5G auctions in Latin America do not veto Huawei as requested by Washington

As elsewhere, 5G mobile technology is beginning to take hold instructions in Latin America. It is doing so more slowly than in more developed regions (some countries are still expanding 4G) and experiencing more directly the geopolitical struggle between the United States and China: the pressure from Washington to exclude Huawei from the new networks may be more noticeable in countries geographically closer; at the same time, the financial difficulties of the countries advise not to undermine the potential of the band auctions. So far, only Costa Rica has banned the use of Chinese technology in the new networks, while Mexico has excluded it only near the US border.

Huawei and other Chinese companies such as ZTE and Xiaomi have had a favorable market in Latin America in recent years. High inflation and the financial difficulties of the states have favored cheaper technological solutions than those offered by the most prominent western companies, both in terms of technical infrastructure and users' mobile handsets. 4G-LTE connections in the region are supported up to 70% by Huawei infrastructure, according to data offered by this company, which means that the communications of more than 660 million Latin Americans travel every second through Chinese technology. In 2022, Huawei had a turnover of 4.5 billion dollars in these countries, with a 9% growth over the previous year.

Huawei's figures are mainly due to sales of its hardware, which it supplies to many of the main telephone operators, while Xiaomi has carved out a niche for itself in the cell phone market. In 2023, Xiaomi obtained around 12% market share, in third position after the 40% of South Korea's Samsung and the 20% of the American Motorola.

Chinese technology is an attractive option for regional governments and service providers. As for specific countries, in Brazil, for example, six out of seven 4G mobile networks were built by Huawei, while in Mexico, 55% of the 4G-LTE cellular network has Huawei technology. Furthermore, in Mexico, the Chinese government has supported the development of the country's shared network by investing in Atlan Redes.

The position achieved allows Chinese interests to play strongly in the promising development of communications in Latin America. According to GSMA, the global organization of telephone operators, in 2021 mobile technologies and services generated 7.4% of the region's GDP, a contribution that amounted to more than US$345 billion.
7.4% of the region's GDP, a contribution that amounted to more than US$345 billion in economic value added, generated 1.6 million direct and indirect work jobs, and contributed tax revenues of nearly US$30 billion. By 2025, 83% of connections are expected to be with smartphones and 11% of all connections will already be via 5G.

Pressure from Washington

Chinese penetration in the communications sector has mobilized the United States. After Vodafone Italy discovered some "hidden backdoors" in Huawei equipment between 2009 and 2011 (the Chinese business has admitted that there were "vulnerabilities", but denies that it was an intentional plan) Washington has been alleging that Huawei can be used by the Chinese government as an espionage tool , which would give Beijing a significant advantage from a geopolitical point of view. In addition to advising its most direct allies to dispense with Chinese technology, the U.S. administration has been especially insistent on its mainland neighbors. The Southern Command - the Pentagon's regional security command - has warned of such risks in its publication directed at Latin America.

In 2019, the Trump Administration banned US companies from using Huawei's technologies and invited other countries, especially Latin American countries, to follow suit, citing article 7 of China's National Intelligence Law, enacted the previous year, which states that "all organizations and citizens shall support, assist, and cooperate with national intelligence efforts in accordance with the law, and protect the secrets of the national intelligence work of which they have knowledge". So far, countries such as Canada, the United Kingdom, Japan, Australia and New Zealand have followed the U.S. example.

Heeding that call, Jair Bolsonaro tried to find a legal way to prevent Huawei from building 5G networks in Brazil, despite the fact that this business was already an important provider of 3G and 4G technologies in the country. But after Trump's departure from the White House Bolsonaro corrected his position, because if Huawei was subject to such a ban it could stop supplying 3G and 4G equipment, resulting in potential losses of billions of dollars. The same logic applies to other countries in the region, whose political and economic instability does not give them the same privilege as stronger countries to say no to Huawei.

If Chinese technologies really serve espionage purposes, then the region is already vulnerable to intrusion, as China equips most 3G and 4G networks. However, with 5G the risks would be much greater, as it allows for high-speed Internet, it will increase the issue of devices on the network and, consequently, the possibility of alleged infiltration of national infrastructures.

So far, Costa Rica has been the only country to exclude Chinese companies from its 5G networks. It did so indirectly, by approving a cybersecurity regulation that prohibits companies from countries that are not signatories to the 2001 Budapest cybercrime agreement from participating in 5G bidding processes. The government of Rodrigo Chaves has thus sought to boost the installation of US technology companies, which may opt for this country for the manufacture of chips.

First auctions

Another country geographically close to the United States, neighboring Mexico, has adopted an intermediate position. In 2022, the telecommunications business America Movil confirmed the launch of 5G services, through its subsidiary Telcel, in 18 Mexican cities, using Ericsson equipment in the north of the country and Huawei in the south to build the network. Thus, Huawei will not intervene in the network in the north of Mexico due to the proximity of the United States and the political sensitivity surrounding the topic. In Mexico, the American AT&T, which does not maintain partnership with Huawei, and the Spanish Movistar (Telefónica), which has not closed its doors to solutions from the Chinese technology company, have also begun to offer 5G, although it is assumed that it would not use them near the border with the United States.

In fact, in Mexico, as well as in Guatemala and Uruguay, where there are already 5G operations, there have been no auctions of bandwidth spectrum to use this technology; instead, telephone operators are offering the service based on existing 4G LTE allocations. In Guatemala, Claro (América Móvil) and Tigo have not been imposed requirements on technology providers. In Uruguay, the development of the network corresponds to Antel, the national company that has the telecommunications monopoly and was a pioneer in the first incursions into 5G services. Antel is negotiating with Huawei for its partnership.

The possibility of going hand in hand with Huawei could be formally prohibited at the time of call direct auctions for 5G, but this has not happened so far. Brazil sold 5G licenses in 2021 to the country's main mobile operators, Vivo (Telefonica), Claro and TIM, without including any exclusionary clause. Huawei, which has two telecom equipment plants in São Paulo, supplies materials to Vivo, Claro and TIM. The return of Lula da Silva to the Brazilian presidency has brought Huawei closer to the company, with which it is negotiating the installation of a semiconductor plant in the country.

The second country to auction part of the spectrum for 5G was Chile, at the end of 2021. The government had already warned that it would not impose on the winning operators either the supply chain or the nationality of the provider they would hire to build the network, thus also leaving the door open to hire Huawei. The first award went to Movistar. The next country to auction a band for 5G, also in 2021, was the Dominican Republic, which awarded it to Claro and Altice.

In Colombia, on December 20, 2023, an auction was held in which the operators Claro, Telecall Colombia, Partners Colombia, Unión Temporal Colombia Móvil (TIGO) and Movistar obtained the licence for certain bands, to which both Huawei and ZTE will provide technological services. partnership technology.

As far as other countries are concerned, in Argentina, the technology has not yet spread but since 2022 there have been discussions about which business to use as provider, and despite the US attempt to convince the country not to depend on the Chinese, the government of Alberto Fernandez considered Huawei as an option. However, the new president, Javier Milei, has not yet pronounced himself on this specific issue; his political positions would rather indicate a rejection of such direct Chinese participation, but economic urgencies could advise at least some subject benefit for Huawei in the supply of certain components.

Peru, meanwhile, has completed the auction of 60Mhz in the AWS band for fill in the network of 4G and in the coming years, will proceed with the auction of 5G bands.