According to the U.S. Department of Commerce, Brazil boasts the most advanced Internet and e-commerce industry in Latin America and the fifth largest telecom infrastructure worldwide.
This is due to privatization of Brazilian telecom services and associated advancements. between 1998 when the Brazilian telecom system was privatized, and the year 2000, telecom investments advanced an average of 1.36% GNP per year, a rate well above both Brazilian and Latin American historical levels. Thus, in record time the privatization of the Brazilian telecom system succeeded in revolutionizing the national communications industry, which in turn promoted national development of e-commerce.
Approved by the National Congress on July 16, 1997, General Telecommunications Law ("LGT") No. 9.472 authorized the privatization of state-controlled telecom companies and created a regulatory agency ("the National Telecommunications Agency", or "ANATEL"). The law resulted in restructuring and modernization of Brazil's telecom system, which had until then been controlled by the federally owned company "Telebras".
LGT 9.472 went into effect in January 1998, coinciding with the global "dot com" boom. In response to technological innovations and high market demand, telecom investments in Brazil quickly surpassed the Latin American average. Both basic and sophisticated services became available, including corporate high-speed networks and wide band Internet services.
While provided with some financial incentives, private networks were essentially required by law to extend their services to geographic and socio-demographic areas deemed marginally profitable and unprofitable.
Today, Brazilian users dominate the Latin American Internet, and Brazilian internet commerce is ranked third in the region (behind Uruguay and Chile and slightly ahead of Argentina). Since 2002, Brazil has steadily converted from dial-up to broadband connection. Together with the widespread development of VoIP (Voice over Internet Protocol) technology, Brazilian companies are increasingly looking to incorporate Internet telephony with their broadband offerings.
There has long existed a state legislated tax known as "ICMS" which applies to Brazilian commercial transactions including communications services. With the privatization of the nation's telecom service, Brazilian states quickly adopted the position that Internet Service Providers ("ISPs") provide communications services and hence, owe ICMS to the state. The statutory basis for this position was found in article 60 of the Brazilian Telecommunications Law of 1997.43, which defines activities that provide telecommunication services.
ISPs contested the states" position by arguing that rather than 'offering' telecom services; they were merely enhancing existing services provided by telecom service providers. This argument was premised upon article 61 of the Brazilian Telecommunications Law of 1997 which defines the ‘service of added value', as distinguished from telecom service provider defined in article 60.
One case on point held that cable ISPs constitute telecom service providers and therefore owe ICMS tax. (Tribunal de Justiça de Minas Gerais - TJMG, Mandado de Segurança - MS n. 267919-9/000-1, 09 Apr. 2003). In another case, the Brazilian state of Paraná held that ISPs provide telecom services under the terms of article 60 and, therefore, they owe ICMS (RESP 323.358, 03 Sep. 2001).
Notably, the regulatory agency ANATEL does not classify ISPs as telecom service providers. As such, there exists a discrepancy on this issue which has yet to be resolved.
Brazil's financial sector is the regional leader in adopting information technologies. Brazil is widely considered the regional leader of Internet marketing, online sales, service and support. It appears that the Brazilian financial sector has capitalized on its IT experience to adopt e-commerce technologies and integrate them with existing information systems.
Brazil is currently viewed as the largest networked economy in Latin America. In 2006 Brazil was ranked fifth highest in world market cellular phone users and seventh in world market software (estimated to be 9 billion USD per annum with an average consistent annual growth of 10%). In addition, Brazil is among global leaders in the development of e-government applications, such as e-learning, e-procurement, online tax applications and the national election system.
Some suggest that in Brazil, telecommunication limitations are no longer due to an infrastructure supply shortage; rather, they are due to market demand limits.