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 the collapse in oil prices. However, there will continue to be areas of opportunity, and the report projects that IT spending will grow from US$1.6bn in 2009 to around US$2.0bn by 2013. 2009 and 2010 are likely to be difficult years for IT vendors, with negative real growth projected for both investment and private consumption. However, computer shipments should continue to grow, thanks to government affordable computer programmes, and more local production of computers.

Banks and telecoms operators are continuing to spend on IT, and deployment of fixed and mobile broadband will help to drive spending. 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 Developments In 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.

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 packaged 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.

This report has upwardly revised its Q409 computer hardware projections, and the market is now expected to be worth US$871mn in 2009, with sales to pass the US$1bn mark by 2013. Telecoms operators have continued to promote sales of netbooks bundled with their mobile and fixed broadband data plans. Vendors and retailers, including telecoms operators, have offered more flexible financing. The government has continued to roll out affordable computer programmes for households and students. The Veneuzelan computer hardware market should therefore have a positive growth trajectory over the five-year forecast period, with a projected compound annual growth rate (CAGR) of 6%. The current level of computer penetration is estimated at around 12% and is expected to reach close to 18% by 2013. The main long-term driver is greater affordability, partly as a result of cheap computer programmes and the government's initiative to manufacture low-cost 'Bolivarian' computers.

Venezuela's software market is projected at US$298mn in 2009. Software revenues are expected to rise at a CAGR of 5% to around US$367mn by 2013. However, revenue growth is forecast to be flat this year due to rapidly declining business confidence in the private sector, and a relatively high and apparently increasing software piracy rate The market landscape is likely to remain shaped by the government's drive to promote open source software. However, enterprises in sectors such as retail, distribution, telecoms, financial services and export companies should provide potential opportunities for proprietary software vendors.

Venezuela's IT services market is projected at US$254mn in 2009, with little growth compared with 2008. By regional standards, the percentage accounted for by services in Venezuela's hardware dominated IT market is much lower than average, at around 16%. In many countries, such as Brazil, services account for more than 30% of spending. The most demand, around 75%, will come from the large company sector, with the oil sector itself still significant, despite the fall in oil prices. Venezuela's banks and telecoms operators also continued to spend in H109 as they rolled out new platforms and services.

With the number of telecentres continuing to increase and the availability of internet services expanding, it is projected that internet usage will continue to rise at a strong pace in Venezuela. Wireline services seem to dominate, but there is potential for wireless broadband to become a significant driver of broadband growth. Because of the low levels of internet access the country, the Venezuelan government has generally been slow to roll out e-services. The recent decision by the government to launch in 2008 a consultation on a new telecoms law to promote competition may be a hopeful augur of progress. The country has fast growing mobile penetration and has also been rolling out fixed wireless services such as Wi-Fi and the Korean technology WiBro. In 2008, Venezuela's government conducted technical tests on different digital TV standards to decide which ones to adopt. The government expects to implement digital TV by 2012, with both digital and analogue technologies coexisting for a five-year period. The tests involved a number of different standards, including integrated services digital broadcasting (ISDB) from Japan, digital video broadcasting (DVB) from Europe and a Chinese standard.

The government is committed to improving e-use in the public sector and reducing the digital divide. The development of e-infrastructure is also seen as one method to fight corruption in the public sector. Telecom Venezuela is working with the government on a project called Telepolítica, which involves using information and communication technology (ICT) for local development projects. In 2008, stateowned telecoms company Telecom Venezuela signed a co-operation agreement the Comptroller General's Office (CGR) and the National IT Institute (CNTI) to help build ICT infrastructure for the CGR and other public bodies.