Term Paper: Information Technology in Peru

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[. . .] In response many private organizations have set up their portals and e-commerce sites in Peru. Independent estimates point to the fact that e-commerce would find more takers in future. [Bernstein, 2000]

Hardware and Software production

IT Hardware manufacturing is very little in Peru. While the local IT hardware requirement was estimated at $660.3 million, Peru's contribution was on $7.2 million. Most of the equipment is imported from Spain. After the government has done away with monopolies in the IT sector, imports from other countries are expected to rise.

In the software sector there were 150 companies in 1998, who produces small applications which fit into domains like banking, accounting and customized applications for small businesses. Foreign companies like IBM, Microsoft, SAP, Oracle and Novell also operate here either independently or in collaboration with smaller local companies. The total market for software services in Peru were estimated at $142.9 million in 1999, of which $77.4 million was produced locally, and $65.9 million imported. Software exports accounted for $0.4 million. Software is being exported to countries like Venezuela and Uruguay.

Software consumers come in various shapes and sizes. Majority of the corporate users with big infrastructures has computer intensive operations like finance, banking, and telecommunications. There has particularly been a high demand for ERP software and expected growth for ERP solutions would be in the areas of mining, food and chemicals. Small-scale businesses also use software though to a lesser extent. There is a potential for networking solutions in Peru. Government agencies account for 20% of software requirements and the government has been fairly consistent in its efforts in providing the basic infrastructure to companies. As promised, regulations and monopolies have been done away with even through they were implemented in the face of stiff opposition. [Bernstein, 2000]

IT Labour and facilities

As of 2000, People between 15 and 64 years of age make up 61% of Peru's population and Peru's labor force is growing at the rate of 2.6% per year. 72% of the people live in urban areas and 41% of the people are below the poverty line. Among those above 15 years of age, there is an illiteracy rate of 10% and only 19.5% have education up to post secondary level. Although the statistics shows an increase in literacy this could mean insufficient manpower specific to IT requirements. To top it, traditional approach to IT has not been encouraging. Poverty, neglect and lack of education could prompt people to look for other alternatives than IT.

There are no technology parks or exclusive IT research and development facilities in Peru. Most of the industrial environment is Peru is concentrated along the coastal regions and in the capital. [Bernstein, 2000]

Scope for IT Financing

The main possibility of finance comes from Peru's Telecommunication Development Fund which funds projects that would extend IT to the rural areas of Peru. Peru also receives funds from international agencies for developing IT related infrastructure. The fund is used to install and maintain telephone and communication facilities in the country. The U.S. export-import Bank provides Peruvian importers with loans. The World Bank and Inter-American Development Bank also provide finance options for setting up telecommunication and IT projects. [Bernstein, 2000]

Legal issues concerning the IT sector

The government has enacted laws and regulations that would protect intellectual property rights and is expected to combat software piracy. The Constitution recognizes intellectual, artistic, scientific and technical innovations and creations as the property of their creator. The author will have the right to create property rights over his/her creations. Software piracy is a big issue particularly among home users and small businesses. 75% of small businesses are still using illegal software in Peru where the total percentage of illegal software use is put at 66%. The biggest culprit is the education sector where 85% of the software is pirated.

Peru has numerous legal provisions against software piracy and has enacted laws against data and information piracy. It has been observed that the incidences of software piracy have come down drastically due to the measures taken by the government. [Bernstein, 2000]

Business climate with regard to IT

As far as IT in Peru is concerned, there is a fair proportion of risk in it. An honest estimate of risk would require an understanding of the strength and weaknesses of the country with regard to IT. (Young, 1996)

Strong political will, which was evident till the year 2000, goes in favor of Peru. In addition a reasonably skilled workforce, import laws and policies that are conducive to setting up a business, privatization and deregulation of government facilities, favorable e-commerce laws, increasing software applications etc. were favorable trends that supported IT in Peru. On the other hand, lack of an IT policy and a specific IT department, lack of good supporting infrastructure like roads and communication facilities, low education levels, absence of hardware companies and people unwilling to use IT in their daily lives are some reasons that are not in favor of Peru as an IT destination. Local businesses are finding it difficult to recruit IT workforce and cannot afford to import manpower.

At present due to its infrastructure deficiency specific to IT, Peru is not suited for large IT ventures although it may be suited for a sales or marketing office.

Conclusion

The business environment in Peru is not currently conducive to large investments due to the fact that IT labor and basic infrastructure is still lacking in quality. Although the country has big plans for the future and have incorporated advanced technological know-how into its basic services, it will be some time before IT will be able to become a viable business proposition in this country. At present the country is suited for small-scale investments and regional offices.

Primary Source

Bernstein. S. Jeffrey, 2000, Information Technology in Peru, http://www.jsbernstein.com/initeb/peru.htm Accessed on October 22, 2002

Secondary Sources

P.A., and R.W. Stuart. "Entrepreneurship and Technology Transfer: Key Factors in the Innovation Process." The Art and Science of Entrepreneurship. Ed. Donald L. Sexton and Raymond W. Smilor. Cambridge: Ballinger Publishing Company, 1986. 181-211.

Bracker, J.S., G.H. Van Clouse, and R.A. Thacker. "Teleconferencing business forums: an approach to linking entrepreneurs and potential investors." Entrepreneurship and Regional Development. 6 (1994): 259-274.

Brealey, Richard A., and Stewart C. Myers. Principles of Corporate Finance. 4th ed. New York: McGraw-Hill, 1991.… [END OF PREVIEW]

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