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Market Overview Venezuela's near-term economic outlook is challenging for IT spending, with the increasingly consumerdriven growth of recent years cooling due to economic uncertainty and lower oil ...

Market Overview Venezuela's near-term economic outlook is challenging for IT spending, with the increasingly consumerdriven growth of recent years cooling due to economic uncertainty and lower oil prices The January 2010 announcement of a steep devaluation of the bolivar for 'non-essential imports such as computers is likely to depress spending as consumers grapple with runaway inflation However, there will continue to be areas of opportunity, and BMI projects that IT spending will grow from US$16bn in 2010 to around US$23bn by 2014 2010 will be another difficult year for IT vendors, with the recession forecast to continue this year Expansionary government fiscal policies have provided a boost to IT spending, but as the economic climate worsens this year, BMI anticipates that this will weaken Recent laws that are perceived to have undermined private property rights will act to deter foreign investment Venezuela is one of the smaller markets in its region, but a rather low PC penetration rate of less than 12% indicates the underlying potential for growth Government policies such as the promotion of open source software will continue to shape the market The business sector will offer opportunities, including from small and medium-sized enterprises (SMEs), but overall levels of investment are likely to remain relatively low, particularly among private companies Industry DevelopmentsIn September 2009, the government said that it would start to assemble its own laptops as part of its educational programme, Canaima Educativo. The laptops will be manufactured at two plants in the Paraguaná Peninsula, Falcon state, with production scheduled to start within eight months. The goal is to distributed 300,000 PCs manufactured under the programme, starting in September 2010. Earlier in 2009, Venezuelan President Chávez had announced plans to supply schools with 350,000 lowcost netbooks this year. The computers are being delivered from Portugal as part of a technology knowledge transference agreement signed in late 2008. As of Q309 around 50,000 laptops imported from Portugal had already been distributed under the plan. The government-manufactured laptops will come with 100% open source software. In August 2008 the IT agency CNTI said that nearly 60% of Venezuela's government offices had switched from proprietary software to open source, compared with its target of 100% migration by year-end 2008. Competitive Landscape In August 2009, Venezuelan mobile operator Digitel announced a partnership with Chinese PC vendor Lenovo in the launch of a new mobile broadband offering. Digitel's broadband package will come bundled with a Lenovo netbook inclusive of a modem for 3G service, with the packages available at a cost of VEB3,249 (about US$1,500). Digitel launched 3G services this year and has targeted 7.5mn subscribers for its service by the end of 2009. In 2009, local PC vendor Siragon was the first company to launch netbooks in Venezuela, and the company estimated that sales of around 15,000 units in 2008 gave it about 50% of that segment. The company is targeting netbooks as a priority for 2009, as part of its plan to achieve revenue growth of 30% this year. The company estimated that it was on course to sell 80,000 desktops and 50,000 laptops in the Venezuelan market last year. In September 2009, Microsoft Venezuela created a new unit to focus specifically on public sector accounts. The company aimed to increase the amount of business generated from government during its fiscal year 2010, which began in July 2009. Microsoft claimed to have achieved double-digit growth in Venezuela in fiscal 2009 and hoped to replicate this achievement in fiscal 2010. Computer Sales BMI projects that Venezuela's PC market will be be worth US$900mn in 2010, with sales expected to approach the US$1.2bn mark by 2014. In January 2010, consumers crowded into electronics stores to buy notebooks and other consumer electronics goods ahead of anticipated price hikes. Ho