In Latin America, the mobile economy is a major contributor to the regional economy, according to research from the GSMA. In 2017, mobile tech was responsible for 5% of GDP, representing $280B of commercial value. By 2022, the GSMA forecasts that Latin America’s mobile economy will be worth $330B, or 5.2% of GDP for the region.
For this reason, mobile has the potential to be a cornerstone of the Latin American regional economy. With the introduction of 4G and 5G networks to the region, as well as a mobile device penetration rate of 66%, unique opportunities are arising for companies to reach an audience that is experiencing unique shifts to everyday life. This trend is part of a continuum, as Latin America has been leading mobile growth since 2012.
Here are 3 unique trends for marketers to watch.
LATAM Offers New Ecommerce Gateways—For Companies That Can Crack Doors Open
In 2018, mobile drove 27.5% of all retail sales in Latin America, totaling $14.62B. This growth has evolved in parallel with purchasing power, where the middle class is expanding regionally. Among this population, there’s a high demand for western products, particularly from the United States. Brazil, for instance, imported more than $30B worth of goods from the United States in 2016.
LATAM’s mobile retail ecosystem, with the adoption of 4G and 5G networks, opens doors for countries seeking new markets. But there’s a few major challenges that stand in the way. First off, payment methods vary between countries and many in Latin America are underbanked, lacking access to formal financial services such as credit cards. Beyond that, there’s a lack of relevant content, as less than 30% of content accessed by consumers in the region is in the local language.
These attitudes put emphasis on marketers to do the heavy lifting in building brand trust and relationships. The time to source customers for life, given LATAM’s evolving mobile economy, is now. That means marketers need to seek out creative ways to build messaging that resonates with this unique audience.
Marketers Need to Fixate on Focused LATAM Ecosystems—Local Will be Valuable
The other side of LATAM’s growth story is the fact that there’s major risk throughout the region.
Positive economic indicators—like online retail growth and the introduction of high-speed networks—are happening during a time in which geopolitical uncertainty dominates news cycles for the region. Venezuela, for instance, is going through a period of economic contraction, according to the Council of the Americas, an organization devoted to exchanging ideas and solving problems in North and South America. Meanwhile, a number of LATAM countries are performing at magnitudes higher than the region’s forecasted growth rate at 1.7 percent in 2019. For instance, the Dominican Republic and Panama are growing at 5.7 percent and 5.6 percent, respectively.
Economists say that since 2000, one of the biggest drivers of growth has been employment. “Almost 80 percent of Latin America’s GDP growth over the past 15 years has come from strong labor inputs reflecting growing populations rather than rising productivity,” says McKinsey. But this trend could change at any instant. “Falling fertility rates [could] undermind employment-led growth,” McKinsey notes. “The end of the commodity-price boom that has helped fuel the region’s growth is another concern. In addition, there is a risk of increased protectionism that could weaken the exports component of growth.”
Given these factors, if brands are considering moving into LATAM, they need strong empathy, situational awareness, and knowledge of local communities as they work through how best to speak, engage, and build relationships with consumers in the region.
Politics Impact Marketing Outcomes
According to eMarketer, politics and economics affect digital ad spending in Latin America. In Argentina and Peru, the political climate has a negative effect, while Brazil has seen positive growth in its ad budget.
Marketers entering Latin America will need to understand how social dynamics influence consumers’ willingness to make purchase decisions. Research has shown that politics influence a wide variety of societal and economic aspects. “We find that the different ideological and partisan orientations of state governments, as well as a state’s pattern of public policies, have strong effects on satisfaction with life, net of economic, social, and cultural factors,” says one study from the Journal of Politics.
LATAM is a vibrant, growing region in which the nascent mobile economy is prime for innovation. Even in light of risk, brands have immense opportunity to build relationships with individuals who they may not have had a chance to reach in the past. To minimize business risk, a hyper-local, community-focused strategy will be essential. Trust is the cornerstone of the market.
Looking to make that happen? Make sure you’re being thoughtful about your brand’s goals, ensure you’re collecting the data you need to understand and engage consumers, and take advantage of existing tools and tactics that support considerate customer engagement in ways that speak to people in this region.