A Real Success Story of E-commerce in the Southern Cone of Argentina, Brazil, Chile, Paraguay, and Uruguay

The future holds further growth and greater opportunities for companies in Latin America and the Caribbean as they continue to consolidate their position as major players in global e-commerce

E-commerce in the Southern Cone

by Florencia Attademo-Hirt - Fabrizio Opertti

In recent years, a boom in e-commerce has swept the world, transforming how businesses operate and people shop. 

The Southern Cone countries—Argentina, Brazil, Chile, Paraguay, and Uruguay—are no strangers to this digital revolution.  E-commerce is becoming increasingly important in these economies, creating new opportunities for businesses to reach customers worldwide, diversify their export markets, and boost sales.  It’s also driving growth in logistics, payment systems, and financial services.

The spread of e-commerce is hugely significant.  According to the latest estimates, e-commerce sales in Latin America and the Caribbean will exceed US$117 billion by 2023 and are expected to almost double by 2028.  This growth could potentially lower the cost of products for Latin Americans by increasing efficiency, cutting out intermediaries, and reducing transaction costs.  It also gives consumers access to a greater quantity and variety of goods and services.

The region is still facing challenges: the data shows that domestic and cross-border e-commerce in Latin America and the Caribbean represent just 0.77% of GDP, one of the lowest shares in the world, compared to 3.11% globally.  There are also significant differences between countries: Argentina, Brazil, and Mexico alone account for more than 70% of the region’s e-commerce.

To better understand the progress made by companies in this field in the Southern Cone, a new IDB report takes stock of the current status of this form of trade.  The report is based on data on the adoption of e-commerce and online transactions, as well as a proprietary survey examining how companies in the five countries use e-commerce and the challenges they face in building their online sales.  It also discusses the outcomes of specific government policies and makes several policy recommendations to boost cross-border online sales.

The survey led to some interesting findings:

- E-commerce is widespread: almost half of microbusinesses use a marketplace as part of their sales operations to individual consumers, while that percentage is around 70% for medium and large companies.  Companies of all sizes, from small businesses to large corporations, are embracing the opportunity to reach consumers online.

- International expansion: One third of the companies surveyed that use marketplaces for sales report that they are expanding their operations internationally through e-commerce.  This approach enables companies to enter new markets, increase their opportunities for growth, and diversify their revenue streams.

- Greater customer acquisition, revenues, export opportunities, and lower costs: whether through marketplaces or their own online stores, sellers report that e-commerce brings significant benefits in terms of new customers, sales, and export opportunities.  They’ve also forged closer ties with local suppliers, which positively impacted their communities.  About one-fifth of companies selling through online marketplaces have hired new services in their home markets, and one-fourth have increased the services they use as a result of selling online.  In contrast, companies using social networks as a sales channel are less likely to see these benefits.  However, even these businesses say that they have gained new customers, improved the customer experience, and increased sales to existing customers due to using these channels.

- Logistics challenges: 60% of companies selling goods say that high domestic logistics costs have cost them growth, while 57% attribute this loss to the quality of international logistics and 56% to the cost of these.

- Data movement and cybersecurity challenges: the top challenges for services companies are moving data across borders (64% of respondents), the quality of internet connections (60%), managing market access rules (55%), and cybersecurity (54%).

The survey reveals that e-commerce is a real success story in the Southern Cone.  Businesses of all sizes are using this online revolution to expand their operations.  However, the private sector’s logistical, regulatory, and data security challenges should not be overlooked.

The future holds further growth and greater opportunities for companies in Latin America and the Caribbean as they continue to consolidate their position as major players in global e-commerce.

For these reasons, the IDB is deeply committed to strengthening e-commerce in Latin America and the Caribbean.  We firmly believe in creating and nurturing connections between Latin American and Caribbean companies and helping them find new business partners and export markets.  To achieve this, we build business networks, create spaces for dialogue, and facilitate matchmaking among companies in the region.  We also help generate empirical evidence to inform public policy.  For example, we’ve carried out studies on logistical barriers to e-commerce, financial tools for businesses, and the challenges of online payments.  We’ve also emphasized the importance of rules defining online intermediaries’ work and responsibilities and their impact on the digital economy, including creating and distributing third-party content used by platforms and access to this.

We also created ConnectAmericas, a regional and global platform that has become the region’s leading online network for entrepreneurs.  It has more than 800,000 registered users and received more than 14 million visits.  Online platforms like ConnectAmericas play a crucial role in reducing search costs, which makes it easier for companies to export.  A study of companies using ConnectAmericas found that their exports increased by 17% after joining the platform.

E-commerce is not only a critical export channel for the region, it’s also a potentially significant growth engine for businesses.

In light of this positive outlook, we at the IDB will continue to work closely with the private and public sectors to foster this momentum.  Our goal is to help build a more inclusive and developed region where e-commerce drives progress and prosperity for all.

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The Bahamas National Trade Policy Instituted

With the launch of the National Trade Policy, The Bahamas now has a comprehensive framework for trade that the government intends to use to lower the trade deficit by empowering more local businesses to tap into export markets.

Speaking at a press conference held on Thursday, 25 May, 2023 to announce the launch of the nation’s first-ever National Trade Policy, Bahamas Trade Commission Chairman, Philip Galanis, said that trade is expected to play a big role in the Bahamian economy as the nation continues its post-pandemic recovery.

“Prior to the pandemic, the export of services, particularly tourism related services, served as a counterbalance to our food and goods trade deficit.  However, moving forward we are seeking to expand existing areas of strength and diversify into new areas to create new trade opportunities for local businesses and more resilient national economy.”

With the launch of the National Trade Policy, Chairman Galanis indicated that country finally has a coherent approach to the development of trade in alignment with wider national development plans.  He stated that the policy is “comprehensive and with broad impacts on the Bahamian economy.”

“This Policy speaks to more effective management of imports through reviewing our tariff structure, the need for competition laws, domestic preferences, and improved incentive schemes.  It addresses how we will expand existing exports through our trade promotion efforts and development programmes, a full review of the existing tax regime, the embracing of digital technology, and the development of free trade zones.”

“Through this Policy, The Bahamas will diversify its exports in target areas within the blue, green, and orange economies, while strengthening our domestic competitiveness through the creation of more service-oriented, faster processes combined with greater education and support for local businesses.”

Chairman Galanis credited the extensive consultation process done over the past two years with local businesses, trade experts, and other stakeholders for the comprehensiveness of the Policy.

“We have held numerous formal and informal sessions with local businesses of all sizes and in all relevant industries, securing vital stakeholder input that played a big role in the crafting of the policy.  The document we have today reflects that input, as well as the inclusion of input from top local and international experts.  As a result, we have developed a trade framework that addresses local needs and is responsive to global demand.”

Moving forward, Mr. Galanis encouraged all local businesses who are interested in participating in international trade or expanding the extent of their trade activity to reach out to the Trade Commission to learn more about the Policy and upcoming opportunities for enrichment.

He also welcomed all industry stakeholders to continue to work collaboratively with the government as the policy is rolled out, so that all initiatives continue to reflect the needs and input of Bahamian businesses.

“Most trade is conducted by businesses, not the Government, and affects the lives of the Bahamian people, so it will take the joint efforts of both the Government, as well as the private sector, to truly encourage economic diversification in the country.  I encourage you all to take an interest in trade and to learn more about the importance of trade to helping us building a stronger economy.”

Those who wish to learn more about the National Trade Policy can download a copy of the policy at https://moea.gov.bs/the-bahamas-national-trade-policy.

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