Latin America Leads ICT Reform

Posted on 17th May 2019

From new fiscal policies to labour laws, governments across Latin America are debating structural reforms, with ICT being one of the main sectors targeted.

Digital platforms are likely to see increased regulation across the region. For example, Uber — previously banned upon its arrival in Costa Rica, Argentina, and Colombia — will be subject to the same regulation as its competitors as a condition for its legalisation. In Costa Rica, owners of short-term rentals using platforms like Airbnb or Booking.com will soon need to register with the authorities and pay a tax.

Following a call by ECLAC (the United Nations Economic Commission for Latin America), several countries, including Argentina, Uruguay and Colombia, are implementing a consumption tax (or Value Added Tax) for digital platforms.

Interestingly, Argentina is about to pass a law that will create major tax incentives for digital companies. The “Knowledge Economy Bill” includes lower labour costs and tax cuts for companies employing high-qualified personnel. The VAT will not apply for software or content development, but it will apply for consumption of services. In other words, Netflix may not need to pay taxes when producing new content, but it will for new subscriptions. This Argentinian law will seek to promote employment and investment in the ICT industry, including satellite companies. Other items on the policy agenda include a data protection bill to strengthen restrictions on personal data processing and regulation of content in television, radio and streaming platforms.

Aside from the digital sector, Peru is also reforming the telecommunications industry. A bill, aimed at updating a 1993 regulatory law, was recently introduced in Congress. Among other items, it would allow the public sector to provide telecommunication services if there is no private offer. It will also bind licensing recommendations from the regulator (Osiptel) to the Ministry of Telecommunications.

In Colombia, President Duque introduced a bill last year to modernise the tech sector, streamline regulation and increase technology penetration. If passed, the law would extend spectrum licences from 10 years to 20 and centralise telecommunications regulation into a single body to ensure greater efficiency, facilitate the relationship between government and industry, and concentrate funds for the promotion of communication technologies.

In office since August 2018, the Colombian head of state is pushing for tech regulation reform in the hopes that it will drive innovation, sectoral growth, and level the playing field of network connectivity across the country.

Governments are also focusing on cybersecurity and attack prevention. A draft law in Chile will promote digital banking and protect financial operations from cyberattacks, and Ecuador — in partnership with the Inter-American Development Bank — is expected to introduce a comprehensive cybersecurity strategy later this year.

Regulation in Latin America differs across the territory, with new leaders reforming laws from previous governments and each country pursuing its own policy agenda. Still, the region is a hub for growth and its vast unconnected lands and population of 650 million provide wide-ranging opportunities for digital and telecommunications companies to strengthen their market position. Industry players must remain attentive to policy developments and help policy-makers build a nurturing ecosystem for tech.

Author: Juan Cacace, Senior Analyst, International Public Policy

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