The digital divide, as it relates to both basic telephone service and the Internet, is widening in Latin America, according to Gartner's Dataquest unit.

Not surprisingly, both the "teledensity" (number of people with a telephone connections) and broadband connections in Latin America trail far behind the United States. In the United States, 80 out of 100 people have telephone connections, compared to Latin America's highest country for telephone penetration, Chile, which has a teledensity of less than 25 percent. Not every country in Latin America has broadband connections. According to Ron Cowles, principal analyst for Dataquest's Telecommunications and Networking Group, Latin American governments need to put in place incentives for carriers to serve underserved and unserved areas, as well as upgrade existing networks. The absence of the proper infrastructure is keeping Latin America's population and companies from taking part in what has been heralded as the "new economy." It prohibits companies from using the Internet to keep costs down and keeps residential consumers from participating in e-commerce. "The lack of broadband connectivity has created a sort of chicken or egg situation," said Marta Kindya, senior industry analyst for Gartner Dataquest. "Because there is a lack of advanced network infrastructure in most areas of Latin America, there is a lack of e-commerce -- particularly for residence consumers. Brazil led all countries in the region with 53,000 consumers with broadband access in 2000. In comparison, the United States had a broadband consumer base of 6 million in 2000." While Internet connectivity may be at a premium in Latin America, the region's PC shipments remain strong despite the downturn in the U.S. economy, according to International Data Corp. (IDC). By the end of 2001, the total number of desktops and notebooks shipped in Latin America is expected to reach 9.24 million units for a total value of $9.4 billion. With more than 20 percent PC unit growth in the region expected in 2001, the sharp decrease in PC sales in the United States is not likely to have a dramatic effect on the Latin American region. IDC's latest PC forecasts are slightly less aggressive than the previous quarter's, but Latin America's PC unit growth estimates are still among the highest in the world. As for the effect the U.S. economy has on the region: "Any serious recession in the United States would obviously have an impact on the Mexican economy, first and foremost," Gumbinger said. "Poor macroeconomic indicators, however, are not always an indication of the potential of the PC market -- as Argentina has shown to be a high-flyer recently despite anemic GDP growth."