Smartphone adoption is sweeping across Latin America, making it a prime location for new technologies. The Internet of Things industry, in particular, is gaining speed in the region. Micromarket Monitor forecasts that the IoT sector in Latin America will increase from US$14.2 billion in 2013 to US$44.4 billion in 2019. It is good to know why Latin America is ready for IoT growth.

There has been a boom of IoT startups in Latin America, a region with over 625 million people. This innovation comes with challenges particular to Latin America. Unclear regulations, failing infrastructure, and lack of resources all hinder IoT expansion. The opportunity, however, remains as more individuals and businesses spur this growth.

The Challenges of IoT in Latin America

Countries such as Argentina, Brazil, Colombia, Chile, and Mexico are leading IoT adoption. Brazil, in particular, as 60% of Brazilian companies have invested in IoT research and development. But many challenges remain.

One challenge is the lack of infrastructure and connectivity to support IoT innovation. “Telco operators will play a key role that goes beyond mere connectivity providers. However, they will first have to deliver reliable connectivity that has widespread availability to enable any IoT initiative to get off the ground,” noted Victoria Escudero, Sales Director Latam Telco for Comarch.

Another major challenge is regulation, or lack thereof, in many countries. “Regulation and legislation on security and data privacy which affect IoT are currently insufficient or nonexistent,” says Dr. Ximena Hartsock, co-founder and president of Phone2Action. “There is a need for clear rules on the retention, use and security of data and metadata.”

There are, of course, non-Latin American specific challenges as well. Even countries with developed infrastructure, clear regulation, and high R&D investment face challenges with security and data privacy. Furthermore, all regions that adopted IoT technologies had to integrate them with legacy systems at one point.

Claudio Barahona, CEO of Wayra Chile says, “Innovators must be able to demonstrate the IoT benefits, the security of its platforms due to data encryption and that it is an accessible alternative in terms of cost.”

Even with these challenges, Latin America still seems to be ripe for an IoT boom.

The possibilities of IoT in Latin America

The technology initiatives vary widely across Latin America, and more developed countries are clearly leading the way. That doesn’t, however, mean that other countries in the region won’t follow.

For instance, though 4G mobile Internet connectivity has not been fully deployed in some areas of Argentina, and almost 20% of mobile users don’t have access to this communication network, companies in Argentina are already preparing to implement 5G connectivity by 2020. Testing is happening now, and speeds may reach 20 Gbps. That speed is almost four thousand times faster than the average home connection speeds in Argentina currently. Faster connection speeds will not only help reduce energy consumption, but they will also increase IoT and smart city developments in the country.

In Brazil, approximately 58% of Brazil’s population has Internet access, and over 100 million people connect using smartphones. The Brazilian government also launched a plan to expand the Internet of Things throughout the country via partnerships and higher education programs. The Brazilian government predicts that IoT projects will contribute US$132 billion to the economy by 2025 in verticals such as smart cities, healthcare, agriculture, and manufacturing.

“The time is ripe for IoT because the IT infrastructure and systems of companies have evolved over the past few years and are now ready to deal with the massive amount of data that IoT solutions create,” explains Pablo Perinetti, Vice President of Vertical Markets for Belatrix. “Open source and cloud-based services have helped dramatically lower the costs involved in creating IoT solutions. Companies throughout Latin America are taking advantage.”

“While Latin America hasn’t been on par with other regions when it comes to adoption of IoT devices, probably the best asset we have at this stage is an openness and increased investment in IoT technologies —especially in Brazil, Argentina, Chile, and Colombia,” says Marcio Leibovitch, General Manager of Brazil at Work & Co.

Increasing Investment in Latin America

Smartphone adoption and improved connectivity help prepare Latin America for an IoT boom, but investment will make an even bigger push. Softbank launched its innovation fund, dedicating US$2 billion to invest in Latin America. China is also heavily investing in Latin America, though the investments are mostly centered on specific countries. Wherever the source of the investment, it will help startups create new solutions to solve old problems.

Nora Leary

Co-Founder

Nora Leary is the co-founder of Launchway Media, a digital marketing firm that works with startups and SMEs in high-tech industries.