Smartphone Adoption in Mexico

I recently traveled to Mexico and encountered an interesting phenomenon. Everyone had smartphones[1]. I looked up the numbers when I got back: the smartphone penetration rate in Mexico is 37%. That’s roughly half the rate of smartphone penetration in the US. That’s a surprising number in a country with a per capita GDP that’s 20% of the per capita GDP in the United States[2].

I’d read several places that smartphone adoption had grown outside the US. I knew that a significant part of the developing world was purchasing smartphones. These smartphones are often the first computer and internet connection people have ever had. It was different to see it in practice.

Granted, the people I encountered had owned cell phones for a decade or two. The mobile industry isn’t as onerous in Mexico as it is here. Cell phone plans in Mexico are almost always pay-as-you-go plans. Calls and texts get deducted from the caller or sender’s plan, not both, halving the cost of a call or text.

Mobile customers buy phones up front and low cost options are available. They’re affordable enough that on previous trips it made sense for me to buy a cheap phone and plan to use while I was in the country. I didn’t have time to research how that system may have changed since the arrival of smartphones on the market. A growing trend of purchasing items on credit may also be affecting smartphone adoption.

This is all fine and good from a consumer perspective, but what excites me is the economic impact of smartphone adoption. I’m look forward to discovering what effect the rapid propogation of information will have.

There’s always been an entrepeneurial attitude in Mexico. Many people own their own business or operate a side-business from their home. Small factories are common throughout Mexico City. Small convenience stores are often operated out of the front of homes.

A glance at a GDP graph shows steady growth starting sometime in the 80s. That growth has stayed pretty constant through today. But a more recent spike in GDP growth correlates[3] nicely with an increase in smartphone adoption. Obviously, a simple correlation between two charts on the internet doesn’t indicate causation. But, the fact that the growth of smartphones and the economy mirror each other indicates two possibilities. Either the two statistics are directly correlated and some causation exists (with one number driving the other), or both statistics share some inditerminate causation.

In other words, smartphones are either the canary or the minecart[4]. Either way, things are looking up for the Mexican economy

  1. Obviously, I don’t mean literally “everyone”. But the majority of people that I knew from when I lived in Mexico, as well as a significant number of people that I encountered throughout my trip were using a smartphone of some kind.  ↩

  2. GDP is Gross Domestic Product: “The monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis.” Investopedia  ↩

  3. Correlation indicates a relationship between two numbers. For example, ice cream sales and drowning deaths are correlated. Causation indicates that one number is the result of the other. Ice cream and drowning do not share a causal relationship, but they both share a causal relationship to average temperatures, thus the correlation.  ↩

  4. If smartphones are the canary they’re the indicator of economic growth. If they’re the minecart they’re one of several drivers of economic growth. This report from GSMA seems to indicate the latter, if only as a significant growth industry in Latin America. Check out footnote 4 in the report. It indicates that of the 4.1% GDP contribution from the smartphone industry, 2.5% is due to “productivity improvments”. That’s exactly the sort of thing I was thinking about in this piece. The GSMA is an industry organization, but they’re trying to predict future growth and give a measurement of smartphone growth in Latin America, so the numbers reported should be decent.  ↩