Business

The rise of Chilecon Valley and Silicon Savannah

How the developing world is shaking up tech from Mexico to Chile and Kenya

Today earbuds can translate foreign languages in real time, while scientists are developing ‘living’ solar panels that can be printed on paper.

Meanwhile, tech pioneers are setting their sights on still grander goals, like enhancing the human brain with implants raising the possibility of telepathic communication.

The pace of change in the sector continues to accelerate.

In the US alone, the number of tech-related patents has doubled over the past decade.

But, while expertise has been concentrated around California’s Silicon Valley, in the coming years technological disruption is increasingly likely to blossom in the developing world.

Valparaíso, Chile, Photo credit Loic Mermilliod

Emerging markets are already undergoing a radical transformation. A decade ago the tech industry accounted for only 10% of the benchmark MSCI Emerging Markets index. Now that figure has nearly tripled to 29%, with four of the index’s five largest-capitalized companies coming from the tech sector.

In China, the education system currently produces three million science and engineering graduates each year – five times that of the US – and the nation is already on the way to joining the long-standing tech leaders, Taiwan and Korea.

In neighbouring India, already a global player in the IT services industry, the government now has the world’s largest biometric identification system, with fingerprints and iris scans of more than one billion residents.

Yet, the technological shift is not being limited to Asia. Coordinated public and private efforts to foster tech start-ups in Chile have earned the country the “Chilecon Valley” moniker, drawing comparisons with the famous California innovation hub.

Mexico has also made progress in promoting start-ups through the creation of the National Institute of Entrepreneurship, with similar programs running in Colombia and Peru, now beginning to trigger rapid start-up growth in cities like Bogotá, Medellín and Lima.

Given the large population in Latin America who are without banking services, a key growth area is fintech. According to Finnovista, the number of fintech start-ups in the region recently surpassed 1,000.

Bicentenario Park, Vitacura, Chile, Photo credit Javier Graterol

Elsewhere, in Africa, as telecommunication markets mature, mobile phones are evolving from simple communication tools into service delivery platforms.

Kenya’s M-PESA is one of the first projects that attracted venture capital funding in Africa, and Kenya came to be referred to as the “Silicon Savannah” with a payments platform that supports clients with no credit history or credit scores by using mobile payments to assess their ability to pay a loan.

These changes are a key factor in our benign medium to long-term forecast for emerging and frontier markets. Around the world, companies that embrace technological shifts and remain flexible enough to adjust their business models will be better placed to ride these trends in the year – and years – ahead.

Download the UBS House View Year Ahead 2018 – and read the UBS Chief Investment Office’s prediction for the year ahead.