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POTENTIALLY LUCRATIVE INTERNET MARKET.

Surfing the net is still a rare activity in low-technology Central America, but European and U.S. telecommunications giants are positioning themselves to control the region's nascent and potentially lucrative Internet market, reports Reuters (March 28, 2000):

A region mired in poverty and scarred by decades of civil war, Internet use remains low in Central America. Industry estimates of Internet use in El Salvador, Costa Rica, Guatemala, Honduras, Nicaragua and Panama put the number of Internet accounts at about 250,000 among a combined population of some 31 million people. The penetration rate -- the percentage of the population using the Internet -- is only 1%. But industry experts believe deregulation under way in Central America's telecommunications industry, coupled with the region's young population, will cause a growth spurt in Internet use;

Today, top European and U.S. telecommunication companies, such as Spain's Telefonica, Britain's Cable & Wireless, France Telecom and Atlanta-based BellSouth Corp. are launching Internet services to try to gain an early edge. "Now is the right moment for the players to start positioning themselves," said Carlos Arevalo, head of Internet services of CTE, El Salvador's former telecom monopoly, now owned by France Telecom;

Spain's Telefonica is taking the lead, providing Internet services in six Central American countries through its subsidiary Terra Networks SA. "Internet is already changing the ways businesses and communications are being done in Central America," said Luis Anton, Telefonica's manager in El Salvador;

In Guatemala, Central America's most populous country with 11 million people, 15 companies are providing Internet services for an estimated 40,000 accounts. The number of residential Internet accounts in Guatemala is expected to grow by 20% in 2000. Businesses such as banks, coffee exporters and even indigenous weavers are starting to recognize the advantages of being connected, said Juan Carlos de Leon, Telefonica's data expert in Guatemala. "We are talking of an emerging market with modest growth but with an enormous potential," said Luis Fernando Juarez, director of Terra Networks Guatemala;

In El Salvador, CTE hopes to see the number of its clients grow to 15,000 by year's end, a 300% growth. Panama has 39 firms offering Internet access, including Britain's Cable & Wireless Plc and BellSouth. In Honduras, 25 companies provide service, including state- owned Hondutel. Costa Rica remains the only state-owned holdout, with only one company providing Internet service to the estimated 30,000 accounts. Internet use in Costa Rica has grown 50% in the last five years;

Despite rosy growth predictions, Internet providers still face significant obstacles because of sociological and economic factors, industry analysts said. Illiteracy rates in Central America are among the highest in the Western Hemisphere. Personal computers are all but a luxury in such countries, and large segments of the population lack even electricity. An estimated 80% of Central Americans live below the poverty level. Ox-drawn carts are a far more common sight than the few Internet cafes that have popped up in some tourist areas;

By comparison, Internet penetration in Argentina and Mexico during 1999 was 6.3% and 5%, respectively, according to a 2000 Latin American Internet study by Credit Suisse First Boston Corp. "The challenge is how you expand the Internet to other levels of the population," said Michael Shalom, CEO of IFX, a Miami-based Internet company with subsidiaries in El Salvador, Costa Rica, Guatemala, Honduras, Nicaragua and Panama.
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Publication:Caribbean Update
Geographic Code:20CEN
Date:May 1, 2000
Words:556
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