Internet penetration in Latin America has surpassed that of China and India and is quickly approaching that of developed economies, reports early-stage venture capital fund Atlantico in the third edition of its “Latin America Digital Transformation Report.” Additionally, the smartphone adoption rate has increased 40 percent over the last five years, with most devices running on Android.
The report analyzes the region’s digital growth to better identify future investment opportunities, considering that Latin America will have massive value creation in the decade to come as it catches up in tech penetration.
Latin America’s GDP surpasses US$5 trillion, with Brazil contributing 32 percent, Mexico 26 percent, Argentina 10 percent, Chile 6 percent and Colombia 6 percent. In internet penetration, the region’s four largest economies are catching up with major global economies. Germany stands at 95 percent internet penetration, Chile at 92 percent, the US at 92 percent, Argentina at 86 percent, Brazil at 81 percent and Mexico at 74 percent.
Factors such as smartphone adoption and internet reach can help the region improve in terms of financial inclusion and education, says the firm. The region represents a substantial opportunity for technological development and implementation, with the stage set for new companies to take over.
According to the Atlantico Digital Transformation Index, the largest companies in Latin America are still “real economy” companies rather than tech companies. In 2022 the main companies in the region were: Petrobras, Vale, America Movil, Walmart and Amev. On the other hand, the main companies in the US in 2022 were technology companies: Microsoft, Apple, Alphabet, Amazon and Tesla.
The growing number of large tech companies in Latin America shows continued value creation from digitization, emphasizing the opportunity that is coming for a tech wave in the region. The region’s largest tech companies are: Mercado Libre, NuBank, d.local, Stone, PagSeguro, TOTVS, B2W, VTEX, Arco and Locaweb. Latin America also has 34 active Unicorns, of which most are focused on technology as part of their solutions. Mexico has eight Unicorns: Kavak, Bitso, Konfio, Merama, Clip, Clara, Stori and Nowports.
The region’s opportunities lie in fintech thanks to initiatives such as open banking, pix and open finance, which are increasingly gaining traction and are poised to bring lasting changes, according to Atlantico. There are also opportunities in digitalizing small and medium companies, which constitute over 95 percent of all businesses in Latin America, and in tackling pain points related to their limited access to capital and inefficient backend management. Finally, there has been explosive growth in Web3 and Crypto, with over 100 Web3 startups across many verticals.