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Crisis in the TIC sector in Colombia

The slow recovery of oil prices, the tax reform, the mistrust of consumers, and now a drop in the TIC sector for the eighth consecutive quarter, are causes for the slow growth of the Colombian economy, showing an evident crisis of the economy.

Additionally, since the first quarter of 2015, the sector is growing less than the Colombian economy as a whole, in other words, the Colombian economy has grown less than the GDP for the last three years. For instance, while the last 3 years the Colombian economy has grown at an annual rate of 1.9%, the TIC sector has only grown at a rate of 1.5%, a gap of more than 3 percentage points, confirming the difficult situation of the sector.

If this performance is compared to other sectors (see chart below) it is undoubtedly the worst figure in the last 2 years, except for the mining sector. This behavior is concerning as both the mining and the TIC sector are industries which most impact the economy, slowing the growth of the country and there are now reasons to think this scenario will not improve on the short term.

This administration seems to look the other way to the two main issues of the sector: the slow drop in income and the high market concentration. In regards to the former, it has focused its efforts on TIC mass use and diminishing consumer prices. However, the government has neglected the main indicator of the healthiness of the sector, revenue.

In these two years of decrease, the industry has lost more than 3% of its real revenue [1]. Currently, the sector is enduring a delicate economic scenario and the investment is discouraged due to the loss of revenue. The situation is even more serious if investment in the sector greatly depends on imports of raw material and with a strong dollar of the last months, investment is more costly.

On the short term, low investment can delay the adoption of new technologies, implementation of infrastructure or deepening of internal gaps. In fact, Colombia has a significant lag with respect to other countries of the region in terms of smartphone and mobile data penetration. For example, in 2017, the country had a smartphone penetration of 41.5%, which is under the Latin American average and below countries such as Chile or Brazil, which have rates between 55% and 70% [2].

Finally, according to the quarterly TIC bulleting of the TIC Ministry, the market is one of the most focused in the country. The largest operator has a market quota and income greater than 50% of many segments of the industry, showing serious shortcomings of the competence. This concentration could feed the low investment of the operators and gravely impact consumer welfare, due to delays in adopting new technologies or for price abuse.

Regional and social strata difference persist

In terms of TIC penetration, Colombian has progressed in mobile telephone coverage and access to mobile and fixed internet. However, there are still great gaps regarding provinces, cities, and socio-economic classes.

The provinces of the south-east of the country such as Vaupés, Guainía, and Amazonas have between 1 and 5 people connected to fixed internet for every 1,000 inhabitants, while Bogotá has 222 for every 1,000. In the municipality of Sabaneta (Province of Antioquia), more than 52.5% of the people are connected to fixed internet.

The differences are also notable if TIC penetration is analyzed due to socioeconomic strata. Strata 1 coverage is very limited due to serious difficulties in coverage and capability to access some TIC services, plus the low available income and the lack of programs to help close that gap.  

Although there are advances in TIC penetration in Colombia, it is essential that the public and private sectors work together to fight against the issues of the sector such as loss of revenue, concentration and the regional and socio-economic gaps.


[1] Calculations based on information from the Banco de la República and National Administrative Department of Statistics (DANE, for its Spanish acronym) National Accounts.

[2] Calculations based on World Bank data and Strategy Analytics.

 

Consejo Editorial