Creating a digital market in Latin America would allow the region to compete with advanced economies

The creation of a Latin American digital market—with more than 500 million potential consumers—would increase connectivity of individuals and businesses, facilitate the exchange of goods and services online and contribute to the development with equality and environmental sustainability, according to the study “Towards the Strategy for a Digital Single Market in Latin America,” prepared by CAF.

The publication also recognizes that, despite the economic and social benefits, the debate on the regional digital market has barely begun and there is still a long way to go to jointly articulate the political and regulatory challenges that would allow their full potential to be leveraged.

In this sense, the obstacles to the creation of a regional digital market include the lack of coordination on standards and regulation, and gaps in infrastructure and freight transport.

“Effective implementation efforts among all countries in the region are needed to achieve a regional digital market, including actions through appropriate consensus methodologies and governance mechanisms. In addition, it will be essential to improve digital infrastructures, create an entrepreneurial climate for digital services and applications, and for companies and individuals to adopt these new technologies,” explained Mauricio Agudelo, ICT expert at CAF and coordinator of the publication.

According to the report, the Digital Single Market would enable the free movement of goods, digital services and capital related to the digital industry, provide easily accessible services with compatible regulations between countries, establish an intra-regional scheme for free competition—without arbitrary restrictions or barriers—and would ensure the protection of consumers and personal data, regardless of their nationality or country of residence.

The main challenges for a Latin American digital market include unifying regulatory frameworks, which so far have been developed independently and based on national needs. In addition, problems related to digital infrastructure, limitations on companies and individuals to perform online transactions or restrictions on individual access to internet also hinder the leveraging of cross-border synergies.

Apart from some customs agreements concluded by sub-regional entities on tariff issues, most current initiatives for a regional digital market aim to collect, analyze and share information, draft guides, or discuss current challenges and exchange experiences of countries at the regional level. Regional fragmentation is often compounded by overlapping efforts across the region.

Digital market in the European Union and Digital Agenda for Latin America

The report also analyzes the situation of digital integration in the European Union (EU) in order to establish similarities and learning opportunities. Both regions have a market of approximately 500 million inhabitants, but while in the EU the “single market” has decades of treaty-based economic, social and political integration, the ground in Latin America is yet to be broken.

The EU is committed to the creation of a free and secure digital single market in order to remove national barriers to online transactions, improve access to information, achieve efficiency improvements by lowering transaction costs and introduce improved business and administrative models that will expand the EU’s digital economy. According to the European Commission, a digital market could bring up to 415 billion euros each year to the EU economy.

In the case of Latin America, the countries of the region have established a dialogue mechanism known as the Digital Agenda for Latin America and the Caribbean (eLAC2018). This agenda incorporates the emerging challenges of the digital revolution and studies feasibility of a digital market in the region. It also analyzes the impact of digital developments on public policy, and has become a tool to enhance access and infrastructure, the digital economy, e-government, internet governance, social inclusion and sustainable development.

eLAC2018 is structured around 23 interdependent and complementary objectives, the results of which are mutually influential and are sorted into a reference map in five pillars of action: (i) access and infrastructure; (ii) digital economy, innovation and competitiveness; (iii) e-government and citizenship; (iv) sustainable development and inclusion, and (v) governance.