Information Technology in Peru























Analysis: IT Strengths and Weaknesses

Peru exhibits some strengths, or potential strengths, in its IT environment, including its legal environment and liberalized markets, software development potential, widespread grass-roots Internet access and an educated workforce. However, it still has considerable challenges to overcome if it intends to use IT as a tool to attract and sustain new or improved businesses.

Strengths

Although Peru is still a developing nation, and its IT development is just beginning, it has already begun to show some strengths. The primary areas in which Peru has shown potential are its regulatory regime and the resulting open markets, its software development, its grass-roots Internet growth, and its well-educated workforce.

The administration of Peruvian President Alberto Fujimori from 1990 to 2000 was a time of substantial change in Peruvian law with respect to information technology and related issues, disregarding the public perception of Fujimori or the allegations of authoritarianism against him and his administration for the purposes of this evaluation. The catalyst for much of Peru's IT development up to the present, and well into the future, stems from the decision to privatize and liberalize many state assets, particularly the telecommunications system. While the government still limits the number of participants in many of the markets formerly controlled by state monopolies, they have made substantial progress in granting concessions to a variety of companies. These fairly open markets provide many opportunities for domestic and foreign companies to enter various Peruvian IT and IT-related markets, as well as for suppliers to those markets to benefit. In addition to privatization and liberalization, Peru has implemented legislation to ease electronic commerce and to protect data privacy. These are important steps to take if Peru expects to be an attractive market for IT-related businesses, or simply for non-IT businesses that rely on electronic data transfer. For a country with a fairly new information infrastructure, it is to Peru's credit that they have taken these legislative steps fairly early.

Peruvian software development is still a small industry, even compared to other Latin American countries, but it has shown potential for growth. If Peruvian manufacturers continue on the path of customized, niche software for small- and medium-sized businesses, and continue to improve their products, software production could become an important, albeit somewhat small, profit center. As noted in software development, Peru has begun to export very small amounts of domestic software, but there is room for substantial growth as more of Latin America becomes more heavily IT-dependent. However, this is not a quick-fix profit opportunity. Such a plan would require concentrated efforts to produce high-quality software that is successful in Peru and can be easily exported to neighboring countries. Latin America is a young market with many opportunities for someone to be the first mover. Peru has shown the sparks of a potential market leader in Latin American software design, but whether or not Peru can muster the cooperation and production necessary to give it a first mover advantage remains to be seen.

The one overwhelming Peruvian IT success story is the growth and success of the Peruvian Scientific Network, or RCP. The organization was the first Internet service provider in Peru, and still commands approximately half of the market. Because it is a nonprofit organization and aims to provide communication tools to the underserved, it reinvests all profits directly back into the organization, and has not only remained completely self-sufficient since it began providing Internet access, but has seen returns of approximately 20 percent per year for the past several years. Because of its self-sufficiency, RCP is not heavily controlled by the Peruvian government or by Telefónica of Peru, the incumbent telecommunications provider. The tightly knit group of organizations that initiated Peruvian access to the Internet is a powerful resource that illustrates to Peruvians and others that the government need not be the only factor in determining Peru's IT future. This is especially important in Peru, a country which has an historical distrust of its own governments. RCP presents a partnership and alliance prospects for companies who are trying to reach the diverse Peruvian population either through the Internet or with products that relate to the Internet and IT. And again, this potential partner is not a typical puppet or co-conspirator of the Peruvian government, and important measure of credibility in the eyes of Peruvians.

The Centers for Technological Innovation described in government policies, show another of Peru's strengths: the government's support of technological innovation in all sectors of the Peruvian economy. While this is not the creation of an IT-focused sector, it is still an important indicator that the Peruvian government acknowledges the potential of IT investment and is willing to lend its influence to support such development.

Finally, Peru has made strides in recent years to improve the education and literacy levels of its citizens. As noted in IT labor market, over the past few decades, and even over the past few years, substantial progress has been made in reducing illiteracy and increasing the number of Peruvians attaining higher education. A well-educated workforce is the first necessary component of a competent IT workforce. If Peru can build upon this momentum by training knowledge workers and technical experts in information technology, it could position itself as a gateway to IT opportunities in Latin America. Again, as with software, there is still no clear first mover in this field, and Peru has taken some necessary first steps toward fulfilling that role. Creating a desirable IT workforce is not an overnight process, but continued investment and effort could pay off and position Peru very favorably in the Latin American market.

Challenges

While the opportunities presented above capitalize on the strengths of Peru's newborn IT environment, there are still considerable hurdles to overcome. The very youth of the Peruvian IT environment is an important weakness. The entire developed world, and many developing nations, including many of Peru's South American neighbors, have put more time, effort and money into development of a strong IT environment that both strengthens existing industries and creates new ones. Peru has had little time or experience with such undertakings, and although progress is being made, it will likely never move rapidly enough to overcome the gap between Peru and those nations that are "ahead" of it in terms of IT development.

More specifically, Peru is lacking certain tools that would make it a much more competitive IT environment. First and foremost is the overall infrastructure in Peru. Like many other countries emerging from government control of many industries, Peru suffers from neglected and underdeveloped infrastructure, including transportation, utilities, and of course communications. These are significant hindrances to development of new Peruvian businesses and especially to the interest of foreign businesses looking for a Latin American opportunity. Similarly, Peru lacks any substantial hardware development, meaning that companies operating in Peru must rely on imported goods. While Peru has relaxed import restrictions, there is still a time factor that is inherent in any business that relies on long-distance outside suppliers.

In general, Peru lacks a truly IT-focused industrial policy. Industrial policy refers to the tools used by a government to favor, strengthen or otherwise encourage development in a specific sector. The Peruvian government has taken several different steps to encourage IT development, but there does not appear to be an overarching policy in place to coordinate all of these steps toward any specific goals. While industrial policy has weaknesses as well, primarily the government's inability to choose the appropriate sectors to help or methods to help them, there are continued success stories, such as in Singapore, which turned itself from a declining port into an "information island" in a matter of years. The lack of a focused IT policy for Peru is an important weakness in the development of the Peruvian IT environment.

Peru also suffers from the same malady as many other developing nations, in that its people are not accustomed to the use of IT in their everyday work or life. Many of those outside the elite class see information technology as a tool of the elite, or as a status symbol. In addition, Latin American culture in general tends to be a very interpersonal culture, unaccustomed to the use of technological intermediaries. Personal relationships are very important. These cultural characteristics continue to slow the rate of IT adoption in Peru as in other Latin American countries. This situation is likely to endure until a generation grows up with information technology readily available for the majority of their lives and their comfort level with increases to the point where IT is seen as a commodity or necessity, rather than a luxury.

Last update: December 19, 2000 by Jeffrey S. Bernstein.