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Argentina technology: Overview of e-commerce(IndustryWire Via Thomson Dialog NewsEdge) FROM THE ECONOMIST INTELLIGENCE UNIT According to Tendencias Digitales (a well-known local group that conducts surveys), Argentina was the Internet and e-commerce leader in the Spanish-speaking world in May 2007. The country produces half of the Internets Spanish-language content and is home to 11 of the top 15 sites in terms of traffic in Latin America and Spain. According to Internet World Stats (internetworldstats.com), Argentina has about 13m Internet users, or about 34% of the population, higher than Brazil (17.2% of the population), but lower than Chile (42.4%). In terms of connections, broadband is the preferred access route (about 85% of accounts). According to Cisco (US), broadband penetration in Argentina was 4.1% of the total population in December 2006, below Chile (6.8%), but above Brazil (3%). The average time on the Internet in Latin America is about 8 hours per week, according the same survey, but Argentinians tops this, with a weekly average of 8.2 hours. In previous years, the Internet was used mainly for communication purposes (e-mail, chat, etc) and information searches, but the number of e-commerce transactions more than doubled during 2006, according to the Argentina E-commerce Chamber (Cmara Argentina de Comercio ElectrnicoCACE). About 5m Argentinian Internet users made purchases via the Web in 2006, for a total of Ps10bn (around US$3.3m); online advertising grew by 35% over the same period. Several companies perform most of their procurement and sales operations through electronic transfers of some sort, but the fact that tax evasion is so high in the country (even outside of these electronic platforms) has made the government more interested in setting some limits on e-commerce. According to the Networked Readiness Index (NRI) of the World Economic Forum, Argentina ranks 63rd out of 122 countries. The index measures countries integration of information and communication technologies (ICT). Within the region, Chile ranks 31st and Brazil ranks 53rd. Growth of e-commerce According to the Argentina E-commerce Chamber (Cmara Argentina de Comercio ElectrnicoCACE), the average online purchase was for about Ps240 (around US$80) in 2006, with technology as the top-selling sector in terms of revenue. Other products purchased online included clothes, home appliances, handicrafts, financial services and retail products. The number of new and second-hand products sold via online-auction websites also grew strongly in 2006. The purchase of tickets (cinema, concerts and theatres) and electronic learning also showed up an important part of users purchase preferences. Home-appliance stores have very functional websites that allow shoppers to compare prices and conduct purchases online. Several stores also offer customers the ability to view and make purchases from online wedding registries. CACE expects the value of e-commerce purchases in Argentina to double, from around Ps10bn in 2006 to Ps20bn in 2007. It explains this jump by the rise of broadband connections, the increase in personal-computer ownership and improvements in Internet offerings of goods and services. The number of homes with Internet access reached 2.50m by the end of 2006, up from 2.22m a year earlier, according to the national statistics office (Instituto Nacional de Estadstica y Censos). Ofthis amount, there were 1.4m broadband accounts ( compared with 795,000 in 2005, a rise of 76%), 381,000 dial-up accounts (509,000 in 2005, a drop of 25%), and 727,000 free accounts from Internet service providers (919,000 in 2005, a drop of 21%). Free ISP accounts generated an average of around 320m minutes per month of communications, a decrease of 20% compared with 2005. About 43% of residential Internet users are in the city of Buenos Aires. At the corporate level, 223,000 institutions had Internet access at the end of 2006, compared with just 192,000 at the end of 2005. By the end of 2006, ISPs provided 80% of the accounts, with more than 50,000 customers. Speedy (owned by Telefnica; ADSL) is the main provider, followed by Fibertel (Cablevisin; cable-modem), Arnet (Telecom; ADSL) and Flash (Grupo Clarn; cable-modem). The variety of services provided over the Internet have increased dramatically. For instance, online banking has always been a very active segment but mostly to check balances and pay utility bills. Customers are increasingly using the web to transfer money and pay for everyday items such as school fees and hotel bookings. The sending of cheques through the mail has always been insecure, so there was no difficulty in getting consumers to change that practice. In the investment sector, however, the picture is mixed. Although asset managers claim that 50% of unit-trust (mutual-fund) sales are done via the web, only 8% of stockmarket trades are conducted online, although many brokers have their own portals. Music downloading is one of the main uses of the interneteven more so than e-mails and chat. According to figures provided by the chamber that represents the local music industry (Cmara Argentina de Productores de Fonogramas y VideogramasCAPIF), Argentinians downloaded 608m songs illegally in 2006 (412m in 2005), equivalent to 50m albums with 12 songs each. This figure includes downloads from local and international websites. The survey indicates that three albums are downloaded illegally for each album sold legally. Piracy in Argentina accounts for 74% of music purchases; only 26% of the songs acquired pay copyrights. Foreign investment There are no restrictions on foreign investment in telecommunications, data transmission and the Internet. All telecoms operators in Argentina are under the control of foreign companies or have important foreign shareholders. These companies in turn run the largest Internet service providers. The exception to the foreign player is Ciudad Internet, which is controlled by a local company, Grupo Clarn (in which Goldman Sachs of the US has a minority interest). Law 25856 of January 2004 has enabled the software industry to receive investment incentives similar to those offered other industrial activities. Prior to the passage of the law, the sector was not eligible for investment incentives. Thegovernment hopes they will spur foreign investment in the sector. Intellectual property Intellectual-property rights are being reviewedas is patent and trademark legislation generallyto align them with global standards. Argentina has not passed any laws recently that affect software, however, and this is beginning to have severe implications. In April 2002 a judge ruled a group of website hackers not guilty, since existing intellectual-property laws could not be applied to the Internet. The state prosecutor did not appeal against the ruling since there was no legal basis to doso. Domain names are also a troublesome issue. Although the courts have ruled more than once that the owner of a trademarked brand has rights over the same domain name, the process of recovering the name when another person or firm has registered it may take months, at the very least. The body that registers domain names is the Network Information Centre Argentina (NIC Argentina) of the Ministry of Foreign Affairs, International Trade and Culture. Registration is on a first-come-first-served basis online at http://www.nic.ar. In mid-2006 the Council of the Common Market (Consejo del Mercado Comn) decided on the creation of a Mercosur domain; a commission is now defining the technical and registration issues. Argentina was one of the two Latin American countries that had free registration, but the government announced at the end of 2006 that it will charge a fee for Argentina Internet domains (com.ar, org.ar, edu.ar, mil.ar and net.ar) in order to avoid domain seizure. Consumer protection Law 24240 of October 1993 enforces consumer safeguards. Internet buyers have a window of five days in which to return their purchase at no cost, as long as the goods are unused. In the private sector, American Express provides insurance that protects customers against fraud for all transactions paid for with its card. The legal climate for e-business in Argentina has been strengthened by the passage of a personal-data-protection law of November 2000 (Law 25326/2000) and a digital-signatures law of November 2001 (Law 25506). Contract law and dispute resolution No specific bodies have been set up to resolve e-commerce disputes among companies or between companies and consumers. The normal court system and arbitration mechanisms apply. Basis of taxation E-commerce companies are expected to provide invoices, like other businesses. Most taxes in Argentina are federal, and there are only slight variations among provincial taxes to make a real difference between online and offline transactions. E-commerce companies are less prone to tax evasion than other businesses in Argentina since credit cards retain value-added tax (VAT) payments on behalf of the seller. Imports related to e-commerce are minimal, and most are for books (which are tax free in Argentina) and compact discs. Since most US shops do not ship goods to Argentina and very few of them accept credit cards issued in Argentina, crossborder taxation has not been a significant issue. Classification of e-commerce transactions At present, there are no legal classifications of e-commerce transactions for tax or other purposes. Compliance and enforcement issues Tax collection in Argentina has always been lax. Proposals now before the legislature would attempt to improve administration and collection, but they are a long way from implementation. Written laws are not significantly different in Argentina from the average Western developed country, but enforcement of these laws is poor. Lobbying, the network of contacts and unwritten rules are often more important than having good management teams to perform business. SOURCE: Country Commerce Copyright 2007 Economist Intelligence Unit |