30 September 1999

Software Industry Creates Jobs, Income for Americas, Says Study

By Eric Green
Washington File Staff Writer

Washington -- Latin America's software industry is generating huge sales, new jobs, and tax revenues in the region, according to a new study by the PricewaterhouseCoopers management consulting firm.

The results of the 52-page study were released September 30 at a news conference at the Organization of American States (OAS), which was a co-sponsor of the first hemispheric conference on "Responding to the Legal Obstacles to Electronic Commerce in Latin America." The study surveyed the software industry in 18 countries in the Americas, along with Puerto Rico, and estimated that in 1998 the industry generated $3,540 million in sales, 137,345 jobs, and $1,240 million in tax revenues for the region's governments.

By 2002, the study projected that the software industry will generate about 193,700 jobs and fiscal revenues of $2,400 million in the region.

Pricewaterhouse said the perception still persists in some quarters that Latin America is "clinging to its old ways and its old industries, such as agriculture, natural resources, tourism, and basic manufacturing." However, the study contradicts such perceptions.

"The truth is that these 'traditional industries' are actually increasingly modern and technologically sophisticated," the study said. "Moreover, the Latin American economy is building capabilities in new industries including information technology. These new industries in turn also help modernize the older industries."

This assertion was supported by another sponsor of the conference, the National Law Center for Inter-American Free Trade, a research group funded in part by the U.S. Congress and by cooperation agreements with the U.S. Department of State and the Treasury. The Center said that Latin America "enjoys one of the world's fastest rates of growth in Internet connectivity; demand for information technology is soaring." The number of Internet hosts in the region, the Center said, has increased at an annual rate of 144 percent in the 11 largest Latin American economies between 1993 and 1997. Some estimates, it added, have the overall number of Internet users in Latin America multiplying from 8.5 million in 1997 to 34 million in 1999.

However, the Pricewaterhouse study warned that about six out of 10 personal computer business software applications installed in Latin America in 1998 were illegal copies. This represents not only serious losses for the software industry, but substantial numbers of lost jobs and greatly diminished tax revenues.

Reductions in software piracy, the study said, "can lead to dramatic increases in packaged software sales and consequent growth in jobs and tax revenues." The study said that if the Latin American average piracy rate (62 percent for personal computer business software in 1998) had been reduced to the level of the United States (25 percent), the resulting $5,320 million increase in sales of legitimate software products, together with the increase in directly-related economic activity, could have created about 206,000 more jobs and an additional $1,860 million in tax revenues in 1998.

The president of the Inter-American Development Bank, Enrique Iglesias, said in a foreword to the study that the "proper use of information technology holds great promise for Latin American and Caribbean governments, businesses, and societies. Effective software management can enable governments and institutions to deliver services more efficiently and modernize their operations."

Along with Puerto Rico, the 18 countries surveyed in the study were Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Jamaica, Mexico, Panama, Paraguay, Peru, Trinidad and Tobago, Uruguay and Venezuela.

By far, the country with the largest software industry in Latin America and the Caribbean was Brazil. The software industry in that country produced $1,760 million in sales in 1998, generated 71,535 jobs and $622 million in fiscal contributions. Ranking second was Mexico, where there was $519.7 million in sales, 19,597 jobs generated, and $185 million in fiscal contributions. Colombia came in third, with $153 million in sales, 5,604 jobs generated, and $48 million in fiscal contributions. Fourth was Chile, at $120.5 million in sales, 4,915 jobs generated, and $41 million in fiscal contributions.

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