly those with 1,000 or more employees.

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Methodology

Overview Businesses in Mexico with or Planning to Implement

Population and Economy eBusiness Applications, by Number of Employees,

Technology Infrastructure 2001

Internet Users and Access SCM Usage and Demographics eCommerce 12% eAdvertising 34% eFinance CRM Argentina

Brazil 20%

Mexico 30%

Chile ERP Colombia 10% Venezuela

Index of Charts 30%

<1,000 >1,000 Note: Percentages are approximated from a bar chart Source: Select-IDC, 2001

InfoAmericas estimates that around 85% of Mexican companies have a computer in their purchasing department and/or upper management. Just under 80% of purchasing departments have internet access, but only 20% have actual experience with e-procurement.

Exchanges and Marketplaces Cementos Mexicanos (Cemex), the world’s third-largest cement company, is expanding its integrated global operations with new vertical procurement portals. The company is building on its strength in the construction business by launching ConstruMix portals in major markets around the world. The sites will bring together suppliers of a full range of materials with end users in the architectural, design, construction and contracting business. Cemex and Grupo Industrial Alfa (another Mexican conglomerate) have joined with Brazilian cement maker Votorantim and Bradespar, Banco Bradesco’s non-ﬁnancial arm, to form Latinexus, a Latin- wide e-marketplace for indirect goods.

Many other B2B operations are in the early phases of development. Given the expectations for B2B e-commerce in Brazil, exchanges are generally in a phase of expansion. According to Select-IDC, the following sectors are likely to produce the most dynamic marketplaces: Construction Agriculture eProcurement Indirect goods and services Transportation and logistics

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Methodology

Overview B2B Exchanges in Mexico Population and Economy Exchange Industry Technology Infrastructure

Internet Users and Access Latinexus Indirect goods Usage and Demographics Artikos SME procurement portal eCommerce Source: eMarketer, 2001; Economist Intelligence Unit (EIU), 2000 eAdvertising eFinance

Argentina Brazil F.eAdvertising Mexico As in other leading Latin American media markets, television dominates Chile

Colombia advertising expenditures in Mexico. According to Goldman Sachs Venezuela estimates, online advertising expenditures in Mexico are the second highest Index of Charts in Latin America after Brazil and represents 15% of the regional total. Note that Forrester Research’s considerably higher projections were issued prior to the region- and worldwide drop in online advertising. Despite the market downturn, the AMIPCI has stated that online advertising expenditures could reach as high as $150 million in 2001.

Comparative Estimates: Online Advertising Expenditures in Mexico, 2001-2004 (in millions)

2001 $61.0 $47.0

2002 $127.0 $78.0

2003 $241.0 $134.0

2004 $422.0 $179.0

Forrester Research Goldman Sachs Source: Goldman Sachs, 2001; Forrester Research, 2000

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Methodology

I Overview

II Population and Economy

III Technology Infrastructure

IV Internet Users and Access

V Usage and Demographics

VI eCommerce

VII eAdvertising

VIII eFinance

IX Argentina

X Brazil

XI Mexico XII Chile 279 A. Overview 280 B. Technology Infrastructure 281 C. Internet Users 289 XIID. Demographics 290 E. eCommerce 291 F.eAdvertising 301

XIII Colombia

XIV Venezuela

Index of Charts

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Methodology

Overview At a Glance: Chile, 2001 Population and Economy Total population (in millions) (1) 15.3 Technology Infrastructure Population 14+ (in millions) (1) 11.4 Internet Users and Access

Usage and Demographics Population living in urban areas (1999) (2) 85% eCommerce GDP (PPP adjusted, in billions) (1999) (3) $185 eAdvertising GDP per capita (PPP adjusted) (1999) (3) $12,400 eFinance

Argentina PCs per 100 inhabitants (2000) (4) 9

Brazil Main telephone lines per 100 inhabitants (2000) (4) 21 Mexico Cellular subscribers per 100 Inhabitants (2000) (4) 15 Chile ISPs (1999) (3) 26 Colombia

Venezuela Internet users (in millions) (4) 1.82 Index of Charts Source: eMarketer, 2001; (1) US Census Bureau, 2000 (interpolated by eMarketer); (2) World Bank, 2000; (3) CIA World Fact Book, 2000; (4) International Telecommunication Union (ITU), 2001; Santiago Chamber of Commerce, 2001

A. Overview With its dynamic, largely unrestricted and stable economy, its high (for the region) GDP per capita, high PC and credit card penetration rates and well- developed telecommunications infrastructure, Chile is well positioned to support growing internet usage and the development of e-commerce. Chile’s population, like that of most Latin American countries, is heavily urbanized. According to World Bank estimates, 85% of the country’s 15 million people live in urban areas. Moreover, unlike Brazil and Mexico, which have several cities with populations over 1 million, Chile’s population is further concentrated in and around one city: Santiago, the nation’s capital. The Chilean government is an active participant in the nation’s digital economy, and since October 1999, has required all departments to purchase goods and services online through its procurement portal. Chile’s tax collection system is one of the most effective in the region, and tax collection rates are high in comparison to neighboring countries. 42% of all 2000 tax returns (approximately 790,000 in total) were submitted over the internet in 2001. Nevertheless, like many of its neighbors, Chile currently has no laws that apply speciﬁcally to online commerce, although the government is working to pass binding legislation and will most likely do so by the end of this year.

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Methodology Low-Cost Access Overview Despite many promising indicators, Chile is not immune to the Population and Economy

Technology Infrastructure phenomenon of the digital divide. In fact, income distribution in Chile is

Internet Users and Access among the most skewed in Latin America, even if a comparatively small Usage and Demographics portion of the population lives at or below the poverty line. Given that a eCommerce pattern of uneven income distribution prevails in Chile (as well as across eAdvertising the region), the costs of buying a computer or renting a telephone line are eFinance still beyond the reach of a large segment of the population. Argentina

Brazil The Chilean government is working proactively on several fronts to close

Mexico the nation’s digital divide. The Subsecretariat of Telecommunications Chile (SUBTEL) is investing in community “telecenters” designed to provide Colombia internet access to low-income segments of the population and a Venezuela countrywide network of information centers designed to provide small and Index of Charts micro enterprises with details about emerging technologies. In addition, the Ministry of Education has plans to connect 100% of Chile’s secondary schools and 50% of all schools to the internet by 2005. Finally, the government has set aside credit for micro and small enterprises targeted speciﬁcally for the purchase of computer equipment, internet connections and training in new technology. In this capacity, the government is both capitalizing on and facilitating the growth of Chile’s digital economy.

B. Technology Infrastructure

Fixed-Line Telephones Although small in size and population, Chile boasts one of Latin America’s most dynamic telecommunications sectors. The government began its privatization program in the late 1980s, well ahead of most countries in the region, and fully deregulated the market in 1994. Today, it is more competitive than most. According to preliminary figures for 2000 released by SUBTEL, wireless teledensity has now exceeded fixed-line teledensity, in large part due to a 51% growth in wireless subscribers in 2000. However, fixed-line traffic, as measured in the number of minutes of talk time, still far exceeds the quantity of traffic on wireless networks. SUBTEL estimates that 20% of fixed-line traffic went towards internet connections.

Comparative Estimates: Telephone Lines per 100 Inhabitants in Chile, 1999-2005 1999 2000 2001 2002 2003 2004 2005 Gartner Dataquest – 24.7 ––––– International 20.7 –––––– Telecommunication Union (ITU) Morgan Stanley – 21.4 23.0 24.6 26.1 27.6 29.3 SUBTEL – 22.0 ––––– Source: Gartner Dataquest, International Telecommunication Union (ITU), SUBTEL, 2001; Morgan Stanley, 2001

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Methodology On a national level, the country’s technology infrastructure is unevenly Overview distributed. According to SUBTEL, 57% of Chile’s ﬁxed-line telephones are Population and Economy located in the metropolitan region of Santiago. Teledensity in the Technology Infrastructure

Internet Users and Access metropolitan region is far higher than the national average as well.

Usage and Demographics eCommerce Distribution of Telephone Lines in Chile, by Region, eAdvertising 2000 eFinance

Argentina Region I

Brazil 2.5%

Mexico Region II Chile

Colombia 3.1% Venezuela Region III Index of Charts 1.0%

Region IV 2.4%

Region V 10.7%

Metropolitan region (Santiago) 57.4%

Region VI 2.8%

Region VII 2.7%

Region VIII 8.3%

Region IX 3.0%

Region X 4.4%

Region XI 0.5%

Region XII 1.2%

Source: SUBTEL, 2001

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Methodology

Overview Telephone Lines per 100 Inhabitants in Chile, by

Population and Economy Region, 2000

Technology Infrastructure

Internet Users and Access Region I 20.5

Usage and Demographics Region II 22.0 eCommerce eAdvertising Region III 12.2 eFinance Region IV 13.7 Argentina Brazil Region V 23.0 Mexico

Chile Metropolitan region (Santiago) 31.4

Colombia Region VI 11.9 Venezuela Index of Charts Region VII 10.0

Region VIII 14.3

Region IX 11.7

Region X 14.0

Region XI 17.0

Region XII 25.0

Source: SUBTEL, 2001

Wireless Telephony According to ﬁgures released by SUBTEL, Chile had 3.4 million wireless subscribers at year-end 2000, representing a leap of 51% from the year before. The increasingly widespread availability of prepaid plans has contributed to the explosive growth in wireless subscribers: approximately 69% of wireless users were on prepaid plans and 31% had contracts with wireless operators in 2000. Although prepaid predominates, SUBTEL research indicates that most of the trafﬁc (61%) came from users with monthly subscriptions. This is unsurprising given that users on prepaid plans tend to restrict their talk time in order to contain costs. Another factor behind the explosive growth in wireless subscriptions was the introduction of Calling Party Pays in early 1999, which substantially reduced wireless tariffs. Wireless operators and internet content providers are teaming up rapidly to deliver content to wireless devices. The Santiago Chamber of Commerce (CCS) registered 39 WAP-enabled websites in Chile alone in March 2001.

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Methodology

Overview Wireless Subscribers and Fixed-Line Telephones in

Population and Economy Chile, 2000 (in millions)

Technology Infrastructure

Internet Users and Access Wireless subscribers 3.40

Usage and Demographics Fixed-line telephones 3.37 eCommerce eAdvertising Source: SUBTEL, 2001 eFinance

Argentina

Brazil Wireless Subscribers and Fixed-Line Telephones per

Mexico 100 Inhabitants in Chile, 2000

Chile

Colombia Wireless subscribers 22.2 Venezuela Fixed-line telephones 22.0 Index of Charts Source: SUBTEL, 2000

Wireless Subscribers in Chile, by Type of Subscription, 2000

Contract 31.4%

Prepaid 68.6%

Source: SUBTEL, 2001

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Methodology As with ﬁxed-line telephones, the metropolitan region of Santiago is home Overview to the overwhelming preponderance of Chilean wireless subscribers. Population and Economy Wireless teledensity in the capital city also far exceeds the national average. Technology Infrastructure

Internet Users and Access

Usage and Demographics Distribution of Wireless Subscribers in Chile, by eCommerce Region, 2000 eAdvertising Region I eFinance

Argentina 2.5% Brazil Region II Mexico 3.0% Chile Colombia Region III Venezuela 0.9% Index of Charts Region IV 3.0%

Region V 9.5%

Metropolitan region (Santiago) 58.0%

Region VI 3.6%

Region VII 3.3%

Region VIII 7.7%

Region IX 3.3%

Region X 4.2%

Region XI 0.3%

Region XII 0.7%

Source: SUBTEL, 2001

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Methodology

Overview Wireless Subscribers per 100 Inhabitants in Chile, by

Population and Economy Region, 2000

Technology Infrastructure

Internet Users and Access Region I 21.4

Usage and Demographics Region II 21.4 eCommerce eAdvertising Region III 11.5 eFinance Region IV 17.8 Argentina Brazil Region V 20.5 Mexico

Chile Metropolitan region (Santiago) 32.1

Colombia Region VI 15.6 Venezuela

Index of Charts Region VII 12.1

Region VIII 13.4

Region IX 12.7

Region X 13.4

Region XI 9.2

Region XII 16.0

Source: SUBTEL, 2001

As of September 2000, Chile’s wireless market was split evenly between CTC Startel, majority owned by Telefónica, and Entel PCS Telecomunicaciones, controlled by Telecom Italia. The other two players in the wireless market are Smartcom, owned by Spain’s Endesa, and BellSouth.

Wireless Operators in Chile, by Market Share, September 2000

CTC Startel (Analog/TDMA) 39%

Entel (GSM1900) 38%

BellSouth (Analog/TDMA) 19%

Smartcom (CDMA1900) 4%

Source: Informa, 2001

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Methodology Broadband Overview The number of broadband connections (bi-directional cable and xDSL) in Population and Economy

Technology Infrastructure Chile is currently rather limited. SUBTEL recorded 7,795 such connections Internet Users and Access in December 2000 (up, however, from 2,411 in June 2000). Pyramid Usage and Demographics Research believes that due to a slow start by Chilean telecommunications eCommerce operators, cable modem internet access will surpass DSL for the next eAdvertising eFinance several years. According to the EIU, three telecommunications operators

Argentina were offering ADSL services by the end of 2000: Manquehue Net, Entel and Brazil Terra, while two companies − VTR and Metropolis Intercom − offered cable Mexico modem internet access. Chile Colombia Cable Modems in Operation vs. Digital Subscriber Venezuela Lines in Chile, 2001-2003 Index of Charts 2001 5,150 240

2002 15,740 440

2003 30,580 670

Cable modem DSL Source: Pyramid Research, 2000

However, the Yankee Group projects rapid growth in the upcoming years, estimating that the number of broadband connections in Chile will nearly triple during 2001 from 23,000 to 61,000. That figure should reach 114,000 by 2002, the research firm estimates. Chilean businesses, which had a total of just 4,000 broadband connections at the end of 2000, should account for much of the growth: the report finds that 10,000 companies (out of a country total of 550,000) are potential users in the immediate future. According to Frost & Sullivan, broadband penetration of internet subscribers is expected to reach 51%, resulting in 1.25 million subscribers by the end of 2006. With over half of the country’s internet subscribers connecting over broadband, a more extensive universe of content and commerce options will become available.

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Methodology

Overview Broadband Subscribers in Chile, 2001-2005

Population and Economy 2001 Technology Infrastructure

Internet Users and Access 49,000

Usage and Demographics 12,000 eCommerce 61,000 eAdvertising eFinance 2002

Argentina 92,000 Brazil 22,000 Mexico 114,000 Chile

Colombia 2003 Venezuela 143,000 Index of Charts 35,000 178,000

2004 210,000 50,000 260,000

2005 280,000 65,000 345,000

Cable modem ADSL Total Source: Yankee Group, 2001

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Methodology C. Internet Users Overview Population and Economy Internet usage in Chile is growing rapidly by all accounts. According to Technology Infrastructure SUBTEL estimates, the number of internet users has increased by a factor of Internet Users and Access nearly seven in the past 3 years: Usage and Demographics eCommerce 215,000 internet users in 1998 eAdvertising 750,000 internet users in 1999 eFinance 1.4 million users in 2000 Argentina

Brazil Estimates from local ISPs also put the number of users in the 1 to 1.2 Mexico

Chile million range, while a 2001 study by IDC estimated the number of users at Colombia 1.1 million. The ITU reported a more conservative ﬁgure of 800,000. The Venezuela Santiago Chamber of Commerce (CCS) study, released in the second quarter Index of Charts of 2001, cited a 9% internet penetration rate in Chile, certainly among the highest in the region. The CCS expects the penetration rate to triple by 2005, aided in no small part by the active efforts of both the Chilean government and private-sector ﬁrms. Falling telephone access costs (and the availability of low-cost off-peak rates) and ISP charges have also helped to boost internet adoption rates.

Comparative Estimates: Internet Users in Chile, 2000 (in millions)

Santiago Chamber of Commerce (CCS) 1.4

International Data Corp. (IDC) 1.1

International Telecommunication Union (ITU) 0.8

Source: various, as noted, 2001

Internet Users in Chile, 2001-2005 (in millions and as a % of total population)

2001 1.8 (12%)

2002 2.4 (15%)

2003 3.0 (19%)

2004 3.8 (24%)

2005 4.5 (28%)

Source: Santiago Chamber of Commerce (CCS), 2001

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Methodology D. Demographics Overview

Population and Economy Technology Infrastructure Socioeconomic and Educational Status Internet Users and Access According to CCS research, households pertaining to the ABC1 and C2 Usage and Demographics eCommerce socioeconomic segments make up 26% of all Chilean homes. However, they eAdvertising account for 50% of income nationwide and 68% of all internet eFinance connections. Still, the percentage of C2 and C3 homes with internet access Argentina is more proportional to their representation among all Chilean households. Brazil As in other Latin American countries, the lowest socioeconomic strata are Mexico

Chile the least represented among the country’s internet users.

Colombia

Venezuela Households in Chile, by Socioeconomic Strata, 2001

Index of Charts

ABC1 8%

C2C3 DE 53% 39%

Source: Santiago Chamber of Commerce (CCS), 2001

Households with Internet Access in Chile, by Socioeconomic Strata, 2001

DE 5%

ABC1 34% C2C3 61%

Source: Santiago Chamber of Commerce (CCS), 2001

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Methodology In terms of their educational achievements, the CCS study indicates that Overview more than 60% of Chilean internet users have completed high school. This Population and Economy is in line with the educational status of internet users in other Latin Technology Infrastructure

Internet Users and Access American countries.

Usage and Demographics eCommerce Geography eAdvertising Chile’s internet users are further segmented by geographical location of eFinance

Argentina access. According to the CCS, the metropolitan region of Santiago, which

Brazil accounts for 40% of the country’s total population, is home to 57% of Mexico Chile’s internet users. Chile Given the concentration of technology, population and resources in the Colombia capital city, this concentration of users is unsurprising. Venezuela

Index of Charts Population and Internet Users in Chile, by Location, 2001

Other Other regions regions Metropolitan Metropolitan 60% 43% region region (Santiago) (Santiago) 40% 57%

Population Internet users Source: Santiago Chamber of Commerce (CCS), 2001

E. eCommerce

Total eCommerce Growth in e-commerce in both the business and consumer segments has been brisk. CCS research shows that a steadily increasing percentage of businesses of all sizes are connected to the internet and using the web to buy and sell products and services. Consumers have also been ﬂocking to online retailers. Online shoppers also have an increasingly wide array of retailers from which to choose. According to the CCS, the number of Chilean e-commerce sites totaled 486 in March 2001, with 274 B2C sites and 212 in the business segment. Note that CCS estimates, released in May 2001, exceed those of Forrester Research, which were released in early 2000, by a considerable margin. CCS, which monitors e-commerce activity in Chile on a monthly basis, has seen consistent increases in online consumer spending and business internet penetration in the past year.

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Methodology

Overview Comparative Estimates: eCommerce Revenues in Population and Economy Chile, 2001-2005 (in billions)

Technology Infrastructure 2001 Internet Users and Access

Usage and Demographics $2.68 eCommerce $0.27 eAdvertising 2002 eFinance

Argentina $4.46

Brazil $0.50

Mexico 2003 Chile

Colombia $7.28

Venezuela $1.07

Index of Charts 2004 $10.31 $2.62

2005 $11.82

Santiago Chamber of Commerce Forrester Research Source: Santiago Chamber of Commerce (CCS), 2001; Forrester Research, 2000

B2C eCommerce Despite the drop in internet markets around the region, consumer-based e- commerce has been steadily increasing in Chile, thanks in large part to the country’s relatively healthy economy. Although CCS recorded 51 closures of e-commerce sites in Chile, the country has seen an overall net increase in the number of sites in the past year. According to the EIU, the leading B2C operations are falabella.cl and almacenesparis.cl, the online divisions of the nation’s largest department store chains. Many banks, insurance companies and even several brokerage houses offer online services to both consumers and businesses. The majority of sites are concentrated in the household goods, tourism and computer sectors. The total number of products offered by Chilean retailers has also been on the rise, and has resulted in a marked shift in the purchasing habits of online shoppers in Chile, with an increasing percentage now favoring local e-commerce sites.

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Methodology

Overview Comparative Estimates: B2C eCommerce Revenues in

Population and Economy Chile, 2001-2005 (in millions)

Technology Infrastructure 2001 Internet Users and Access $78.0 Usage and Demographics eCommerce $98.0 eAdvertising $44.6 eFinance 2002 Argentina

Brazil $152.0

Mexico $168.0 Chile $83.8 Colombia

Venezuela 2003

Index of Charts $268.0 $299.0 $141.5

2004 $402.0 $614.0 $218.6

2005 $563.0 $311.8

Santiago Chamber of Forrester Research Commerce Jupiter Research Source: Santiago Chamber of Commerce (CCS), 2001; various, as noted, 2000

Distribution of B2C Retailers in Chile, by Sector, 2001

Household goods 12.0%

Tourism 10.9%

Computer 8.0%

Vehicles 7.3%

Food and drink 6.6%

Clothing 4.7%

Personal care 3.6%

Music 3.3%

Sporting goods 3.3%

Others 27.4%

Note: Does not add up to 100% due to rounding Source: Santiago Chamber of Commerce (CCS), 2001

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Methodology CCS research has revealed considerable activity in the consumer-to- Overview consumer (C2C) segment, primarily concentrated in online auction sites. Population and Economy CCS expects revenues from C2C transactions to rise from $9 million in Technology Infrastructure

Internet Users and Access 2001 to $72 million in 2005.

Usage and Demographics eCommerce C2C eCommerce Revenues in Chile, 2001-2005 (in eAdvertising millions) eFinance

Argentina 2001 $9.0

Brazil 2002 $19.0 Mexico Chile 2003 $34.0 Colombia

Venezuela 2004 $55.0 Index of Charts 2005 $72.0

Source: Santiago Chamber of Commerce (CCS), 2001

The CCS, which surveyed the nation’s online retailers, found that: 74% provide nationwide coverage 62% offer online payment options 45% maintain secure online transaction environments 10% offer consumers lower prices than comparable ofﬂine merchants

For the most part, these ﬁgures have increased since March 2000, the last time CCS undertook a major survey of Chile’s e-commerce landscape, despite the fact that the number of online retailers has grown exponentially. In particular, the percentage of sites offering nationwide coverage has jumped from 59% to 74%. The only decline was in the price category: in March 2000, 14% of sites surveyed offered lower prices than ofﬂine stores.

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Methodology Transactions Overview CCS projections indicate that 13% of Chileans internet users made Population and Economy

Technology Infrastructure purchases online in 2000, spending an average of $204 per user. Similarly, Internet Users and Access Frost & Sullivan estimates that only 12% of Chilean internet users have Usage and Demographics made purchases online, and 39% of the shoppers only made one purchase. eCommerce Repeat buying is necessary for e-commerce to succeed. eAdvertising eFinance

Argentina Comparative Estimates: Internet Users in Chile

Brazil Buying Online, 2000 (as a % of total internet user

Mexico population)

Chile Santiago Chamber of Commerce (CCS) 13% Colombia Venezuela Frost & Sullivan 12% Index of Charts Source: various, as noted, 2001

According to CCS estimates, average annual spending will double from 2000 to 2005. The percentage of internet users buying online will also double in this period.

Internet Users Buying Online in Chile, 2001-2005

2001 15%

2002 18%

2003 21%

2004 25%

2005 27%

Source: Santiago Chamber of Commerce (CCS), 2001

Annual Spending per Internet User in Chile, 2001-2005

2001 $272

2002 $337

2003 $382

2004 $387

2005 $411

Source: Santiago Chamber of Commerce (CCS), 2001

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Methodology Payment Methods Overview On the whole, penetration rates solely for credit cards in Chile are among Population and Economy

Technology Infrastructure the highest in Latin America. However, when factoring in debit cards as Internet Users and Access well, Chile lags behind its larger neighbors. Usage and Demographics eCommerce Credit and Combined Credit/Debit Card Penetration eAdvertising in Chile, 2000 (as a % of total population) eFinance Argentina Credit 22% Brazil

Mexico Credit/debit 24%

Chile Source: Morgan Stanley, 2001 Colombia

Venezuela Index of Charts Taxation Like several other Latin America countries, Chile has no legislation speciﬁc to e-commerce transactions. At present, goods ordered online are treated the same way as any other transaction. According to the EIU, the value- added tax for all goods and services is 18%.

Residential Delivery In terms of drop-off locations, Chile enjoys coverage similar to that of Argentina and Colombia. According to a 2000 CCS survey, the average delivery time for products ordered online has been just over 2 days, aided in no small part by Chile’s compact geography.

Number of Drop-Off Locations of International Couriers in Chile, 2001

DHL 12

FedEx 2

UPS 3

Source: various, as noted, 2001 Privacy and Security According to IDC, the country’s conditions favor e-commerce: 82% of the Chilean e-commerce ﬁrms use security systems to send information over the internet. CCS research has found that 45% of online merchants maintain secure online transaction environments, up from 40% in March 2000. Netcraft’s January 2001 study revealed that only 0.1% of the servers surveyed had either strong or weak encryption, about the same level as Argentina, Mexico, Venezuela and Colombia. A major emphasis of the Chilean government has been to improve online security among the nation’s business and consumer e-commerce sites. The CCS also maintains services to assist e-commerce ﬁrms in this process.

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Methodology Consumer Attitudes and Behavior Overview When making purchases online, Chileans’ preference for foreign sites may Population and Economy

Technology Infrastructure be shifting. An InfoAmericas study conducted last year found that 25% of Internet Users and Access spending went to domestic sites and 75% to foreign sites. More recent Usage and Demographics research by the CCS revealed that 43% of consumer e-commerce spending eCommerce went to domestic retailers. In 1999, a CCS survey found the split to be 20% eAdvertising eFinance domestic/80% foreign. The rise in the number and variety of online

Argentina retailers in Chile as well as an increase in the products offered account for Brazil this shift. Mexico Chile Online Consumers Shopping at Domestic and Foreign Colombia Sites in Chile, 2000 Venezuela

Index of Charts

Domestic Domestic 43% 25%

Foreign Foreign 57% 75%

Santiago Chamber InfoAmericas of Commerce Source: Santiago Chamber of Commerce (CCS), 2001; InfoAmericas, 2000

CCS research also conﬁrms that Chileans tend to prefer the same product mix as other Latin American consumers. Books, music and electronic equipment top the list of products bought by online consumers in Chile.

Products Purchased Online in Chile, 2000 (% of online consumers)

Music 21%

Books 17%

Electronics goods and kitchen equipment 17%

Household goods 12%

Computer goods 11%

Source: Santiago Chamber of Commerce (CCS), 2000

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Methodology B2B eCommerce Overview Much of the e-commerce activity taking place in Chile is going on between Population and Economy

Technology Infrastructure businesses, which are getting connected to the internet and doing their Internet Users and Access procurement online in rapidly increasing proportions. Given the relatively Usage and Demographics high rate of business internet penetration and the government’s proactive eCommerce stance regarding online procurement, the potential for B2B is substantial. eAdvertising eFinance The CCS’ most recent projections (revised upwards from 2000 estimates by

Argentina a considerable margin) have B2B transactions bringing in more than $11 Brazil billion by 2005. Mexico The majority of B2B sites are concentrated in the industrial sector. Chile Professional services, commerce and information technology round out the Colombia

Venezuela leading categories. According to the CCS, 97% of B2B sites are based in

Index of Charts Chile. Overall, approximately 9% of B2B sites are electronic marketplaces.

Comparative Estimates: B2B eCommerce Revenues in Chile, 2001-2005 (in billions) 2001 $1.88 $0.25 2002 $4.31 $0.47 2003 $7.01 $0.99 2004 $9.91 $2.44 2005 $11.26

Santiago Chamber of Commerce Forrester Research Source: Santiago Chamber of Commerce (CCS), 2001; Forrester Research, 2000

Distribution of B2B Sites in Chile, by Sector, 2001

Industry 31.0% Professional services 14.0% Commerce 11.0% Information technology 9.4% Service 8.0% Transportation 4.7% Telecommunications 3.3% Other 18.6%

Source: Santiago Chamber of Commerce, 2001

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Methodology Business Internet Penetration Overview Most of Chile’s 550,000 businesses fall into the micro category, meaning Population and Economy

Technology Infrastructure that they have 1 to 9 employees, although they generate only 1% of the Internet Users and Access country’s e-commerce revenues. Large businesses, those with 200 or more Usage and Demographics employees, represent only 1% of the nation’s ﬁrms, yet they account for eCommerce 72% of all nationwide sales and more than half of total e-commerce eAdvertising eFinance revenues. Small- and medium-sized businesses (SMEs), which represent

Argentina 17% of the nationwide total, bring in 46% of e-commerce revenues.

Brazil Mexico Distribution of Businesses in Chile, by Size of Chile Business, 2001 Colombia

Venezuela

Index of Charts SME Large 17% 1%

Micro 82%

Source: Santiago Chamber of Commerce (CCS), 2001

Distribution of eCommerce Revenues in Chile, by Size of Business, 2001

Micro 1%

Large 53% SME 46%

Source: Santiago Chamber of Commerce (CCS), 2001

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Methodology Despite the divide in e-commerce revenues, CCS research has found that Overview the majority of businesses of all sizes are connected to the internet, with Population and Economy many of them conducting some kind of transaction over the web. The Technology Infrastructure

Internet Users and Access percentage of businesses with their own website goes in descending order Usage and Demographics of size, with large ﬁrms far better represented online than micro businesses. eCommerce According to CCS research, 74% of medium-sized and large businesses in eAdvertising Chile connect to the internet over dedicated lines. eFinance

Argentina

Brazil Businesses with Internet Access in Chile, by Size of

Mexico Business, 2001

Chile Micro 57.6% Colombia Venezuela Small 77.2% Index of Charts Medium 92.7%

Large 97.2%

Total 61.4%

Source: Santiago Chamber of Commerce (CCS), 2001

Businesses with a Website in Chile, by Size of Business, 2001

Micro 8.5%

Small 21.1%

Medium 35.7%

Large 62.7%

Total 11.2%

Source: Santiago Chamber of Commerce (CCS), 2001

Although Chilean businesses are getting connected to the internet in increasing proportions, channel shift in terms of purchasing is still limited. Overall, according to CCS research, businesses of all sizes do 18% of their buying online, which amounts to 2% of total nationwide purchasing. The interesting trend highlighted by the CCS report is that the smaller the business, the greater percentage of its buying takes place online. The likelihood is that smaller businesses have a comparably smaller supplier network, and are therefore better able to migrate their purchasing to the online channel. By contrast, the larger the business, the more likely it is to sell its products over the internet. This trend is unsurprising given the added costs (of marketing and advertising for example) of selling products and services online, which larger businesses, particularly those with ofﬂine subsidiaries, are better able to bear.

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Methodology

Overview Businesses in Chile Transacting Online, by Size of

Population and Economy Business, 2001 Technology Infrastructure Buy Sell % of purchasing % of total Internet Users and Access online online online purchasing Usage and Demographics Micro 4.1% 9.9% 20.0% 2.0% eCommerce Small 13.9% 15.9% 8.3% 1.3% eAdvertising eFinance Medium 20.0% 20.0% 7.5% 1.5% Argentina Large 29.4% 27.1% 5.0% 1.4% Brazil Total 6.1% 11.1% 17.9% 2.0% Mexico

Chile Source: Santiago Chamber of Commerce (CCS), 2001

Colombia

Venezuela Index of Charts F.eAdvertising As in other Latin American countries, television dominates advertising expenditures in Chile, but not to the same degree as elsewhere. Given Chile’s small size, its advertising market, both online and off, is considerably smaller than that of other Latin American nations. According to Goldman Sachs estimates, online advertising spending in Chile represents only 2% of the regional total.

Comparative Estimates: Online Advertising Expenditures in Chile, 2001-2004 (in millions)

2001 $7.0 $5.9

2002 $16.0 $14.2

2003 $30.0 $38.0

2004 $45.0

Goldman Sachs Zenith Media Source: Goldman Sachs, 2001; Zenith Media, 2000

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Latin America Online

Methodology

I Overview

II Population and Economy

III Technology Infrastructure

IV Internet Users and Access

V Usage and Demographics

VI eCommerce

VII eAdvertising

VIII eFinance

IX Argentina

X Brazil

XI Mexico

XII Chile XIII Colombia 303 A. Overview 304 B. Technology Infrastructure 305 C. Internet Users, Access and Usage 308 XIIID. eCommerce 310 E. eAdvertising 312

XIV Venezuela

Index of Charts

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Methodology

Overview At a Glance: Colombia, 2001 Population and Economy Total population (in millions) (1) 40.3 Technology Infrastructure Population 14+ (in millions) (1) 28.3 Internet Users and Access

Usage and Demographics Population living in urban areas (1999) (2) 73% eCommerce GDP (PPP adjusted, in billions) (1999) (3) $245 eAdvertising GDP per capita (PPP adjusted) (1999) (3) $6,200 eFinance PCs per 100 inhabitants (1999) (4) 3 Argentina

Brazil Main telephone lines per 100 inhabitants (2000) (4) 16 Mexico Cellular subscribers per 100 Inhabitants (2000) (4) 8 Chile ISPs (1999) (3) 13 Colombia

Venezuela Internet users (in millions) (1999) (4) 0.66 Index of Charts Source: eMarketer, 2001; (1) US Census Bureau, 2000 (interpolated by eMarketer); (2) World Bank, 2000; (3) CIA World Fact Book, 2000; (4) International Telecommunication Union (ITU), 2001

A. Overview Colombia’s long-running guerrilla wars and the endemic problems associated with drug trafﬁcking inject unique elements of uncertainty into the country’s economy, presenting local and national governments as well as investors with signiﬁcant challenges. Yet, recent research by InfoAmericas indicates that even with 35% of the country’s territory in the hands of three different armed groups, the overall economy continues to grow, albeit at a moderate pace. Colombia’s population is the third largest in Latin America, and is highly urbanized. There are a number of large commercial centers both along the coast and in the highlands. As in Chile, the government has assumed a proactive role in stimulating internet usage and has taken legislative steps to facilitate online transactions. For example, in 1999, it passed legislation that validates digital signatures for online purchases, making Colombia one of the few countries in the region with this type of protective regulation. The government is also moving its own purchasing to the internet, and has established guidelines stating that all government entities must offer online procurement by June 2002 as part of the “Government Online” initiative.

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Methodology Low-Cost Access Overview The Colombian government is also undertaking initiatives to lower internet Population and Economy

Technology Infrastructure access costs (which, as of 1999, were among the highest in Latin America) in Internet Users and Access an effort to bring a larger portion of the population online. Through its Usage and Demographics National Connectivity Agenda (Agenda Nacional de Conectividad), the state eCommerce will provide funds to improve basic technology infrastructure and internet eAdvertising eFinance access for rural and low-income communities, with an explicit goal of

Argentina creating increased work and educational opportunities for the Colombian Brazil population. The Yankee Group estimates that government investment in the Mexico country’s internet economy could stimulate as much as $750 million in new Chile business opportunities among information technology ﬁrms. Colombia

Venezuela

Index of Charts B. Technology Infrastructure

Fixed-Line Telephones Teledensity in Colombia exceeds that of both Brazil and Mexico. The telecommunications infrastructure is relatively modern and the market is becoming increasingly competitive, although multinational corporations may balk at making substantial investments due to the risks involved. Note that the ITU has maintained its 2000 estimate for teledensity in Colombia in its most recent projections. Gartner Dataquest research, on the other hand, puts teledensity in Colombia third highest in the region behind Chile and Argentina.

Comparative Estimates: Telephone Lines per 100 Inhabitants in Colombia, 1999 & 2000 Gartner Dataquest 22.4

International Telecommunication Union (ITU) 16.0

Ministry of Communications (Colombia) 16.4 16.9

1999 2000 Source: Gartner Dataquest, International Telecommunication Union (ITU), 2001; Ministry of Communications, 2000

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Methodology Wireless Telephony Overview Colombia’s wireline infrastructure remains considerably more advanced Population and Economy

Technology Infrastructure than the country’s wireless sector as evidenced by the disparity in ﬁxed- Internet Users and Access line and wireless teledensity. According to the ITU, the ratio of ﬁxed-line Usage and Demographics telephones to wireless subscribers is 2 to 1, while estimates by Colombia’s eCommerce Ministry of Communications puts the ratio at 3 to 1. eAdvertising eFinance

Argentina Comparative Estimates: Wireless Subscribers and

Brazil Fixed-Line Telephones per 100 Inhabitants in

Mexico Colombia, 2000 Chile Wireless subscribers Colombia 7.5 Venezuela

Index of Charts 5.3 Fixed-Line telephones 16.0 16.9

International Ministry Telecommunication of Communications Union (ITU) (Colombia) Source: International Telecommunication Union (ITU), 2001; Ministry of Communications, 2000

The Yankee Group expects substantial growth in the number of wireless subscribers to take place after 2001. These projections are predicated on continued growth in the Colombian economy and ongoing investment by wireless operators in spite of the business climate.

Wireless Subscribers in Colombia, 2001-2006 (in millions)

2001 2.5

2002 3.5

2003 4.6

2004 5.6

2005 6.5

2006 7.4

Source: Yankee Group, 2000

As of September 2000, BCE Comcel and Celumovil (owned by BellSouth) were the dominant wireless operators in Colombia, controlling 60% of the country’s wireless market. The remaining 40% of the market was split among Occel, Celcaribe and Cocelco (also owned by BellSouth).

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Methodology

Overview Wireless Operators in Colombia, by Market Share,

Population and Economy September 2000

Technology Infrastructure

Internet Users and Access BCE Comcel (Analog/TDMA) 31%

Usage and Demographics Celumovil (Analog) 29% eCommerce eAdvertising Occel (Analog) 16% eFinance Cocelco (Analog) 13% Argentina Brazil Celcaribe (Analog) 10% Mexico

Chile Note: Does not add up to 100% due to rounding

Colombia Source: Informa, 2001

Venezuela Index of Charts Broadband Ovum predicts steady growth in Colombia’s broadband market. However, given the country’s relatively high teledensity, the number of digital subscriber lines will continue to exceed the number of cable modems in operation for the next few years. As such, DSL will remain a more common means of broadband access to the internet.

Broadband Households in Colombia, 2001-2004 (in thousands)

2001 10

2002 34

2003 107

2004 283

Source: Ovum, 2000

Cable Modems in Operation vs. Digital Subscriber Lines in Colombia, 2001-2003

Cable modems 19,920 35,290 58,170

DSL 24,440 49,170 86,940

2001 2002 2003 Source: Pyramid Research, 2000

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Methodology C. Internet Users, Access and Usage Overview Population and Economy Internet usage in Colombia has been growing steadily despite the Technology Infrastructure aforementioned impediments. Current estimates put internet penetration at Internet Users and Access around 1% of the population. The ITU reported 664,000 users as of year- Usage and Demographics eCommerce end 1999, while the Colombian Ministry of Communications’ estimate for eAdvertising 2000 was 735,192 users. Pyramid Research had a considerably higher eFinance estimate of 1.9 million users for 2000. According to the EIU, a drop in Argentina phone charges at both peak and off-peak hours has helped to stimulate the Brazil duration of internet sessions. Mexico

Chile

Colombia Comparative Estimates: Internet Users in Colombia,

Venezuela 2001-2005 (in millions)

Index of Charts 2001 1.2 1.3

2002 1.5 1.9

2003 1.8 2.7

2004 3.5

2005 4.4

International Data Corp. (IDC) Jupiter Research Source: various, as noted, 2000

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Methodology Access Preferences Overview According to research by the Ministry of Communications, Colombia’s Population and Economy

Technology Infrastructure internet users are split on a fairly even basis between those who access the Internet Users and Access internet from home and those who go online at the workplace. The Usage and Demographics remaining users have access from schools. EIU research indicates that eCommerce internet cafes, which offer high-speed access for as little as $1.10 per hour eAdvertising eFinance in major cities, are an increasingly popular access location, particularly

Argentina among Colombia’s youth. According to the EIU, approximately 300 Brazil internet cafes have sprung up in urban areas in the past 2 years. Mexico Chile Internet Users in Colombia, by Access Location, 2000 Colombia (as a % of total) Venezuela

Index of Charts School 10%

Home 49% Work 41%

Source: Ministry of Communications, 2000

Usage Patterns As with most internet users elsewhere in Latin America, e-mail is the favorite application of Colombians online. According to NAP Colombia, which handles over 90% of the nation’s internet traffic, the principal tangible effect of lower connection costs has been a rise in surfing as an online activity. Previously, Colombians went online for brief sessions, primarily to send and receive e-mail. February 2001 was the first month that general surfing exceeded e-mail usage.

Internet Activities in Colombia, April 2001

Others 28% Surfing 42%

eMail 30%

Source: NAP Colombia, 2001

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Methodology D. eCommerce Overview Population and Economy Beyond the political and economic uncertainty resulting from internal civil Technology Infrastructure strife, other signiﬁcant barriers to e-commerce remain. Even computers Internet Users and Access costing $1,000 remain beyond the reach of most of Colombia’s population, Usage and Demographics eCommerce meaning that B2C e-commerce will be conﬁned to a relatively small eAdvertising audience until the governmental and computer manufacturers can develop eFinance a more viable pricing scheme. According to IDC, the bulk of revenues from Argentina online transactions will come from the B2B segment. Brazil Mexico eCommerce Revenues in Colombia, 2000 & 2001 (in Chile millions) Colombia

Venezuela 2000 $56 Index of Charts 2001 $134

Source: International Data Corp. (IDC), 2000

Payment Methods On the whole, credit and debit card penetration rates in Colombia are about average for the region. Lack of disposable income is a more serious impediment to consumer e-commerce.

Credit and Combined Credit/Debit Card Penetration in Colombia, 2000 (as a % of total population)

Credit 13%

Credit/Debit 24%

Source: Morgan Stanley, 2001

Taxation Although Colombia does not have tax legislation speciﬁc to e-commerce, its tax rates, both personal and corporate, are among the highest in Latin America, according to the EIU.

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Methodology Residential Delivery Overview In terms of drop-off locations, Colombia enjoys coverage similar to that of Population and Economy

Technology Infrastructure Argentina and Chile. The country’s mountainous geography and the fact Internet Users and Access that many areas remain under guerrilla control complicate the delivery of Usage and Demographics goods. eCommerce eAdvertising Number of Drop-Off Locations of International eFinance Couriers in Colombia, 2001 Argentina Brazil DHL 12 Mexico

Chile FedEx 5 Colombia UPS 6 Venezuela Index of Charts Note: Colombian FedEx drop-off locations are all with authorized in-country agents Source: various, as noted, 2001

Privacy and Security Colombian consumers have little trust in the security of online transactions. This concern may be valid, given the lack of secure servers in Colombia, particularly among local B2C firms. Only 0.1% of the servers surveyed by Netcraft earlier this year had either strong or weak encryption. InfoAmericas estimates that local investment in online sales technology and software in 1999 was $7 million, fourth in Latin America, but well behind the $110 million spent by Brazilian firms. As a result, InfoAmericas found that in 2000, 66% of Colombians preferred to buy from foreign firms, well above the Latin American average of 59%. Colombian banks, which were among the early companies to move into the online space, are capitalizing on their first-mover advantage by bringing online and partnering with local retailers. As in Brazil, the banks guarantee the security of the transactions.

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Methodology Consumer Attitudes and Behavior Overview Given the relative proximity of the US, with its much larger consumer e- Population and Economy

Technology Infrastructure commerce market, and the limited offerings of Colombian e-commerce Internet Users and Access merchants, Colombian internet users have preferred to do their online Usage and Demographics buying at foreign sites. eCommerce eAdvertising Online Consumers Shopping at Domestic and Foreign eFinance Sites in Colombia, 2000 Argentina

Brazil

Mexico

Chile Colombia Domestic Venezuela 34% Index of Charts Foreign 66%

Source: InfoAmericas, 2000

E. eAdvertising According to Zenith Media, Colombia is home to Latin America’s fourth largest overall advertising market, with expenditures coming in just behind those of Argentina. As in other Latin American countries, television dominates advertising expenditures in Colombia, garnering over 60% of total advertising expenditures. Despite the noted problems afﬂicting the country’s business environment and the limited size of its internet user population, Goldman Sachs expects Colombia to have the region’s fourth largest online advertising market, just behind Argentina. In fact, by 2004, Goldman Sachs predicts that online advertising expenditures in Colombia will top those of Argentina. Overall, online advertising expenditures in Colombia represent 8.4% of the regional total.

Online Advertising Expenditures in Colombia, 2001-2004 (in millions)

2001 $26

2002 $45

2003 $64

2004 $89

Source: Goldman Sachs, 2001

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Methodology

I Overview

II Population and Economy

III Technology Infrastructure

IV Internet Users and Access

V Usage and Demographics

VI eCommerce

VII eAdvertising

VIII eFinance

IX Argentina

X Brazil

XI Mexico

XII Chile

XIII Colombia XIV Venezuela 313 A. Overview 314 B. Technology Infrastructure 315 C. Internet Users 318 XIVD. eCommerce 318 E. eAdvertising 321

Index of Charts

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Methodology

Overview At a Glance: Venezuela, 2001 Population and Economy Total population (in millions) (1) 23.9 Technology Infrastructure Population 14+ (in millions) (1) 16.7 Internet Users and Access

Usage and Demographics Population living in urban areas (1999) (2) 87% eCommerce GDP (PPP adjusted, in billions) (1999) (3) $183 eAdvertising GDP per capita (PPP adjusted) (1999) (3) $8,000 eFinance PCs per 100 inhabitants (2000) (4) 5 Argentina

Brazil Main telephone lines per 100 inhabitants (2000) (4) 11 Mexico Cellular subscribers per 100 Inhabitants (2000) (4) 14 Chile ISPs (1999) (3) 11 Colombia

Venezuela Internet users (in millions) (2000) (4) 0.95 Index of Charts Source: eMarketer, 2001; (1) US Census Bureau, 2000 (interpolated by eMarketer); (2) World Bank, 2000; (3) CIA World Fact Book, 2000; (4) International Telecommunication Union (ITU), 2000

A. Overview With ﬁxed-line teledensity at approximately 11% and a relatively low per capita GDP, Venezuela does not present prime conditions for supporting internet usage and e-commerce. The country’s occasionally volatile economy and currency ﬂuctuations have also hindered growth in online usage and services. However, Venezuela’s president, Hugo Chavez, has proven to be an ardent promoter of the internet, and is moving to diffuse internet access throughout the Venezuelan population. In February 2001, the government passed legislation protecting digital signatures for document transfers and online purchases, becoming only the fourth country in the region to do so. Venezuelan media groups are also active in providing internet content. For example, the powerful Cisneros Group owns a stake in AOL Latin America and purchased the Argentine portal, El Sitio, in 2000.

Low-Cost Access As part of the National Information Technologies Plan, the government has already installed public internet kiosks in libraries, shopping malls and government buildings. According to the EIU, the nation’s largest wireless operator, Telcel, which is owned by BellSouth, has introduced prepaid cards that allow users to connect to the internet and shop online up to the preset limit at the company’s mipunto.com portal. The government is studying the possibility of adopting a similar system for its existing public access points. With collaboration from the private sector, it is also in the process of establishing over 200 “infocenters” equipped with PCs and internet access.

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Methodology B. Technology Infrastructure Overview

Population and Economy Technology Infrastructure Fixed-Line Telephones Internet Users and Access Venezuela’s low teledensity remains a serious impediment to the country’s Usage and Demographics eCommerce internet market. Internet access charges are high, although telephone eAdvertising companies do offer a small discount to customers dialing in to their ISP. eFinance Access prices may decline as new operators enter the ﬁxed-line market, Argentina which became open to competition in November 2000. Brazil

Mexico Comparative Estimates: Telephone Lines per 100 Chile Inhabitants in Venezuela, 1999 & 2000 Colombia

Venezuela

Index of Charts Gartner Dataquest 15.3

International Telecommunication Union (ITU) 10.9

CONATEL 10.4

1999 2000 Source: Gartner Dataquest, 2001; International Telecommunication Union (ITU), 2001; National Telecommunications Commission (CONATEL), 2000

Wireless Telephony Venezuela’s wireless infrastructure is far more advanced than the country’s fixed-line sector as evidenced by the disparity in fixed-line and wireless teledensity. According to the ITU, wireless subscribers represent 57% of all subscribers to telephone services in Venezuela. Yankee Group research indicates that the disparity between wireless subscribers and fixed-line telephones will increase by the middle of the decade. Consequently, delivering content and services over the wireless web may be a more promising avenue than the PC-based internet.

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Methodology

Overview Wireless Subscribers and Fixed-Line Telephones per

Population and Economy 100 Inhabitants in Venezuela, 2001-2005 Technology Infrastructure 2001 Internet Users and Access 28.1 Usage and Demographics 12.0 eCommerce eAdvertising 2002 eFinance 32.5 Argentina 13.0 Brazil 2003 Mexico 34.9 Chile 14.0 Colombia Venezuela 2004 Index of Charts 36.6 14.0 2005 37.8 15.0

Wireless subscribers Fixed-line telephones Source: Yankee Group, 2000

As of September 2000, Telcel and Movilnet (controlled by CANTV) were the dominant wireless operators in Venezuela, controlling 96% of the country’s wireless market. The remaining 4% of the market was split between Digitel (controlled by Telecom Italia Mobile) and Infonet.

Wireless Operators in Venezuela, by Market Share, September 2000

Telcel (Analog/CDMA) 64%

Movilnet (Analog/TDMA) 32%

Digitel (GSM) 2%

Infonet (GSM) 1%

Note: Does not add up to 100% due to rounding Source: Informa, 2001

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Methodology Broadband Overview Ovum predicts steady growth in Venezuela’s broadband market. Pyramid Population and Economy

Technology Infrastructure Research predicts that internet access via digital subscriber lines will still Internet Users and Access outpace access through cable modems, despite the country’s low Usage and Demographics teledensity. eCommerce eAdvertising Broadband Households in Venezuela, 2001-2004 (in eFinance thousands) Argentina

Brazil 2001 13 Mexico

Chile 2002 34

Colombia 2003 82 Venezuela Index of Charts 2004 177

Source: Ovum, 2000

Cable Modems in Operation vs. Digital Subscriber Lines in Venezuela, 2001-2003

2001 11,260 19,550

2002 22,320 44,770

2003 39,060 83,410

Cable modems DSL Source: Pyramid Research, 2000

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Methodology C. Internet Users Overview Population and Economy Internet usage in Venezuela has been growing despite the many Technology Infrastructure impediments presented by the country’s limited ﬁxed-line infrastructure. Internet Users and Access The ITU reported 950,000 users as of year-end 2000, while the Venezuelan Usage and Demographics eCommerce Chamber of Electronic Commerce’s (CAVECOM-e) estimate for 2000 was a eAdvertising far more modest 286,546 users. eFinance Argentina Comparative Estimates: Internet Users in Venezuela, Brazil 2000 (in millions) Mexico Chile CAVECOM-e 0.3 Colombia

Venezuela Intenational Telecommunication Union (ITU) 1.0

Index of Charts Source: various, as noted, 2001

Internet Users in Venezuela, 2001 & 2003 (in millions)

2001 0.4

2003 0.6

Source: Venezuelan Chamber of Electronic Commerce (CAVECOM-e), 2001

D. eCommerce Online spending by both consumers and businesses remains limited in Venezuela. As in other Latin American countries, banks in Venezuela were among the ﬁrst companies to offer online services. Now, according to the EIU, the leading national bank Banco de Venezuela, a subsidiary of Banco Santander Central Hispano, even holds a daily lottery offering the equivalent of $1,500 to attract new customers to its online service. Other businesses are slowly migrating their operations to the internet as well. For example, telecommunications giant CANTV has launched an electronic marketplace, Avantxa, which it will use to trade with its goods and services suppliers. In December 2000, the Venezuelan Petroleum Chamber, which has 900 members, backed the launch of PetroLatin, one of the region’s largest exchanges in the oil sector.

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Methodology B2C eCommerce Overview

Population and Economy

Technology Infrastructure B2C eCommerce Revenues in Venezuela, 2001 & 2002

Internet Users and Access (in millions)

Usage and Demographics 2001 $73.7 eCommerce eAdvertising 2002 $302.0 eFinance

Argentina Source: Venezuelan Chamber of Electronic Commerce (CAVECOM-e), 2001

Brazil

Mexico Chile Transactions Colombia

Venezuela According to CAVECOM-e, the number of online consumers totaled 49,929

Index of Charts in 2000, representing approximately 17% of the internet user population. This ﬁgure seems high in comparison to the ratio of users to buyers in other Latin American countries that have more advanced user populations. The likelihood is that a considerable percentage of these online shoppers made only one purchase. CAVECOM-e expects 73,622 internet users to buy online in 2001.

Payment Methods On the whole, credit and debit card penetration rates in Venezuela are about average for the region. Lack of disposable income is a more serious impediment to consumer e-commerce.

Credit and Combined Credit/Debit Card Penetration in Venezuela, 2000 (as a % of total population)

Credit 12%

Credit/debit 27%

Source: Morgan Stanley, 2001

Taxation At present, Venezuela has no tax legislation speciﬁc to e-commerce. According to the EIU, a value-added tax of 14.5% applies to purchases of most consumer products, both online and off.

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Methodology Residential Delivery Overview In terms of drop-off locations, Venezuela enjoys better coverage than most Population and Economy

Technology Infrastructure other countries in South America. This ability to get goods shipped from Internet Users and Access abroad may in part explain Venezuelans’ preference for purchasing at Usage and Demographics foreign websites. Another factor may be the national postal system’s eCommerce continued lack of reliability. eAdvertising eFinance

Argentina Number of Drop-Off Locations of International

Brazil Couriers in Venezuela, 2001

Mexico DHL 16 Chile Colombia FedEx 16 Venezuela

Index of Charts UPS 2

Source: various, as noted, 2001

Privacy and Security Only 0.1% of the servers surveyed by Netcraft earlier this year had either strong or weak encryption. This level of security is similar to that found in Colombia and Chile.

Consumer Attitudes and Behavior Given the relative proximity of the US, with its much larger consumer e- commerce market, and the still-limited (albeit growing) offerings of online merchants in Venezuela, it is unsurprising that Venezuelan internet users have preferred to do their buying at foreign sites.

Comparative Estimates: Online Consumers Shopping at Domestic and Foreign Sites in Venezuela, 2000

Domestic Domestic 23% 23%

Foreign Foreign 77% 77%

CAVECOM-e InfoAmericas Source: Venezuelan Chamber of Electronic Commerce (CAVECOM-e), 2001; InfoAmericas, 2000

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Methodology E. eAdvertising Overview Population and Economy According to Zenith Media, among Latin America’s overall advertising Technology Infrastructure markets, Venezuela’s is the one most dominated by television, which is Internet Users and Access expected to account for 73% of total spending in 2002. Venezuela’s online Usage and Demographics eCommerce advertising market, however, remains small, accounting for just 3.5% of eAdvertising the regional total. eFinance Argentina Online Advertising Expenditures in Venezuela, Brazil 2001-2004 (in millions) Mexico Chile 2001 $11 Colombia

Venezuela 2002 $23 Index of Charts 2003 $36

2004 $49

Source: Goldman Sachs, 2000

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Latin America Online

Methodology

I Overview

II Population and Economy

III Technology Infrastructure

IV Internet Users and Access

V Usage and Demographics

VI eCommerce

VII eAdvertising

VIII eFinance

IX Argentina

X Brazil

XI Mexico

XII Chile

XIII Colombia

XIV Venezuela Index of Charts 323

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Index of Charts Welcome to eMarketer 12 Methodology: The eMarketer Difference 13 I Overview 15 II Population and Economy 19 A. Deﬁning the Region 20 Population 20 Population of Latin America and the Caribbean, by Country, 2001 (in millions) 20 Population Living in Urban/Rural Areas in Latin America and the Caribbean, 2000 21 Population Living in Urban Areas in Selected Countries in Latin America, 1999 22 B. Identifying Potential Internet Users in Latin America 22 Population 14+ of Selected Internet Markets in Latin America, 2001-2005 (in millions) 22 Age Distribution 22 Age Breakdown of Selected Countries in Latin America, 2001 23 Income Distribution 24 Population Living on $2.00/Day or Less in Selected Countries in Latin America, 1994-1997 24 Income Distribution in Selected Countries in Latin America and the US, 2000 25 Wealth Distribution in Selected Countries in Latin America and the US, 2001 26 Potential Internet Users in Selected Countries in Latin America, 2001-2005 (in millions) 27 III Technology Infrastructure 29 A. Telecommunications 30 Fixed-Line Telephones 31 Telephone Lines per 100 Inhabitants in Selected Countries in Latin America, 2000 31 Main Telephone Lines per 100 Inhabitants in Selected Countries in Latin America, 2000 32 Telephone Lines per 100 Inhabitants in Selected Countries in Latin America, 1999 & 2000 32 Telephone Lines per 100 Inhabitants in Latin America, 2001- 2005 33 Telephone Lines per 100 Inhabitants in Argentina, Brazil and Mexico, 2001-2003 33 Number of Telephone Lines in Service in Latin America, 2001-2005 (in millions) 34 Number of Telephone Subscribers in Latin America, 2001-2005 & 2010 (in millions) 34 Wireless Telephony 34 Latin American Wireless Subscribers, by Technology, 2000 36 Latin American Wireless Subscribers, by Technology, 2001-2006 (in millions) 36

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Index of Charts GSM Subscribers in Latin America, 2001-2005 (in millions and as a % of total GSM subscribers) 37 Wireless Technology in Latin America, 2001-2004 (as a % of total users) 37 Wireless Subscribers in Latin America, 2001-2006 (in millions and as % of total population) 38 Comparative Estimates: Wireless Subscribers in Latin America, 2001-2006 (in millions) 38 Comparative Estimates: Wireless Phone Penetration in Latin America, 2001-2006 38 Worldwide Wireless Market, by Region, 2001-2003 (as a % of total wireless phones installed) 39 Worldwide Wireless Market, by Region, 2000-2003 (as a % of total subscribers) 39 Handset Sales in Latin America, 2001-2004 (in millions and as % of total worldwide sales) 40 B. Broadband 40 Consumers with Broadband Access in Latin America, 2000 41 Comparative Estimates: Residential Broadband Subscribers in Latin America, 2000-2004 (in thousands) 41 Broadband Technologies in Latin America, by Market Share, 2004 41 Business Broadband Subscribers in Latin America, 2000-2004 (in thousands of lines) 42 Business vs. Residential Broadband Subscriptions in Latin America, 2004 42 Cable 42 Number of Cable TV Subscribers in Latin America, 2001-2006 (in millions) 43 Number of Cable TV Subscribers in Selected Latin American Countries, 2001-2005 (in millions) 43 Number of Cable TV Subscribers in Selected Latin American Countries, 2001-2005 (in millions) 43 Households with Cable TV in Selected Latin American Countries, 2001-2005 44 Comparative Estimates: Residential Broadband Cable Subscribers in Latin America, 2001-2004 (in thousands) 44 Cable Modems in Operation in Selected Countries in Latin America, 2001-2003 45 DSL 45 Comparative Estimates: Residential DSL Subscribers in Latin America, 2001-2004 (in thousands) 45 Digital Subscriber Lines in Selected Countries in Latin American, 2001-2003 46 Alternative Broadband Technologies 47 Comparative Estimates: Residential Subscribers to Alternative Broadband Technologies in Latin America, 2000-2004 (in thousands) 48 Digital Broadcast Satellite Subscribers in Latin America, 2001-2006 (in millions) 48

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Index of Charts Distribution of Worldwide Interactive TV Audience, by Region, 2001 48 C. Dial-Up Access and Internet Service Providers (ISPs) 49 Dial-Up Access 49 Internet Subscribers in Latin America, by Access Type, 2000 49 Internet Subscribers in Latin America, by Means of Access, 2002 49 Internet Access Speeds in Selected Countries in Latin America, 2000 50 Businesses with High-Speed Internet Access (>56 Kbps), 2000 (as a % of total businesses surveyed) 50 ISPs 51 Comparative Estimates: Number of ISPs in Selected Countries in Latin America, 1999 52 D. Hardware 53 PC Vendors in Latin America, by Market Share, 2000 53 Combined Desktop and Notebook Shipments to Latin America, 2002-2005 (in millions) 54 Computer Shipments to Latin America, 2000 (in millions and as a % of Latin America’s total) 54 Hardware Revenues in Latin America, by Category, 2000 & 2004 (in billions and as a % of Latin America’s total) 54 Server Vendors in Latin America, by Market Share, 2000 55 PCs per 100 Inhabitants in Selected Countries in Latin America, 1999 & 2000 56 PC Penetration in Latin America, 2001-2005 (as a % of population) 56 PC Penetration in Latin America, 2001-2005 (as a % of population) 57 Number of PCs in Latin America, 2001-2005 (in millions) 57 Distribution of PCs in Latin America, 2001 (in millions and as a % of Latin America’s total) 57 Number of Households with PCs in Latin America, 2001-2005 (in millions) 58 Households with PCs in Latin America, 2001-2005 (as a % of total households) 58 Workforce with PC Access in Latin America, 2001-2005 (as a % of total workforce) 59 Growth in Business Spending on Hardware in Latin America, 2001-2003 59 E. Internet 60 Network Capacity 60 Average Response Time, Packet Loss (past 30 days) and Number of Routers, by Region, 2001 60 Internet Hosts 61 Internet Hosts in Selected Countries in Latin America, 1995- January 2001 61 Internet Content 62 Webpages in Spanish, Portuguese and Other Languages, 2000 (in millions and as a % of total) 62 Online Language Populations Worldwide, March 2001 63

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Index of Charts F.Access Costs 63 Home and Business Telephone Costs in Selected Countries in Latin America, 1999-2000 64 Telephone and Internet Access Fees Reported by Internet Users in Selected Countries in Latin America, 2000 65 Telephone and Internet Access Fees in Selected Countries in Latin America, 2000 65 Residential and Business Internet Access Revenues in Latin America, 2001, 2003 & 2005 (in billions) 66 Changes in Wireless Rates for Selected Markets in Latin America, 1999-2000 67 IV Internet Users and Access 69 A. Internet Users 70 Internet Users in Latin America, 2001-2004 (in millions and as a % of population 14+) 70 Distribution of Worldwide Internet Users, by Region, 2001 & 2004 (in millions and as a % of worldwide internet users) 71 Market Concentration 71 Internet Users in Latin America, 2001-2004 (in millions) 72 Concentration of Internet Users in Latin America, 2001 & 2004 (in millions and as a % of Latin American internet users) 72 Comparative Estimates 73 Internet Subscriptions in Latin America, 2001-2005 (in millions) 73 Internet Users per Subscription in Latin America, 2001-2005 73 Comparative Estimates: Internet Users in Latin America, 2001-2005 (in millions) 74 Internet Penetration 75 Internet Users in Latin America and the US, 2001-2004 (as a % of population 14+) 75 Comparative Estimates: Internet Users in Latin America, 2001-2005 (as a % of population) 76 Internet Users in Latin America, 2001-2004 (as a % of top 15% of population 14+) 77 Households with Internet Connection in Argentina, Brazil and Mexico, 2003 (in millions and as a % of total households and ABC1 socioeconomic segments) 77 B. Wireless Internet Users 77 Comparative Estimates: Wireless Internet Users in Latin America, 2001-2005 (in millions) 78 Wireless Data Users in Latin America, by Technology, 2001-2007 (in millions) 79 C. Access Preferences 80 Home and Work 80 Internet Users in Latin America, by Access Location, 2001-2005 (as a % of total) 80 Internet Users in Latin America, by Access Location, 2001-2004 (in millions) 81

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Index of Charts Internet Users in Latin America, by Access Location, 2000 (as a % of total) 81 Workforce with Internet Access in Latin America, 2001-2005 & 2010 82 Home and Business PCs in Latin America with Internet Connection, 2001-2005 83 V Usage and Demographics 85 A. Usage 86 Frequency of Sessions 86 Frequency of Internet Sessions in Argentina, Brazil and Mexico, 2000 (in number of times per week) 86 B. Usage Patterns 87 Internet Activities in Argentina, Brazil and Mexico, 2000 87 Internet Activities of Survey Respondents in Latin America, 2000 (as a % of activities within the previous month) 88 C. Demographics 88 Gender 88 Internet Users in Latin America, by Gender, 2000 88 Age 89 Mean Age of Population and of Internet Users in Latin America, 1999-2000 89 VI eCommerce 91 A. Total eCommerce 92 eCommerce in Latin America, 2000-2004 (in billions) 93 Worldwide eCommerce Distribution, by Region, 2001 (in billions) 94 eCommerce in Latin America, 2001-2004 (in billions) 94 eCommerce Distribution in Latin America, 2001 & 2004 (in billions) 95 Comparative Estimates 95 Comparative Estimates: eCommerce Revenues in Latin America, 2001-2005 (in billions) 96 B. B2C eCommerce 97 B2C Revenues 97 B2C eCommerce in Latin America, 2000-2004 (in billions and as a % of total Latin American e-commerce) 97 B2C eCommerce in Latin America, 2001-2004 (in billions) 104 Comparative Estimates 99 Comparative Estimates: B2C eCommerce in Latin America, 2001-2005 (in billions) 99 Payment Methods 99 Credit Card Penetration in Selected Countries in Latin America, 2000 (as a % of total population) 100 Combined Credit/Debit Card Penetration in Selected Countries in Latin America, 2000 (as a % of total population) 100 Residential Delivery 101 Global eCommerce Barriers Cited by Companies Worldwide, 2000 102 International Couriers’ Drop-Off Locations in Selected Countries in Latin America, 2001 102

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Index of Charts Privacy and Security 103 Servers with Strong and Weak Encryption in the US and Selected Countries in Latin America, 2001 104 Consumer Attitudes and Preferences 105 Consumers Shopping at Domestic and Foreign Sites in Latin America, US and Europe, 2000 105 Features of Local and Regional Consumer-Oriented Portals in Latin America, 2001 (as a % of portals surveyed) 106 C. B2B eCommerce 106 B2B eCommerce in Latin America, 2000-2004 (in billions and as a % of total Latin American e-commerce) 107 B2B eCommerce in Latin America, 2000-2004 (in billions) 107 Comparative Estimates 108 Comparative Estimates: B2B eCommerce in Latin America, 2001-2005 (in billions) 109 Business Process Automation and IT Spending 109 eBusiness Initiatives Adopted by Latin American Companies, 2001 110 CRM Technology Budget Allocation in Latin America, 2000 111 CRM Services Revenues in Latin America, 2001-2004 (in billions and as a % of total worldwide CRM Services Revenues) 111 D. mCommerce 112 Worldwide Mobile Commerce Revenues, by Region, 2000-2005 (in billions) 112 Worldwide Mobile Commerce Revenues, by Region, 2000-2004 (in billions) 112 VII eAdvertising 113 A. Online Advertising Expenditures 114 Online Advertising Expenditures in Latin America, 2001-2003 (in millions) 114 Online Advertising Expenditures in Latin America, 2001-2003 (as a % of total worldwide and non-US worldwide online advertising expenditures) 114 Comparative Estimates 115 Comparative Estimates: Online Advertising Spending in Latin America, 2001-2005 (in millions) 115 B. Click-Through Rates 115 Latin American Internet Users Clicking on Ads, by Time Online in Past 30 Days, 2000 115 C. Wireless Advertising 116 Worldwide Wireless Advertising Spending, 2004 (in millions) 116 VIII eFinance 117 A. Online Banking 118 Argentina 119 Brazil 120 Online Transactions at Selected Banks in Brazil, 2000 (in millions) 121 Chile 122

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Index of Charts Colombia 122 Mexico 122 Venezuela 123 B. Online Trading 123 Brazil 124 Average Daily Online Trading Value on the Bovespa Stock Exchange in Brazil, April 1999-Dec 2000 (in millions) 124 C. Wireless Financial Services 125 Users Worldwide of Wireless Financial Services, by Region, 2000 & 2005 (in millions) 126 IT Spending on Wireless Financial Services, by Region, 2000 & 2005 (in millions and as a % of total) 127 IX Argentina 129 At a Glance: Argentina, 2001 130 A. Overview 130 Low-Cost Access 131 B. Technology Infrastructure 131 Fixed-Line Telephones 131 Comparative Estimates: Telephone Lines per 100 Inhabitants in Argentina, 1999-2005 132 Wireless Telephony 132 Wireless Subscribers in Argentina, 2001-2005 (in millions) 132 Wireless Subscribers and Fixed-Line Telephones in Argentina, 2000-2003 (as a % of population) 132 Wireless Operators in Argentina, by Market Share, September 2000 133 Mobile Handset Manufacturers in Argentina, by Market Share, 2000 133 Broadband 134 Comparative Estimates: Residential Broadband Subscribers in Argentina, 2000-2004 (in thousands) 134 Business Broadband Subscribers in Argentina, 2000-2004 (in thousands of lines) 135 Selected Broadband Access Plans in Argentina, 2000 135 Cable Operators in Argentina, by Market Share, 2000 136 Comparative Estimates: Residential Cable Broadband Subscribers in Argentina, 2000-2004 (in thousands) 137 Comparative Estimates: Residential DSL Subscribers in Argentina, 2000-2004 (in thousands) 138 Cable Modems in Operation vs. Digital Subscriber Lines in Argentina, 2001-2003 138 Residential Subscribers to Alternative Broadband Technologies in Argentina, 2000-2004 (in thousands) 139 C. Internet Users and Access 140 Internet Users in Argentina, 2001-2004 (in millions and as a % of population 14+) 140

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Index of Charts Comparative Estimates 140 Comparative Estimates: Internet Users in Argentina, 2001-2005 (in millions) 140 Access Preferences 141 Internet Users in Argentina, by Access Location, 2000 141 Internet Users in Argentina, by Access Location, 2000 (as a % of total) 141 Internet Users in Argentina, by Access Location, 2001-2005 (as a % of total) 142 Households/Workforce with Internet Access in Argentina, 2001-2005 & 2010 143 Home and Business PCs in Argentina with Internet Connection, 2001-2005 144 D. Usage and Demographics 144 Frequency of Sessions 144 Frequency of Internet Sessions in Argentina, Brazil and Mexico, 2000 (in number of times per week) 144 Duration of Sessions 145 Time Spent Online per Day in Argentina, by Experience Online, 2000 145 Usage Patterns 146 Internet Activities in Argentina, Brazil and Mexico, 2000 146 Internet Activities in Argentina, 2000 147 Most Popular Websites 148 Frequently Visited Websites in Argentina, by Category, 2000 148 Top 15 Internet Properties in Argentina, March 2001 149 Top 15 Internet Domains/Applications in Argentina, March 2001 149 Top Domains in Argentina, by Category, March 2001 150 Gender 150 Comparative Estimates: Internet Users in Argentina, by Gender, 2000 150 Age 151 Internet Users in Argentina, by Age and Gender, 2001 151 Experience Online 152 Internet Users in Argentina, by Number of Years Online, 2000 152 Internet Users in Argentina, by Number of Years Online, 2000 (by age, gender and socioeconomic strata) 153 Internet Users in Argentina, by Number of Years Online, 2000 (by gender) 153 Socioeconomic, Employment and Educational Status 154 Comparative Estimates: Internet Users in Argentina, by Socioeconomic Strata, 2001 154 Internet Users in Argentina, by Employment Status, 2001 155 Internet Users in Argentina, by Educational Status, 2000 155 E. eCommerce 156 Total eCommerce 156

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Index of Charts eCommerce Revenues in Argentina, 2000-2004 (in billions and as a % of total Latin American e-commerce) 156 Comparative Estimates 157 Comparative Estimates: eCommerce Revenues in Argentina, 2001-2004 (in billions) 157 B2C eCommerce 157 B2C eCommerce Revenues in Argentina, 2001-2004 (in billions and as a % of total Latin American B2C e-commerce) 158 Comparative Estimates 158 Comparative Estimates: B2C eCommerce Revenues in Argentina, 2001-2005 (in billions) 158 Concentration of Online Retailing Revenues in Argentina, 2000 159 Transactions 159 Comparative Estimates: Internet Users in Argentina Buying Online, 2000-2001 (as a % of total internet user population) 159 Frequency of Online Shopping in Argentina, 2000-2001 (in number of purchases in previous year) 160 Frequency of Online Shopping in Argentina, 2000-2001 (in number of purchases in previous year) 160 Payment Methods 161 Credit and Combined Credit/Debit Card Penetration in Argentina, 2000 (as a % of total population) 161 Online Payment Methods vs. Payment Preferences in Argentina, 2000 161 Taxation 162 Residential Delivery 162 Number of Drop-Off Locations of International Couriers in Argentina, 2001 162 Privacy and Security 162 Consumer Attitudes and Preferences 163 Comparative Estimates: Internet Users Shopping Online in the Previous Year in Argentina, 2000-2001 163 Internet Users Shopping Online in the Previous Year in Argentina, 2001 (by number of years online) 164 Internet Users Shopping Online in Argentina, 2000 (by number of years online) 164 Important ePurchasing Factors among Current and Future Internet Users in Argentina, 2000 165 Reasons for Shopping Online in Argentina, 2000 165 Reasons for Not Buying Online in Argentina, 2001 166 Reasons for Not Buying Online in Argentina, 2000 166 Comparative Estimates: Online Consumers Shopping at Domestic and Foreign Sites in Argentina, 2000-2001 167 Anticipated Online Purchases in Argentina, 2000 168 Consumers Buying Products Online in Argentina, 2001 169 Consumers Buying Products Online in Argentina, 2000 169 B2B eCommerce 170

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Index of Charts B2B eCommerce Revenues in Argentina, 2001-2004 (in billions and as a % of total Latin American B2B e-commerce) 170 Comparative Estimates 170 Comparative Estimates: B2B eCommerce Revenues in Latin America, 2001-2004 (in billions) 171 Business Internet Penetration 171 Businesses with a Website in Argentina, 2000-2001 171 Businesses Buying Online in Argentina, 2000 171 Businesses Selling Online in Argentina, 2000-2001 172 F.eAdvertising 172 Comparative Estimates: Online Advertising Spending in Argentina, 2001-2004 (in millions) 172 X Brazil 173 At a Glance: Brazil, 2001 174 A. Overview 174 Low-Cost Access 175 B. Technology Infrastructure 177 Fixed-Line Telephones 177 Comparative Estimates: Telephone Lines per 100 Inhabitants in Brazil, 1999-2005 178 Wireless Telephony 178 Technology and Market Share in Brazil, by Operating Area, 2000 179 Wireless Operators in Brazil, by Market Share, September 2000 180 Mobile Handset Manufacturers in Brazil, by Market Share, 2000 181 Wireless Subscribers and Fixed-Line Telephones in Brazil, 2001-2005 (in millions and as a % of population) 181 Average Revenue per Wireless User (ARPU) and Average Minutes of Use (MOU) per Month in Brazil, 1997-2001 182 Wireless Subscribers in Brazil, 2001-2005 (in millions) 183 Comparative Estimates: Wireless Subscribers in Brazil, 2001-2005 (in millions) 183 Trunking Subscribers in Brazil, 2001-2005 (in millions) 183 Broadband 184 Comparative Estimates: Residential Broadband Subscribers in Brazil, 2000-2004 (in thousands) 184 Business Broadband Subscribers in Brazil, 2000-2004 (in thousands of lines) 185 Broadband Technologies in Brazil, by Market Share, 1999-2001 185 Sample ADSL, ISDN and Broadband Cable Service Costs in Brazil, 2001 186 Comparative Estimates: Residential Cable Broadband Subscribers in Brazil, 2000-2004 (in thousands) 186 Distribution of Brazilian Cable Subscribers, by Region, 2000 187 Cable Operators in Brazil, by Market Share, 2000 187 Comparative Estimates: Residential DSL Subscribers in Brazil, 2000-2004 (in thousands) 188

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Index of Charts Cable Modems in Operation vs. Digital Subscriber Lines in Brazil, 2001-2003 188 Residential Subscribers to Alternative Broadband Technologies in Brazil, 2000-2004 (in thousands) 189 C. Internet Users and Access 189 Internet Users in Brazil, 2001-2004 (in millions and as a % of population 14+) 189 Comparative Estimates 190 Comparative Estimates: Internet Users in Brazil, 2001-2005 (in millions) 190 Access Preferences 191 Internet Users in Brazil, by Access Location, 2001-2005 (as a % of total) 191 Households/Workforce with Internet Access in Brazil, 2001-2005 & 2010 192 Home and Business PCs in Brazil with Internet Connection, 2001-2005 192 D. Usage and Demographics 193 Frequency of Sessions 193 Frequency of Internet Usage in Brazil, 2001 (as a % of total internet user population) 193 Frequency of Internet Sessions in Argentina, Brazil and Mexico, 2000 (in numbers of times per week) 193 Frequency of Internet Sessions in Brazil, September 2000-February 2001 (in number of days per month) 194 Duration of Sessions 194 Frequency of Access and Time Spent Online in a Week in Brazil, 2000 194 Average Time Spent Online per Month in Brazil, by Gender, January 2001 195 Average Time Spent Online per Day in Brazil, September 2000- February 2001 (in number of minutes per day) 195 Usage Patterns 196 Internet Activities in Argentina, Brazil and Mexico, 2000 196 Most Popular Websites 197 Top 10 Internet Properties in Brazil, February 2001 197 Top 10 Internet Domains/Applications in Brazil, February 2001 198 Top 10 Domains in Brazil, March 2001 198 Reach of Top Domains in Brazil, by Category, September 2000- February 2001 199 Top Domains in Brazil, by Category, January 2001 199 Gender 200 Comparative Estimates: Internet Users in Brazil, by Gender, 2000 200 Age 200 Internet Users in Brazil, by Age, 2000 200 Internet Users in Brazil, by Age, 2000 200

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Index of Charts Internet Users in Brazil, by Age and Gender, 2000 201 Experience Online 202 Internet Users in Brazil, by Number of Years Online, 2000 202 Socioeconomic and Employment Status 202 Comparative Estimates: Internet Users in Brazil, by Socioeconomic Strata, 2000 203 Internet Users in Brazil, by Employment Status, 2000 203 Geography 204 Internet Users in Brazil, by Location, 2000 204 E. eCommerce 205 Total eCommerce 205 eCommerce Revenues in Brazil, 2000-2004 (in billions and as a % of total Latin American e-commerce) 205 Comparative Estimates 206 Comparative Estimates: eCommerce Revenues in Brazil, 2001-2004 (in billions) 206 B2C eCommerce 206 B2C eCommerce Revenues in Brazil, 2001-2004 (in billions and as a % of total Latin American B2C e-commerce) 207 Comparative Estimates 208 Comparative Estimates: B2C eCommerce Revenues in Brazil, 2001-2005 (in billions) 208 Concentration of Online Retailing Revenues in Brazil, 2000 209 Transactions 209 Annual Online Spending per Internet User in Brazil, 2000 209 Shopping Trends in Brazil among Survey Respondents in the Previous 12 Months, 2000 210 Frequency of Online Shopping in Brazil, 2000 (in number of purchases per year) 210 Trends in the Number of Purchases among Survey Respondents in the Previous 12 Months in Brazil, 2000 210 Frequency of Online Shopping in Brazil, 2000 (in six-month period) 211 Frequency of Online Shopping in Brazil, by Gender, 2000 212 Hourly Distribution of Online Shopping in Brazil, 2000 213 Payment Methods 214 Comparative Estimates: Credit Card Penetration in Brazil, 2000 (as a % of total population) 214 Credit and Combined Credit/Debit Card Penetration in Brazil, 2000 (as a % of total population) 214 Number and Usage of eMoney Products in Brazil, 1999 215 Taxation 215 Residential Delivery 216 Comparative Estimates: Products Ordered Online Arriving on Time in Brazil, 2000 216 Number of Drop-Off Locations of International Couriers in Brazil, 2001 217

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Index of Charts Privacy and Security 217 Brazilian eCommerce Websites with and without Adequate Disclosure of Privacy Policies, 2000 218 Consumer Demographics 219 Comparative Estimates: Online Consumers in Brazil, by Gender, 2000 & 2001 219 Online Shoppers in Brazil, by Age, 2000 220 Online Shoppers in Brazil, by Age, 2000 220 Online Shoppers in Brazil, by Education, 2000 221 Annual Household Income of Online Shoppers in Brazil, 2000 221 Online Shoppers in Brazil, by Location, 2000 222 Consumer Attitudes and Preferences 222 Comparative Estimates: Internet Users Shopping Online in Brazil, 2000 223 Reasons for Shopping Online in Brazil, 2000 223 Factors Involved in Choosing an Online Retailer in Brazil, 2000 224 Important ePurchasing Factors among Current and Future Internet Users in Brazil, 2000 225 Reasons for Not Shopping Online in Brazil, 2000 225 Reasons for Abandoning Shopping Carts in Brazil, 2000 226 Online Consumers Shopping at Domestic and Foreign Sites in Brazil, 2000 226 Top Reasons for Brazilians Purchasing at Foreign Sites, 2000 227 Consumer Expectations of Online Merchandise Assortment in Brazil, 2000 227 Consumer Expectations in Brazil of Lower Prices for Online Merchandise, 2000 228 Anticipated Online Purchases in Brazil, 2000 229 Consumers Buying Products Online in Brazil, 2000 229 Favorite Websites for Purchasing in Brazil, 2000 230 Favorite Websites for Purchasing in Brazil, December 2000 (by % reach) 230 B2B eCommerce 231 B2B eCommerce Revenues in Brazil, 2001-2004 (in billions and as a % of total Latin American B2B e-commerce) 231 Comparative Estimates 232 Comparative Estimates: B2B eCommerce Revenues in Brazil, 2001-2005 (in billions) 232 B2B eCommerce (by Industry) 233 Future B2B Potential in Brazil 233 Distribution of Industrial B2B Portals in Brazil, by Industry, 2000 234 Distribution of B2B eCommerce Revenues in Brazil, 2001-2005 (in billions) 234 B2G eCommerce 235 Business Internet Penetration 235

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Index of Charts Exchanges and Marketplaces 236 B2B Exchanges in Brazil 236 F.eAdvertising 237 Online Advertising Expenditures in Brazil, 2001-2004 (in millions) 237 Online Advertising Expenditures in Brazil, 2001 & 2003 (in millions) 238 Online Advertising Expenditures in Brazil, 2001-2004 (in millions) 238 Online Advertising Expenditures in Brazil, 2001-2003 (in millions and as a % of total Brazilian advertising expenditures) 238 Comparative Estimates: Online Advertising Spending in Brazil, 2001-2004 (in millions) 238 XI Mexico 239 At a Glance: Mexico, 2001 240 A. Overview 240 Low-Cost Access 241 B. Technology Infrastructure 241 Comparative Estimates: Telephone Lines per 100 Inhabitants in Mexico, 1999-2005 242 Wireless Telephony 242 Wireless Subscribers in Mexico, 2001-2006 (in millions) 243 Wireless Subscribers in Mexico, by Technology, 2001 243 Wireless Subscribers in Mexico, by Technology and Type of Service, 2000 243 Wireless Subscribers and Fixed-Line Telephones per 100 Inhabitants in Mexico, 2000 244 Wireless Subscribers and Fixed-Line Telephones per 100 Inhabitants in Mexico, 2001-2003 244 Wireless Subscribers per 100 Inhabitants in Mexico, 2001-2006 244 Wireless Operators in Mexico, by Market Share, September 2000 245 Mobile Handset Manufacturers in Mexico, by Market Share, 2000 246 Broadband 246 Comparative Estimates: Residential Broadband Subscribers in Mexico, 2000-2004 (in thousands) 246 Business Broadband Subscribers in Mexico, 2000-2004 (in thousands of lines) 247 Comparative Estimates: Residential Broadband Cable Subscribers in Mexico, 2000-2004 (in thousands) 247 Cable Operators in Mexico, by Market Share, 2000 248 Comparative Estimates: Residential DSL Subscribers in Mexico, 2000-2004 (in thousands) 248 Cable Modems in Operation vs. Digital Subscriber Lines in Mexico, 2001-2003 249 Residential Subscribers to Alternative Broadband Technologies in Mexico, 2001-2004 (in thousands) 249 C. Internet Users and Access 250 Internet Users in Mexico, 2000-2004 (in millions and as a % of population 14+) 250

337 ©2001 eMarketer, Inc. Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published, publicly available information. Latin America Online

Index of Charts Comparative Estimates 250 Comparative Estimates: Internet Users in Mexico, 2001-2005 (in millions) 251 Access Preferences 251 Internet Users in Mexico, by Access Location, 2001 251 Internet Users in Mexico, by Access Location, 2001-2005 (as a % of total) 252 Households/Workforce with Internet Access in Mexico, 2001-2005 & 2010 253 Home and Business PCs in Mexico with Internet Connection, 2001-2005 253 D. Usage and Demographics 254 Frequency of Sessions 254 Frequency of Internet Sessions in Argentina, Brazil and Mexico, 2000 (in number of times per week) 254 Frequency of Internet Sessions in Mexico, by Gender, March 2001 (in number of times per month) 254 Duration of Sessions 255 Time Spent Online per Week in Mexico, 2000 255 Usage Patterns 256 Internet Activities in Argentina, Brazil and Mexico, 2000 256 Internet Activities of “Mature” Internet Users in Mexico, 2001 257 Internet Activities in Mexico, February 2001 257 Average Number of eMail Messages Sent and Received per Month in Mexico, by Level of Internet Usage, February 2001 258 Most Popular Websites 258 Top 10 Internet Properties and Domains in Mexico, March 2001 259 Top 10 Internet Properties in Mexico, by Unique Users and Reach, March 2001 259 Top 10 Internet Domains in Mexico, by Unique Users and Reach, March 2001 260 Gender 260 Internet Users in Mexico, by Gender, March 2001 260 “Mature” Internet Users in Mexico, by Gender, 2001 261 Age 261 Internet Users in Mexico, by Age, 2000 261 Internet Users in Mexico, by Age, 2000 261 Socioeconomic Status 262 Internet Users in Mexico, by Socioeconomic Strata, 2000 262 Internet Users in Mexico, by Socioeconomic Strata, 2000 262 E. eCommerce 263 Total eCommerce 263 eCommerce Revenues in Mexico, 2000-2004 (in billions and as a % of total Latin American e-commerce) 263 Comparative Estimates 264

338 ©2001 eMarketer, Inc. Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published, publicly available information. Latin America Online

Index of Charts Comparative Estimates: eCommerce Revenues in Mexico, 2001-2004 (in billions) 264 B2C eCommerce 264 B2C eCommerce Revenues in Mexico, 2001-2004 (in billions and as a % of total Latin American B2C e-commerce) 265 Comparative Estimates 265 Comparative Estimates: B2C eCommerce Revenues in Mexico, 2001-2005 (in billions) 265 Concentration of Online Retailing Revenues in Mexico, 2000 266 Transactions 266 Comparative Estimates: Internet Users in Mexico Buying Online, 2000 (as a % of total internet user population) 266 Frequency of Online Shopping in Mexico, 2000 (in number of purchases in the previous 90 days) 266 Payment Methods 267 Number of eMoney Products in Mexico, 1999 267 Taxation 268 Residential Delivery 268 Number of Drop-Off Locations of International Couriers in Mexico, 2001 268 Privacy and Security 268 Conﬁdence in the Security of Buying Online in Mexico, 2000 269 Consumer Attitudes and Behavior 269 Comparative Estimates: Internet Users Shopping Online in Mexico, 2000 269 Internet Users Shopping Online in Mexico, August & December 2000 270 Comparative Estimates: Internet Users Shopping Online in Mexico, by Gender, 2000 270 Reasons for Shopping Online in Mexico, 2000 271 Online Consumers Shopping at Domestic and Foreign Sites in Mexico, 2000 272 Online Product Research vs. Purchases in Mexico, 2000 272 Consumers Buying Products Online in Mexico, 2000 273 Consumers Buying Products Online in Mexico, 2000 273 Women Buying Products Online in Mexico, 2000 274 B2B eCommerce 274 B2B eCommerce Revenues in Mexico, 2001-2004 (in billions and as a % of total Latin American B2B e-commerce) 274 Comparative Estimates 275 Comparative Estimates: B2B eCommerce Revenues in Mexico, 2001-2005 (in billions) 275 Business Internet Penetration 276 Businesses in Mexico with a Website, 2001 (as a % of business in that size range) 276 Businesses in Mexico with or Planning to Implement eBusiness Applications, by Number of Employees, 2001 277

339 ©2001 eMarketer, Inc. Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published, publicly available information. Latin America Online

Index of Charts Exchanges and Marketplaces 277 B2B Exchanges in Mexico 278 F.eAdvertising 278 Comparative Estimates: Online Advertising Expenditures in Mexico, 2001-2004 (in millions) 278 XII Chile 279 At a Glance: Chile, 2001 280 A. Overview 280 Low-Cost Access 281 B. Technology Infrastructure 281 Fixed-Line Telephones 281 Comparative Estimates: Telephone Lines per 100 Inhabitants in Chile, 1999-2005 281 Distribution of Telephone Lines in Chile, by Region, 2000 282 Telephone Lines per 100 Inhabitants in Chile, by Region, 2000 283 Wireless Telephony 283 Wireless Subscribers and Fixed-Line Telephones in Chile, 2000| (in millions) 284 Wireless Subscribers and Fixed-Line Telephones per 100 Inhabitants in Chile, 2000 284 Wireless Subscribers in Chile, by Type of Subscription, 2000 284 Distribution of Wireless Subscribers in Chile, by Region, 2000 285 Wireless Subscribers per 100 Inhabitants in Chile, by Region, 2000 286 Wireless Operators in Chile, by Market Share, September 2000 286 Broadband 287 Cable Modems in Operation vs. Digital Subscriber Lines in Chile, 2001-2003 287 Broadband Subscribers in Chile, 2001-2005 288 C. Internet Users 289 Comparative Estimates: Internet Users in Chile, 2000 (in millions) 289 Internet Users in Chile, 2001-2005 (in millions and as a % of total population) 289 D. Demographics 290 Socioeconomic and Educational Status 290 Households in Chile, by Socioeconomic Strata, 2001 290 Households with Internet Access in Chile, by Socioeconomic Strata, 2001 290 Geography 291 Population and Internet Users in Chile, by Location, 2000 291 E. eCommerce 291 Total eCommerce 291 Comparative Estimates: eCommerce Revenues in Chile, 2001-2005 (in billions) 292 B2C eCommerce 292

340 ©2001 eMarketer, Inc. Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published, publicly available information. Latin America Online

Index of Charts Comparative Estimates: B2C eCommerce Revenues in Chile, 2001-2005 (in millions) 293 Distribution of B2C Retailers in Chile, by Sector 293 C2C eCommerce Revenues in Chile, 2001-2005 (in millions) 294 Transactions 295 Comparative Estimates: Internet Users in Chile Buying Online, 2000 295 Internet Users Buying Online in Chile, 2001-2005 295 Annual Spending per Internet User in Chile, 2001-2005 295 Payment Methods 296 Credit and Combined Credit/Debit Card Penetration in Chile, 2000 (as a % of total population) 296 Taxation 296 Residential Delivery 296 Number of Drop-Off Locations of International Couriers in Chile, 2001 296 Privacy and Security 296 Consumer Attitudes and Behavior 297 Online Consumers Shopping at Domestic and Foreign Sites in Chile, 2000 297 Consumers Buying Products in Chile, 2000 297 B2B eCommerce 298 Comparative Estimates: B2B eCommerce Revenues in Chile, 2001-2005 (in billions) 298 Distribution of B2B Sites in Chile, by Sector, 2001 298 Business Internet Penetration 299 Distribution of Businesses in Chile, by Size of Business, 2001 299 Distribution of eCommerce Revenues in Chile, by Size of Business, 2001 299 Businesses with Internet Access in Chile, by Size of Business, 2001 300 Businesses with a Website in Chile, by Size of Business, 2001 300 Businesses in Chile Transacting Online, by Size of Business, 2001 301 F.eAdvertising 301 Comparative Estimates: Online Advertising Expenditures in Chile, 2001-2004 (in millions) 301 XIII Colombia 303 At a Glance: Colombia, 2001 304 A. Overview 304 Low-Cost Access 305 B. Technology Infrastructure 305 Fixed-Line Telephones 305 Comparative Estimates: Telephone Lines per 100 Inhabitants in Colombia, 1999 & 2000 305 Wireless Telephony 306 Comparative Estimates: Wireless Subscribers and Fixed-Line Telephones per 100 Inhabitants in Colombia, 2000 306

341 ©2001 eMarketer, Inc. Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published, publicly available information. Latin America Online

Index of Charts Wireless Subscribers in Colombia, 2001-2006 (in millions) 306 Wireless Operators in Colombia, by Market Share, September 2000 307 Broadband 307 Broadband Households in Colombia, 2001-2004 (in thousands) 307 Cable Modems in Operation vs. Digital Subscriber Lines in Colombia, 2001-2003 307 C. Internet Users, Access and Usage 308 Comparative Estimates: Internet Users in Colombia, 2001-2005 (in millions) 308 Access Preferences 309 Internet Users in Colombia, by Access Location, 2000 (as a % of total) 309 Usage Patterns 309 Internet Activities in Colombia, April 2001 309 D. eCommerce 310 eCommerce Revenues in Colombia, 2000 & 2001 (in millions) 310 Payment Methods 310 Credit and Combined Credit/Debit Card Penetration in Colombia, 2000 (as a % of total population) 310 Taxation 310 Residential Delivery 311 Number of Drop-Off Locations of International Couriers in Colombia, 2001 311 Privacy and Security 311 Consumer Attitudes and Behavior 312 Online Consumers Shopping at Domestic and Foreign Sites in Colombia, 2000 312 E. eAdvertising 312 Online Advertising Expenditures in Colombia, 2001-2004 (in millions) 312 XIV Venezuela 313 At a Glance: Venezuela, 2001 314 A. Overview 314 Low-Cost Access 314 B. Technology Infrastructure 315 Fixed-Line Telephones 315 Comparative Estimates: Telephone Lines per 100 Inhabitants in Venezuela, 1999 & 2000 315 Wireless Telephony 315 Wireless Subscribers and Fixed-Line Telephones per 100 Inhabitants in Venezuela, 2001-2005 316 Wireless Operators in Venezuela, by Market Share, September 2000 316 Broadband 317 Broadband Households in Venezuela, 2001-2004 (in thousands) 317 Cable Modems in Operation vs. Digital Subscriber Lines in Venezuela, 2001-2003 317

342 ©2001 eMarketer, Inc. Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published, publicly available information. Latin America Online

Index of Charts C. Internet Users 318 Comparative Estimates: Internet Users in Venezuela, 2000 (in millions) 318 Internet Users in Venezuela, 2001 & 2003 (in millions) 318 D. eCommerce 318 B2C eCommerce 319 B2C eCommerce Revenues in Venezuela, 2001 & 2002 (in millions) 319 Transactions 319 Payment Methods 319 Credit and Combined Credit/Debit Card Penetration in Venezuela, 2000 (as a % of total population) 319 Taxation 319 Residential Delivery 320 Number of Drop-Off Locations of International Couriers in Venezuela, 2001 320 Privacy and Security 320 Consumer Attitudes and Behavior 320 Comparative Estimates: Online Consumers Shopping at Domestic and Foreign Sites in Venezuela, 2000 320 E. eAdvertising 321 Online Advertising Expenditures in Venezuela, 2001-2004 (in millions) 321 Index Of Charts 323

343 ©2001 eMarketer, Inc. Reproduction of information sourced as eMarketer is prohibited without prior, written permission. Note: all data in this report (other than that sourced as eMarketer) was obtained from published, publicly available information. Latin America Online

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