Protests and Regulation Debates: Uber Takes Latin America for a Ride

Uber has entered nearly every major Latin American market only to be met with protest from taxi drivers. Within this heated environment, unions and regulators debate the company's future in the region.

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Uber is moving aggressively into Latin America. That has customers excited, but it has also raised the ire of taxi companies — and some governments. Most recently, on March 9, thousands of taxi drivers clogged the streets of Guadalajara, Mexico, in protest. Frustrated business owners, and citizens sympathetic to Uber, clashed with the drivers, resulting in 47 arrests. Similar protests have erupted Costa Rica, Colombia, Brazil, and Uruguay.

“It reflects the strength of the traditional taxi union in Latin America, which can be somewhat intimidating,” said Simon Edwards, managing director at Metro Americas. “These are powerful organizations. However, in Colombia, where I am located, there is a lot of sympathy and appreciation for the services that Uber provides.”

Uber has found support among the legion of customers that are flocking to sign up for its ride-hailing service. In Mexico, for example, Uber has reached 1.2 million users, and is now operating in 14 cities. Usually the company sets up shop first without officially registering as a business. From there, pressure mounts on legislators to act.

“Uber wants to test the waters,” said Edwards. “And governments want revenue. In Colombia, in November, the government gave Uber six months to register as a company. That didn’t happen, and they have now been fined.”

The amount levied by Colombia’s Superintendency for Transport was only US $140,000, which is small figure compared to the US $7 million Uber was forced to pay in California in January. In Colombia, as elsewhere, the fine was for providing unauthorized taxi services. If Uber doesn’t formally register as a service, the government is threatening to shut it down.

And though the Uber business model has appeal across Latin America, it is wrong to view all jurisdictions as equal. Transportation experts contacted by Nearshore Americas felt that smartphone-based reservation of personal or small group vehicles will have a huge impact in the years to come. They can be expected to replace all low-frequency and low-density transportation. They might even put a dent in car ownership, and affect rental agencies. For now, however, most expansion of Uber has been in larger cities.

“In smaller jurisdictions, taxis can be more affordable for locals,” said Edwards, “In terms of marketing and awareness, it is easier for Uber to get uptake and usage in the major cities.”

Security is also a factor. In big cities in Latin America, calling a registered taxi company is a safe bet, whereas hailing taxis on the street can — in some circumstance — increase risk. So far, Uber has had a decent track record, despite the recent headline-grabbing news of an Uber driver in Kalamazoo, Michigan, who allegedly went on a deadly shooting spree.

“In Mexico, the standard that Uber is using is similar to the police: psychological exams, background checks, drug screening,” said Walter McKay, a security consultant who helped create Mexico’s first national police accreditation program. “The police, however, also require a polygraph and a financial background check.”

As for taxis, the requirements depend on the jurisdiction. In some cities, the unions are responsible for ensuring the credibility of a driver, with legislation requiring licensing, liability insurance, and other assurances. In Latin America, however, these systems can be corrupted. If you are familiar with a city, that can be fine. But that’s not always the case, and some travelers may be more comfortable with a company like Uber, which is working to protect a global brand, and using technology to back that up.

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“The Uber application does make the service safer,” said McKay. “This is because the app itself functions like a ‘sitio,’ which is the locator used by a regulated public taxi service. It is not the same as hailing a cab on the street.”

This is an improvement. Although a driver’s certificate is usually posted on official taxi windows, these are easy to forge. That means it is effectively impossible to know if a street-hailed taxi is the real thing.

“In some cities in Latin America, hailing a taxi in the street can be somewhat risky,” said Edwards. “In terms of security, there is a chance that Uber is safer, more secure, and more reliable than taxis in other cities. With Uber you know the taxi is coming, you know the price, and you know the route. You don’t have to argue.”

Uber is certainly not going away, and neither are the protests — with mixed results. In Montevideo, Uruguay, the government sided with the taxi unions and imposed penalties on Uber. But in São Paulo, Brazil, an appeals judge ruled in favor of Uber. And in Costa Rica, despite intense protests by the taxi unions, and after operating illegally since last August, Uber has opened a shared services “center for excellence” to provide customer support in the region.

In the end, the model for Latin America may be Mexico City, the first city in the region to regulate Uber. The company now has a 1.5% ride levy, a yearly permit fee, and a minimum vehicle value. It is perhaps no coincidence that Uber has also partnered with Mexican billionaire Carlos Slim to expand its business. If you can’t beat them, might as well join them.

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