- The Washington Times - Thursday, November 30, 2000

SAN JOSE, Costa Rica Earlier this year, Nicaraguan entrepreneur Marco Zeledon introduced EPagos Inc., a Miami dot-com specializing in Web hosting, design and on-line credit-card acceptance. He aimed to go after supermarkets and retail chains in Latin America's main markets: Argentina, Chile, Mexico, Peru and Venezuela.

But Mr. Zeledon never imagined that Central America would play such a big role in the company's success.

"With a $150 setup fee and $150 a month, anyone can create a Web site and do on-line e-commerce transactions," said the former Visa International executive. "We already have 425 merchants in Central America who have created sites from Belize to Panama. I was surprised to see that 120 have signed up from Honduras in the past four months."

Companies such as EPagos are finding Central America a lucrative, untapped market as more and more people log onto the Internet. The deregulation and privatization of Central America's telephone companies is expected to boost dramatically the number of Internet users in the region.

At present, fewer than 350,000 of the region's 36.5 million people surf the Web translating into an on-line penetration of less than 1 percent. That's low compared with Argentina, Brazil or Mexico.

In Costa Rica the most prosperous nation in Central America phone services still are tightly controlled by the government, with the state-owned Instituto Costarricense de Electricidad (ICE) responsible not only for all basic phone service but also Internet access.

In March, a committee of the Costa Rican Congress approved a bill opening up ICE which has a monopoly on phone service to competition and deregulation. ICE's labor unions immediately took to the streets in protest, temporarily paralyzing the Costa Rican economy. Congress later backtracked and forwarded the proposal to a "mixed committee," where it now gathers dust.

"Companies come here because of political stability and our educated work force, but we are sorely lacking in telecommunications," says Lynda Solar, executive director of the Costa Rican-American Chamber of Commerce. "You can buy a cell phone, but you can't get a cellular line. ICE has all kinds of restrictions placed on it. There are so many controls and such bureaucracy that it becomes an impediment to progress. I know these controls were put in place with good intentions, but now it's a spider web you can't get out of."

Data communications are provided by an ICE subsidiary, Radiografica Costarricense S.A. (Racsa), the only Internet service provider for an estimated 30,000 accounts.

"The government is trying its best to open up the state monopolies," said Jaime Daremblum, Costa Rica's ambassador to the United States. "We're making an effort in that direction, but everybody has to be patient."

ICE has nearly 700,000 fixed lines in service, translating into a telephone penetration or "teledensity" of nearly 20 per 100 inhabitants.

In El Salvador, where state-owned Antel was purchased by France Telecom two years ago, 500,000 fixed and more than 400,000 mobile lines are in service up from 175,000 fixed and 50,000 mobile lines in 1995. Since then, more than a dozen long-distance providers have blossomed, all of them competing for business.

"In 1995, to call your brother in the United States you had to pay at least $2 a minute. Now, it's between 10 and 20 cents," says the government's chief of privatization, Juan Jose Daboub. "To get a line, you used to pay [about $2,300] in the black market because there were hardly any lines. Today it's free, and you can choose your own number."

CTE, the privatized phone company, hopes to see the number of its Internet clients grow to 15,000 by year's end, a 300 percent growth; its biggest Internet competitor is Terra Networks S.A., a division of Spain's Telefonica.

In Guatemala, some 15 companies provide Internet service for an estimated 40,000 accounts a number expected to grow by 20 percent by the end of this year.

Businesses such as banks, coffee exporters and even indigenous weavers are recognizing the advantages of being on line, said Juan Carlos de Leon, Telefonica's data expert in Guatemala.

Panama has 39 companies offering Internet access, including Cable & Wireless and BellSouth. In Honduras, 25 companies provide service, including state-owned Hondutel.

At the moment, Hondutel has 370,000 lines installed but only 260,000 actually in service, translating into a teledensity of only 4.3 lines per 100 inhabitants one of the lowest in Latin America. The government's goal is that under private ownership, Hondutel will boost coverage to 600,000 lines by 2005.

Without a doubt, Nicaragua lags behind the rest of Central America in telecom service. State-owned Enitel has only 155,000 lines serving a population of 4.9 million. That translates into a teledensity of only three lines per 100, one of the lowest in the Western Hemisphere.

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