Is Latin America ready for the Internet of Things?

The Internet of Things (IoT) is called to change social and trade dynamics as we know them. It is very likely to change the way we relate to the world, our consumption patterns, business dynamics and even how we make decisions.

The concept of IoT is closely related to the digital interconnection of all kinds of objects and the instant transfer of data between them, which allows decisions to be made in real time. For example, production machines, lamps, toys, TVs, tables or any other tool or utensil you can imagine will be connected to the internet and, one way or another, will be controlled remotely, as well as the data they provide.

This reality ushers in a wide range of possibilities—many of them still seem science fiction—but it also poses great challenges, especially for developing regions such as Latin America and the Caribbean. In fact, this technological revolution is already threatening to widen the existing socio-economic gaps with advanced economies.

In order for the IoT to be rolled out efficiently and massively, we need modern and digital infrastructures for the interconnection of objects and the operability of the new realities that this will enable. For example, for self-driving cars to operate safely, it will be essential to have streets equipped with interconnected sensors that push real-time information that allows safe decision making. Tailored physical and digital infrastructures will also be needed so that drones can roam freely through the skies without crashing, and thus deliver products at the right address efficiently. At the moment, Latin America is far from this reality.

The penetration of the Internet of Things requires sophisticated infrastructures in all sectors and industries and, according to experts, materialization will require an efficient articulation between the public and private sectors, while attracting large investments, which is rare, especially in developing regions.

“For the region not to lag behind the Internet of Things, we will have to transition into new directions, so that new computers and objects can connect to the internet, in what is known as IPv6. At the same time, it will be important that Latin American professionals are trained and have the necessary skills,” says Mauricio Agudelo, ICT specialist at CAF.

According to the report IPv6 Deployment for Socio-Economic Development in Latin America and the Caribbean, Latin America shows a very low IPv6 deployment. Only four countries have percentages of users potentially able to work in IPv6 greater than 1% (Bolivia, Brazil, Ecuador and Peru), which should change substantially if we are to ensure the development of a high-quality Internet.

The development and implementation of this technology is of great interest to the private sector. The IDC estimates that the Internet of Things will create a $7.1 billion market and 36 million jobs for professionals, and a study by Technavio claims that between 2017 and 2021, the same market grew at a 32% rate per year.

The size of this market contrasts with the limited digital integration in Latin America and the Caribbean. In this sense, several leaders are promoting the creation of a Regional Digital Market for the region that allows free movement of goods, services and digital capital, harmonizes laws between countries, generates free competition and protects consumers. This market is also called to reduce digital barriers and create an area of greater economic efficiency where people and businesses can trade, innovate and interact legally, safely and at low cost, which would boost competitiveness in relation to the most advanced economies.

According to Agudelo, “advancing this initiative means overcoming problems related to digital infrastructure, the skills of companies and individuals to participate in online transactions, restrictions on internet access and the availability of online content. These frictions hinder the exploitation of cross-border synergies, which could be achieved through a more standardized institutional and regulatory framework.”