This report has downwardly revised its Chile IT market forecast following negative PC market trends in H109. Chilean IT spending is now expected to dip into negative growth territory in 2009 before recovering to grow to around U$3.1bn in 2013, from US$2.0bn this year. The Chilean IT market is one of the most developed in the Latin American region and, despite current economic headwinds, is projected to grow at a compound annual growth rate (CAGR) of 11% over the 2009-2013 period.

The economic outlook in 2009 remains a difficult one for IT vendors, with the slowdown in economic activity hitting IT spending. Tighter credit conditions have led to consumer and business caution, with some replacement spending postponed, and the political climate in an election year may cause delays in roll-outs of government projects. There are still areas of opportunity, however, particularly government spending on education and small and medium-sized enterprises (SME) informatisation programmes.

Chile's development as an offshoring location will attract more investment in IT services, with sectors like retail, distribution, financial services, telecoms and healthcare all offering opportunities. While only around one-tenth the size of Brazil's IT market, Chile will remain an attractive market for vendors. Industry Developments Government spending on information and communication technology (ICT) projects is expected to rise in H209, with project roll-outs delayed from earlier in the year and stimulus spending to revive a slowing economy. The government has announced a number of flagship projects this year, but funds dispersement was often slow due to the political climate in an election year and economic headwinds.

Spending is expected to pick up in the second half of the year. Among major projects launched in 2009 was the Enlaces programme to provide IT for schools. The programme, led by Chile's education ministry, involved the set-up of a US$3.7mn fund to subsidise IT purchases for more than 2,000 schools throughout the country. Schools will be able to use the fund to acquire education software and devices, with standards and prices established by the ministry. SME informatisation is a government priority.

In 2008, the Chilean government launched a major programme to promote IT use among SMEs. The programme, backed by the economy ministry, was budgeted at CLP3.0bn, with CLP1.8bn coming from the government and the remainder from regional governments. The programme is particularly targeted at SMEs that operate in the food, agriculture and tourism industries. Competitive Landscape HP has predicted double-digit growth in Chilean sales in the next few years. The company has an agreement with Chilean telecoms company Entel by which Entel will sell HP 3G laptops bundled with its own 3G services. HP hopes to sell 30,000 laptops by this channel in 2009. Meanwhile, Acer was implementing its multi-brand strategy in Chile, where it has launched its eMachines brand. Lenovo had a bundling agreement with triple-play (fixed telecoms, broadband and mobile) service provider VTR. In the summer of this year, Microsoft laid the groundwork for the launch of its new operating system, Windows 7, with the release of the software's enterprise version in August.

Microsoft dominates the Chilean operating system market segment, despite a piracy rate of 68% and growing interest in open source software. In 2009, Microsoft revealed plans to develop an ecosystem of local software developers to develop solutions for the public sector. Global IT services vendors continue to expand their presence in the Chilean market. Companies such as Tata Consultancy Services (TCS), Evalueserve and Oracle have all set up IT services operations in Chile. In September this year, UST Global and General Electric (GE) said that it expected to employ 1,000 professionals at the IT offshoring center to be located in Calparaiso. Meanwhile, US healthcare IT solutions specialist InterSystems will invest US$10mn in its Chilean operations.

This report forecasts that Chile's computer and accessories market will have a CAGR of around 10% over the 2009-2013 period. However, the report has downwardly revised its market projections for 2009 following a stream of negative data from H109. PC sales in 2009 are now forecast at US$712mn, down from US$768mn in 2008. Despite the challenging trading conditions in 2009, growth should resume in 2010 with spending passing the US$1bn mark by 2013. In Q209, there were signs of the contraction in the market slowing down, but H109 PC shipments were still estimated to be down by a low single-digit factor year-on-year (y-o-y). The main driver of the decline was desktop sales, which were down by around 30% in H109 as businesses deferred replacement purchases. Notebook sales continued to grow even in the difficult first quarter of the year; however, most of the growth was driven by low-cost netbooks, meaning that PC revenues contracted by more than unit shipments.

Chile's software market is projected to be worth US$313mn in 2009, with flat or slightly negative growth compared with 2008. Software CAGR for 2009-2013 is projected at around 13%. There are expected areas of opportunities in 2009, particularly in the government sector, with the roll-out of tenders that were delayed from earlier in the year. In H109, a slowdown in export markets and tighter credit conditions crisis reportedly led some companies to look to defer systems updates, but other companies saw IT as a means of achieving greater efficiencies in difficult times. Piracy was estimated to account for 68% of software in 2008, up 1% on the 2007 level, despite a sustained government campaign to reduce this.

Chile's IT services market is projected at around US$828mn in 2009 and is expected to grow at a 12% CAGR over the 2009-2013 forecast period. The percentage of IT market revenues generated by services is currently around 37%, high by emerging market standards but similar to other countries in the region, such as Brazil. The majority of demand, around 75%, still comes from the large company sector, but smaller companies are now becoming more sophisticated in their demand. The economic situation is likely to have an impact this year on spending in some verticals, but in many cases spending will be viewed as strategic rather than operational. Led by the financial, telecoms and retail sectors in particular, there is a trend towards bigger managed service and outsourcing deals in the local market.

The government is planning to increase Chile's broadband options by auctioning 3G mobile and WiMAX. For 2008-2009, the government has allocated US$80mn to support projects aimed at boosting internet coverage. The telecommunications regulator Subtel also planned to launch a new universal access fund in 2008. In general, Chile enjoys some of the best telecommunications infrastructure in South America.

The World Economic Forum ranked Chile 31st in the world in its most recent survey of 'degree of preparation to participate in and benefit from information and communications technology', the highest ranking in the Latin American region. However, the report concluded that Chile's e-development was held back by some familiar failings including an inefficient government bureaucracy and over-regulation.