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E-Commerce for Latin America's Small Business

September 25, 2008

Small businesses in Latin America face a huge handicap—no access to global markets. And frankly, small businesses even have minimal access to markets in their own country. E-commerce is opening new doors to overcome that handicap. But the challenge is to find practical ways to apply it to the needs of small entrepreneurs.

In North America, e-commerce is an indispensable element for business, enhancing price competitiveness for consumer goods and opening exciting channels for B2B (business-to-business) opportunities. Shopping online has become routine for the North American consumer. In contrast, e-commerce, with few exceptions, plays a rather unimpressive role in Latin America. This is especially true for the region’s small and medium enterprises.

Lack of technological infrastructure and computer illiteracy are often blamed for this situation. But, if one looks closely, the real reason is the lack of practical facilities to complete Internet transactions, namely, logistics and payment facilities that reach secondary cities. It is one thing to make a transaction using e-commerce. But it is quite another to get the goods from here to there and to pay and get paid, especially across frontiers.

There is no need to reinvent the wheel. Today, access to the Internet is commonplace throughout the hemisphere—be it through private computers or public Internet access points like telecenters and cybercafes. Markets today are digital and global, and Latin America’s many small businesses cannot afford not to utilize the Internet and e-commerce to its fullest extent. The issue is to identify and find a solution to the roadblocks.

The obstacles to expanding e-commerce are practical. First, as noted above, there is a lack of effective and affordable logistic channels. While these channels exist, they do not effectively reach secondary cities or other countries. Second, most prices for online purchases are quoted in dollars. Creating an international payment facility that translates costs into local currency and allows payment with local credit cards in local currency will overcome an enormous impediment to commerce. Another challenge is the lack of access to training, tools and services supplementing the Information and Communication Technology (ICT) channel and small business resistance to using e-commerce and understanding the benefits of global markets. Last—but equally important—is the lack of access to suitable payment options and point of sale credit modalities that support business growth and development.

Solving these problems is vital to the small business supply chain. We know that incomes cannot be elevated without production of value-added goods—and that such production in large quantities is not feasible without the ability to get products to market. If the goal is to open the benefits of e-commerce to small and medium enterprises, then the answer has to address these obstacles and include a holistic and easily implemented solution.

It is clear that a real solution cannot be achieved by one sector alone. The solution has to combine the best of community-service organizations and private sector know-how in a true multi-sector partnership. A solution to these obstacles that provides an easily accessible and useable logistical channel for an affordable interchange of money, goods and services, complemented by capacity building through e-commerce readiness training is being devised as a joint venture between the not-for-profit Telecenters of Americas Partnership (TAP—covers North and South America) and iMallsGlobal, a U.S. corporation. Together they have formed iMallsAmericas, one of the first, real private sector-civil society partnerships in which the telecenters have part ownership. The new venture will provide access to services and e-commerce tools and accessibility to payment options and credit for small and medium enterprises in developing countries.

The iMalls Americas’ business model opens the channel for e-commerce in the developing world by providing key elements needed to solve exclusion from e-commerce. A two-way logistical channel enables merchants to both purchase and sell, and actually send and receive goods and products locally, nationally and internationally through Internet-based technology. This is a unique and fully-integrated process. The much-needed trading channels create access to vital local, regional and global markets not only for previously excluded small and medium enterprises, but also for global companies seeking to access rural and previously untapped markets. It has created a platform for international purchases that provides full-landed cost, including customs duties and shipment to destinations in remote areas. With this system, purchasers have no surprises.

This e-commerce solution is addressing financial challenges by translating all costs into local currency and providing payment facilities using public Internet access points. Local payment options are made possible through established banking affiliates that permit international and national payments. The package is rounded out by making available a range of credit services.

This solution also serves as a major community development instrument by expanding the services of telecenters into international and national logistics and payments centers. Public Internet access can now become a potentially vibrant force in social development. In the United States, such public Internet access points provide a portal for immigrant populations to send products and remittances back to their families. Further, by developing economic opportunities in local communities, e-commerce can help alleviate pressures for migration to urban areas and other countries.

E-commerce is a powerful tool for development. What remains now is for U.S. companies to collaborate with entrepreneurs to enable them, jointly, to take advantage of this huge untapped market.

Klaus Stoll was the President of Chasquinet Foundation, Ecuador, and is now the senior executive vice president of the Community Access Foundation.