Will Huawei weather 5G storms in Latin America?
The doors have been slammed shut on Huawei 5G networks in the US, Australia, New Zealand, Singapore and much of Europe (its largest market outside China). The UK is the latest to join this expanding list. Canada is likely to follow suit, while following the latest India-China border flareup, India too is reportedly mulling banning Huawei.
The US accuses Huawei of espionage activity at the behest of
the Chinese government and security reasons and is advising countries against
the Chinese telecom giant. These have been strongly refuted both by Huawei and
the Chinese government.
Speaking with Brazilian media late last year, Huawei chief
executive Ren Zhengfei played on historical and geopolitical sensitivities,
saying, “the United States treats Latin America as its backyard… our goal is to
help Latin America get out of this trap and maintain the sovereignty of each
country.”
Pressures in US backyard
As Mexico and Argentina plan to initiate the region’s first
5G networks in 2020, the US campaign against Huawei has reached a new frontier:
Latin America. As in Europe, the Trump administration is working hard in Latin
America to convince these countries not to rely on 5G equipment made in China.
During Bolsonaro’s US visit, President Trump told him that
Brazil would need to become a trusted ally in limiting Chinese influence in
Latin America. Crucial to this effort, the U.S. government stated it would be
curbing the spread of Huawei technology in the region. As an alternative, the
US has suggested Brazil’s telecoms companies use Scandinavian suppliers
Ericsson and Nokia for their 5G networks, with US financial help.
Huawei’s brand awareness in Latin America is quite high. Its
blacklisting in the US and the suspension of Google’s support resulted in the
company losing access to Google’s Play Store and Android updates. These
circumstances explain the company’s focus on investing in app developers.
Huawei will launch eight labs worldwide, one of which will be in Mexico.
According to an Ericsson report in 2019, 49% of Latin
America was connected to the 4G network in 2019. It forecast that 64% of mobile
devices will be on the 4G network by 2025, and 18% will take up the next tier,
5G. Thus, while the region works with its ambitions to introduce 5G, the 4G
adoption will continue for another four years, at least.
It is widely recognised that 5G is a revolutionary mobile
communication technology that will usher in the 4th Industrial Revolution and
drastically change the society and economy of the future. These developments
could very well restructure economies and transform our lives. It promotes
advances in such areas as robotics and automation, virtual reality, and
artificial intelligence and machine learning. A range of anticipated
applications, including in healthcare, precision agriculture, mining, and
financial services, have the potential to transform industries, affect economic
productivity, and shape labour markets.
Given the enormous opportunities that 5G networks will
create, Latin American and Caribbean (LAC) countries are keen and actively
working to adopt 5G. Still, 5G will represent 13% of the mobile connection base
in Latin America in 2025.
Before the COVID-19 pandemic, Brazil, Mexico, Colombia, and
Ecuador were scheduling their respective auctions in order to launch the
technology.
PERU
Peru supports the deployment of both 4G and 5G technology. A
number of 5G trials have already taken place. The government believes the
auction process will generate significant revenues – close to $300 mln. It may
sound bizarre but is true. In June this year, it was reported that villagers in
the Huancavelica region detained eight technicians who were repairing an
antenna, over fears their work would spread Covid-19. The villagers mistakenly
believed that the workers – who had come to fix a wireless antenna – were
installing 5G technology in the area. False claims linking 5G to coronavirus
have been widely shared online in the country.
ARGENTINA
In Argentina, the plan is already underway. Whether it
begins to become visible depends on the agreement that President Fernandez’s
administration reaches with the IMF and private creditors. 5G will finally be
on the map this year. Argentina has stated, “in the local market, for now,
Huawei works without problems”.
When Argentina negotiates debt with China, it should be
prepared to commit itself to accept the conditions that will be imposed on it,
not excluding the offer of its firms (Huawei and ZTE) within broader business
agreements. China usually negotiates ‘as a package’ of all or nothing.
BRAZIL
In Brazil, Huawei is already pilot testing 5G technology
with the four main carriers. Huawei has stressed that the firm is a “private
company”, unrelated to the Chinese authorities.
President Bolsonaro, an ardent admirer of US President
Trump, in a bilateral meeting with President Xi on the sidelines of the BRICS
Summit in Brasilia said that China is increasingly part of Brazil’s future.
Six out of seven 4G mobile networks were constructed by
Huawei. It has been operating there for 21 years, has a factory producing
telecommunications infrastructure in the state of Sao Paulo. A new $800 mln
smartphone plant has been promised in view of the country’s upcoming 5G
auction. However, auction of the coveted 5G spectrum has been delayed since
January 2020.
COLOMBIA
Aiming at creating new jobs and transforming Colombia’s
economy, President Duque’s administration has also been working to develop
mobile network coverage throughout the country, from isolated mountain
communities in the Andes to the jungle region of the Pacific coast.
Sylvia ConstaĆn, Minister of Information Technologies and
Communications said that restricting Huawei or other companies to take part in
the 5G auction is not in the plans. Colombia’s 5G auction is planned to happen
by the end of 2020 or early next year.
Chile has unveiled a new 5G consultation as it assesses the
interest in the potential distribution of what is called Limited
Telecommunications Services concessions for businesses. The consultation is
targeting the mining, port, agricultural, industrial and transport sectors.
MEXICO
For Huawei, Mexico is one of the most important markets for
the brand as it is among the top five telecom giants in the country.
Mexican telecom group America Movil, the giant controlled by
the family of billionaire Carlos Slim, expects to launch 5G technology in
certain Latin American markets by the end of the year. The company is currently
working on the virtualisation of the network and to prepare the network
infrastructure to launch 5G in Brazil once the firm secures spectrum. The
company expects capital expenditures of $8.5 bln for the year, on par with last
year’s. The investment will be focused on deploying fiber in Mexico, Colombia,
Brazil and other markets. That is all before the pandemic started hitting the
region badly. Mexico was the first to announce a tender suspension in Latin
America.
US tech security experts are unanimous in their assessment
that if China succeeds in imposing its 5G network, including in Latin America
of over 650 million inhabitants, will be able to control all the documents,
communications, archives, geolocation, other sensitive elements and their administrations
and the main business enterprises.
China knows very well that the economic crisis that the
region is going through is serious. The latest World Economic Outlook Update
estimates the region to shrink by 9.4% in 2020, four percentage points worse
than the April projection and the worst recession on record.
In these circumstances, it appears unlikely the region will
risk incurring China’s wrath by outright banning Huawei. Still, China will
attempt to influence through threats and promise of billions of dollars and
Yuans in assistance in grants and soft loans. The ‘cheque book diplomacy’ is
expected to see much action in the times ahead.
In India, Jio Platforms Ltd. announced its indigenously
built 5G technology. The company-controlled media described the technology as a
“Huawei-killer.”
After testing it on the 400 million 4G customers in the
country, Jio will offer it to other markets. If it enters the Latin American
market it would be a big boost to the company as well as India Latin America
business relations.
In the end, it is not the technology but US pressure, the
outcome of November elections, the impact of COVID-19 and global and regional
economic and financial conditions that will decide Huawei’s fate in Latin
America in the coming years.
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