Source: http://worldcityweb.com/home/MIA/publications/magazine/3/580/

Investment in technology=higher economic growth

by Keith Goodwin

The conditions are in place for accelerated and sustained economic growth in Latin America over the next few years. Success will depend on the intelligent cooperation of governments, the business community, labor, academia and the citizenry at large. The economic security and well being of the region will rise rapidly over the next decade as governments maintain macroeconomic stability, and pursue deregulation and global integration, while removing barriers to productivity.

In order to accomplish these goals, Information and Communications Technology (ICT) will play a major role.

In order to learn what exactly are the effects of ICT applied to businesses, Cisco commissioned Net Impact 2005 Latin America, a wide-ranging study of connectivity in the region, developed by Momentum Research, and sponsored by the Institute for Connectivity in the Americas, ICA. The study provides valuable information and insights about the current state of technology and connectivity of businesses in the region. It analyzes their investments in the area, and examines what they expect to gain from increased connectivity.

The study also sheds light on urgent course corrections needed to improve connectivity in the region.

Net Impact Latin America is especially useful because it provides the first side-by-side comparison of connectivity for businesses in Latin America, the United States and Europe.

Among the many significant findings in the report, there are three in particular which have caught my attention:

1. Positive impact of technology. Most organizations feel that technology has had a positive impact on their operations in the last 12 months.

70 percent of organizations report say technology has helped improve customer or citizen satisfaction 45 percent have seen a reduction in operating costs 32 percent have seen an increase in revenue

**2. Customer satisfaction. The most frequently cited driver of technology investment (by 52 percent of respondents) was the desire to improve customer or citizen satisfaction. The second, (by 46 percent) was the desire to be more competitive. Taken together, these numbers clearly demonstrate that the Latin American business community realizes that technology offers the key to new markets and greater competitiveness and productivity.

3. More broadband. Latin America needs more broadband. Latin American businesses lag behind their U.S. counterparts when it comes to investing in bandwidth to handle increased data flows. More broadband is essential for Latin American businesses to fully exploit the latest technologies and increase their productivity.

It is no secret that investments in ICT Information and Communications Technology have been partially responsible for increases in productivity defined as the amount of production per unit of labor, equipment and capital in the U.S. economy over the last decade. Companies with higher-than-normal investments in IT have reported productivity increases of up to four times those of companies with below-average investments in this area (Economic Report to the President, January 2001).

In Latin America, IT investments lag far behind those in the United States and other parts of the world. While they represent 5.25 percent of Gross National Product in the U.S, 3.50 percent in Europe, and 2.40 percent in Asia, in Latin America they represent a mere 1.38 percent of GNP. This hobbles the region’s growth.

If both businesses and governments of Latin America were to invest in IT Information Technology at an accelerated rate, they would be able to impact their business by quickly automating their processes, decentralizing their structure, improving their teams and increasing their productivity while generating growth. This would inevitably improve the quality of life for millions of people.

This improvement in productivity would have a direct impact on Latin America’s overall standard of living. According to the U.S. Bureau of Economic Analysis (BEA) and the U.S. Bureau of Labor Statistics (BLS), an annual increase in productivity of 1 percent would cause a given country’s standard of living to double every 77 years. If productivity increased 3 percent each year, the standard of living would increase with every generation. If productivity increased 5 percent annually, the standard of living would double every 14 years.

I am convinced that an improved communications infrastructure and increased broadband can be the great enablers for improving the quality of life in Latin America while driving its economic growth.

At Cisco Systems we see Latin America as a region of rapid growth over the next few years, and we are committed to continue investing there. As we do so, we will continue to sponsor studies such as this one, to better understand the impact of technology investments on the productivity and growth of our businesses and countries.