Executive SummaryThe Southern Cone Common Market (Mercado Común del Sur –Mercosur) was established in March 1991 by Argentina, Brazil, Paraguay, and Uruguay.
These four countries form a block that covers most of Eastern South America.
The purpose of Mercosur is to promote free trade and movement of goods and peoples, skills and money, among South American countries.
A few other countries – Bolivia, Chile, Colombia, Ecuador, Peru, and Venezuela – have associate member status.
Mercosur was significantly weakened by the collapse of the Argentine economy in 2002, however it recovered in 2004.
In December 2004, it merged with the Andean Community trade bloc – Comunidad Andina de Naciones (CAN) – to form the South American Community of Nations, patterned after the European Union.Argentina: All telecom services in Argentina have been completely open to competition since 2000.
A single licence covers all services (fixed, mobile, local, long-distance).
The economic crisis in 2002 had a devastating effect on the telecom industry, but the market has made a full recovery and telecommunications grew by around 38% in 2004.
The biggest growth was in mobile telephony (68%) and broadband (88%).
However, mobile penetration is still lower than neighbouring Brazil and Chile.
With Telefónica’s acquisition of Movicom BellSouth in January 2005, the number of competing mobile operators in Chile dropped from four to three.
Argentina’s Internet market is the third largest in Latin America, and penetration is among the highest in the region.
After a slowdown during the economic recession, Argentina is growing again in both narrowband and broadband.
Traditionally, cable modem was the more popular medium of broadband access, but by mid-2003, ADSL had consolidated its leadership.
During the recession, ADSL lines declined by almost 2%, but in 2004 they surged by 175% in one year.
Argentina has also joined the global WiFi bandwagon, with at least five companies offering WiFi services in early 2005.Brazil: Telecoms liberalisation in Brazil has been occurring gradually since 1999.
By early 2005, there were 51 companies licensed to provide fixed-line telephone services, but only around half were operating.
Rules for local-loop unbundling were published in May 2004, and were welcomed by companies striving to compete with the incumbents.
The region’s disastrous economic downturn in 2001-2002 took its toll on all Brazilian telcos, but the market began to recover in mid-2003, and 2004 was a year of outstanding growth, led by mobile telephony and broadband.
Brazil’s fixed-line sector has a low 21% teledensity, and has been stagnant or even decreasing in recent years, losing customers to mobile telephony.
The mobile market, on the other hand, keeps expanding rapidly, with annual growth rates of around 41%.
The number of mobile subscribers passed the number of fixed-lines in August 2003.
Brazil is home to the largest mobile market in the region and, at 37.5%, it has the highest mobile penetration in South America except for neighbouring Chile.
GSM grew 227%% in 2004, overtaking Code Division Multiple Access (CDMA) in November 2004 and Time Division Multiple Access (TDMA) in January 2005.
Brazil also dominates the Latin American Internet market with around 40% of the region’s users.
But in terms of penetration, it occupies approximately the third place, behind Uruguay and Chile and slightly ahead of Argentina.
Internet growth has been fuelled by relatively cheap access charges and government incentives such as low priced, subsidised computers.
But the rising star for operators is Asymmetrical Digital Subscriber Line (ADSL), which accounts for about 84% of the country’s broadband market.
Guyana: The country’s fixed-line teledensity of 15% and mobile penetration of 22% are about average for Latin America.
Guyana Telephone and Telegraph Company (GT&T), the incumbent provider, holds an exclusive 20-year licence, starting from 1991, for fixed-line telephony.
It also has a non-exclusive licence for mobile telephony.
The government issued another three mobile licences between 1996 and 2001 in an effort to promote competition.
Of the three licensees, one is still in the design stage, one operates a small local mobile service, and the third, Cel*Star – the only one able to offer real competition to GT&T – finally launched a GSM network in November 2004, after a three year delay caused by legal wrangles with GT&T.
The Internet has not taken off in Guyana to the same extent as seen elsewhere in Latin America.
Served by around eight commercial ISPs and a small number of telecentres and Internet cafés, development is hampered by high connection fees, very slow connection rates and frequent disconnections.
GT&T charges exorbitant rates for bandwidth and is reluctant to supply enough telephone lines for ISPs to supply an efficient service.
GT&T provides DSL service, mostly limited to high paying business customers.
The service has been criticised as being ‘ridiculously slow’ and over-priced.
Paraguay: With one of the lowest teledensity ratings in the region, Paraguay’s telecom market has the greatest expansion potential in the Mercosur group of countries.
Besides being severely hit by the economic the economic crisis in 2001-2002, the country had to contend with drought, a sinking currency, galloping inflation and a banking crisis.
Recovery began in mid-2003, also helped by the Duarte Frutos government which took office in August 2003 and managed to stabilize the political situation.
In 2004, the economy picked up, however growth remained modest.
The telecom market has been severely restricted by state-owned Copaco’s monopoly over fixed-line services, but the market was officially liberalised in December 2004 and there are hopes that the Duarte Frutos government may finally succeed in bringing about privatisation.
In order to comply with a 1995 telecoms law that prohibits monopolies, several attempts have been made to privatise Copaco, but failed due to intense popular opposition.
The mobile and Internet sectors have been open to competition since 1995 and mobile phones outnumber fixed lines in service by more than four to one.
In 2004, the leading operators Personal and Telecel launched GSM/GPRS/EDGE solutions, making Paraguay a 100% GSM market.
Suriname: The country’s telecom infrastructure is reasonable compared with the Latin American average, with fixed-line penetration around 17% and mobile penetration over 35%.
Internet uptake however is one of the lowest in South America.
State-owned Telesur is the only telecom provider for both fixed-line and mobile services.
It operates a GSM mobile system, which it launched in September 2002.
A second operator, the ICMS, was in operation for four years from 1998 to 2002.
Having received a full service licence, ICMS offered international telephony, local telephony over Wireless Local Loop (WLL), mobile telephony and cable TV services.
However, this duopoly ended in 2002 due to severe wrangles related to interconnection conditions.
Following WTO recommendations, Suriname has agreed to liberalise the telecom sector and has been developing suitable legislation to this end.
However, no move has been made towards privatisation, and a new Telecommunication Act, first drafted in 1998, is still awaiting approval.
Uruguay: The long-distance and international telephone sectors in Uruguay have been liberalised since February 2001, but state-owned Antel retains a monopoly over local telephony.
Yet the country leads Latin America in many key indicators (teledensity, computer and Internet penetration), and has the region’s highest literacy rate.
Despite Antel’s stranglehold over basic telecom services, the country has one of Latin America’s highest fixed-line teledensity rates.
Other segments of the telecom market have been liberalised, including mobile, Internet and value-added services.
The year 2004 witnessed a number of changes and the start of some dynamic competition in the mobile sector, as state-owned operator Ancel launched a GSM/GPRS/EDGE network, Telefónica Móviles took possession of BellSouth’s Movicom and América Móvil entered the market via a spectrum auction.
In the Internet area, Antel made broadband a priority, increasing ADSL speed, reducing service prices and offering wireless broadband over its GSM network in remote areas where copper wires are not installed.
Several other ISPs offer ADSL services.
In fact, most Uruguayan ISPs offer some form of broadband access.
Venezuela: The telecom sector is the most important business in Venezuela after the oil industry.
The fixed-line market has been liberalised since November 2000 and counts 13 competing operators, although incumbent Cantv still owns 86% of all fixed lines in service.
Venezuela ranks about fifth in South America for mobile penetration.
Mobile phones outstripped traditional fixed-lines already in September 1999.
The political and economic troubles of 2002-2003 hurt the mobile business, and phone sales dropped 80% in February 2003.
However, the market turned around in mid-2003, and continued to grow steadily in 2004.
Number one mobile provider Telcel, previously owned by BellSouth, came under the control of Spain’s Telefónica in October 2004, but is likely to lose its leading status in 2005, following Cantv’s agreement to acquire the country’s third largest mobile operator Digitel and merge it with its own mobile unit Movilnet.
The economic recession impacted severely on Internet use, causing a 14% drop in the number of users during 2003.
The market however recovered all of its lost ground and more during 2004.
Nevertheless, Internet penetration remains low compared with other South American countries.
The government has made the promotion of the Internet a national priority.
As part of a campaign to popularise Internet usage, prepaid Internet services are available in cybercafés and in multi-user kiosks.
According to mid-2004 estimates, 66% of Internet users access the service through cybercafés.