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Brazil Stakes Claim on Global Online Map

Added: (Sat Nov 20 1999)

Pressbox (Press Release) - By John Miller

SAO PAULO (Reuters) - Not so long ago, men and women in stuffy business suits crammed into luxury hotel conference rooms in Brazil's financial capital of Sao Paulo to talk about things like stocks, banking and auto parts.

Now, twentysomething cyber entrepreneurs in jeans and plaid shirts pack the same halls to lecture investors on the merits of advertising on lesbian chat pages.

As Brazil's traditional industries retreat into a post-devaluation slump, its Internet market is booming and marking out a special place on the world's online map.

Latin America's leading economy, with a Portuguese-speaking population of 165 million, Brazil hosts the world's largest non-English Web site. Its pioneering work with online banking has drawn kudos from Microsoft's Bill Gates.

Top media and communication companies such as America Online, AT&T and Microsoft are also piling into what analysts say is the most promising emerging Internet market. What excites them is a concentrated group of middle-class consumers who love to gossip online, absorb new technology and punch credit card numbers into their computers more readily than the Spanish-speaking neighbors.

Better Suited To E-Commerce Than Europe Or Japan

"Brazil is going to be an important player in this new economy. Our open and accepting culture is better suited than many European countries and Japan to participate in this society," said Jack London, 50, who wants to turn his 2-month-old site, Valeu, into Latin America's premier online mall and auctioneer.

London created BookNet, Brazil's version of Amazon.com, in 1996. He sold the young company this year for an undisclosed sum to private investors attracted by annual revenue growth of $870,000 to $6 million in just three years.

The former General Electric employee and book lover, named for the American adventure novelist, is not the stereotypical Internet geek, but he says opportunities are open for everyone. Latin America's total Internet audience is expected to grow to at least 20 million in three years from 7.5 million today and Brazil should account for about half the market.

Still, skeptics say London and others like him have gone Internet mad in a country famous for failing to live up to its wide-eyed ambitions. They say poor credit controls, low per capita credit card and computer usage, bad roads and unreliable postal and telephone service will impede the kind of e-commerce growth Internet enthusiasts now anticipate.

Wall Street analysts, just starting to churn out reports on Latin America's fast-growing online economy, complain that figures on Internet use, e-commerce and online advertising vary widely, making it difficult to know exactly what is going on.

A bit of perspective is also in order, they say. Brazil's estimated $6.5 million in annual online advertising revenue, while impressive by Latin American standards, is dwarfed by Japan's $191 million, Great Britain's $90 million, Germany's $70 million and a whopping $3 billion in the United States.

Brazil Leaves Neighbors In Dust On Info Superhighway

Still, there is no question Brazil has left its Latin neighbors in the dust on the information superhighway. It has about half of Latin America's 7.5 million Internet users and it accounts for nearly 90 percent of the region's e-commerce -- valued at anywhere from $70 million to $400 million a year -- and three-quarters of the e-commerce sites.

Global online giants have taken note and are rolling up their sleeves to stake a claim in Brazil's coveted Internet market while the rush is still on.

Yahoo! and AOL first opened sites in Brazil before moving on to neighboring countries. StarMedia, which had 14 people in Brazil last year, now has 120, compared to 30 in Mexico, its second-largest Latin American operation.

Industry watchers say the first big Internet battles are about to begin in Brazil. AOL, the leading U.S. Internet service provider, officially launches its Brazilian site this month in the first serious challenge to Brazil's entrenched Internet Goliath, Universo Online, or UOL. With some 500,000 subscribers, UOL is the world's largest non-English Web site.

Within a year AOL is expected to replace Zaz, owned by Spain's Telefonica, as Brazil's second-largest Internet provider. On AOL's heels will be Microsoft in alliance with the Marinho family, owner of the Globo media empire, with plans to launch a Web site early next year and offer high-speed Internet access via Globo's cable operations.

The arrival of foreign players comes at a convenient time for Brazil's traditional media companies, all of which are short of cash after January's devaluation sent their dollar-denominated debt soaring in local currency terms.

Most local players are eager to align with cash-rich foreigners. Even UOL, majority owned by the Folha newspaper group and publishing powerhouse Abril, sold a 12 percent equity stake for $100 million, much of it bought by foreign firms, to beef up its local operations and finance its expansion into Argentina and eventually the U.S. market.

UOL is confident it can retain its No. 1 spot despite the entry of foreign players. Up and running for four years, it has already worked out many kinks and says it has the local edge to foresee and respond to new problems.

UOL chief operating officer Caio Tulio says newcomers face big headaches setting up shop in Brazil, particularly from the newly privatized, still cumbersome telecommunications network.

"I have a saying for them," Tulio said with a smile. "Welcome to Vietnam." (NYSE:AOL - news) (NYSE:T - news) (NasdaqNM:MSFT - news) (NasdaqNM:YHOO - news) (NasdaqNM:STRM - news) (TEF.MC)

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