National Digital Strategy Creates Local Opportunities

President Enrique Peña Nieto has announced the country's National Digital Strategy with the intention of improving the level of digital inclusion in Mexico. The strategy rests on improvements in five key areas; connectivity, inclusion and digital skills, interoperability, legal framework and open data. BMI identifies a number of opportunities for the ICT and telecoms sectors in light of these goals.

In the statement, Peña Nieto noted that Mexico had scored particularly poorly among OECD countries and the rest of Latin America in certain IT reports dating back to 2011. The goal of the National Digital Strategy therefore aims to push up its scores, placing it around average for OECD and one of the leaders in Latin America. In BMI's latest IT Risk/Reward Ratings for Q1 2014, Mexico climbed from 4 th to 3 rd place, behind just Brazil and Chile among major Latin American markets. However, we note that markets such as Costa Rica and Panama would likely place ahead of Mexico were they included also. While it has certainly improved since 2011, there is still plenty of scope for IT development.

The government aims to make improvements in the five areas below, in order to increase the level of digital inclusion:

Five Digital Strategy Pillars
Pillar Description
Connectivity Network developed and increased deployment of better infrastructure in the country, expanding the capacity of the existing networks and the development of competition in the ICT sector to encourage lower prices.
Inclusion and Digital Skills The equitable development of skills to operate technologies and gender equity.
Interoperability Share information across different technical and organisational platforms.
Legal Framework The harmonisation of the legal framework with the ability to foster a favourable environment for the adoption and promotion of ICT.
Open Data The availability of useful government information to foster civic entrepreneurship and promote transparency, therefore improving public services and creating more accountability.
Source: BMI, President's Office

By developing these aspects of the ICT sector, the strategy hopes to promote move into the digital age, increasing the interaction between government and citizens, as well as contributions to the overall economy. The digital strategy also aims to foster e-government, digital economy, higher education, telecare and public safety, through transparency and promotion of the greater use of ICT.

Internet Usage A Greater Reality
Internet Access By Location (%)

BMI notes that reform to the telecommunications sector passed and signed into law in June 2013, will act as the first step to achieving the National Digital Strategy. By opening up the sector to further competition, the government hopes to boost the level of connectivity in the country, expanding access to the internet through better coverage and lowering prices. BMI data show that the number of fixed broadband users in the country reached 13.8mn at the end of 2012, a penetration of around 12.5%, placing Mexico towards the bottom in the region.

The low penetration rate is based on the dominant position of incumbent operator Telmex, owned by América Móvil. With a 59.5% share of the market at the end of 2012, the competition has found it difficult to compete with the monopolistic provider, leading to higher prices for services. This is evident in a low household PC penetration rate and data showing that the majority of internet users access the web from outside of their homes, such as at work, university and internet cafés. The number and proportion of internet users who own a home computer but who access the internet outside the home has been falling in recent years. PC ownership remains an important factor that shapes access to the internet. However, there remains a sizeable number of Mexicans who own computers but who do not access the internet at home, suggesting that cost of internet services remains an impediment.

Another area that the National Digital Strategy will create opportunities is that of digital goods and services, by enhancing e-commerce and promoting innovation among small and medium enterprises. This will also benefit financial inclusion through mobile banking platforms. Currently, Mercado Libre is the major provider of e-commerce in the Latin American region, but by encouraging entrepreneurship among SMEs and providing better digital education for Mexicans, rival platforms could emerge over the longer term.

Mobile banking platforms can be an important driver for telecoms operator's revenue as well as for financial institutions through greater inclusion in the banking sector. In the World Bank's Financial Inclusion report for 2012, Mexico scored below average in the percentage of adults with a bank account, at 27% compared to 30.9% in the region. However, it did perform above average for mobile banking, with 6% of adults reporting to have used a mobile banking platform to send/receive money or pay bills, compared to 3.6% for the region. Several new platforms are set to be introduced from the likes of América Móvil and Telefónica, and the National Digital Strategy could be a boon for these applications.

The strategy also offers potential for telecare to develop through the commitment to universal healthcare and greater use of information. The government is working to implement the National Single Window, which will unify all government sites into one portal and digitize around 700 government procedures, available on its website. We also believe the greater use of digital platforms in education will help to improve the level of human capital, contributing to further entrepreneurship, job creation and other economic benefits. BMI has a positive outlook for the strategy given the progress of reforms to the telecoms sector and the establishment of a coordinating body the National Digital Strategy Coordination of the Presidency of the Republic. This organisation will be solely responsible for achieving the plans lofty aims, streamlining the overall process.

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Geography: Mexico

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