Strengthening Latin American Digital Ecosystem to Address COVID-19 Disruptions

In order to estimate the importance of digitalization as a mitigating factor of pandemic-related disruptions, and to learn about how Latin America is positioned to meet this challenge, CAF—development bank of Latin America—through the CAF Digital Ecosystem Observatory and Telecom Advisory Services LLC, published the study “The State of Digitalization of Latin America during the COVID-19 Pandemic.”

The document analyzed the impact of COVID-19 on the region in five areas (infrastructure, households, production systems, labor structure and the state), and the role of digitalization in these areas as a key element in mitigating the effects of the pandemic. The study also highlights the need to implement as soon as possible collaboration agreements and joint work between governments and Latin American civil society to help identify areas of work to improve performance of certain components in the digital ecosystem.

As a precedent to the current situation, the research reviewed the econometric analysis of the economic impact of the SARS-CoV virus, which showed that countries with a developed connectivity infrastructure were able to mitigate 75% of the economic losses associated with the SARS epidemic and the impact of healthcare measures taken to counteract it (quarantine, social distancing, air traffic disruption, use of facemasks, etc.).

The data collected showed that networks are being impacted by the exponential increase in traffic. The study identified a decrease in fixed broadband speed in Chile (-3%) Ecuador (-19.6%), and an increase in latency in the same technology in Brazil (11.7%), Chile (19.0%), Ecuador (11.8%) Mexico (7.4%) (source: Ookla/Speedtest). This fact becomes economically relevant since according to CAF Observatory models of the digital ecosystem, fixed broadband speed has a 0.73% impact on GDP when the speed increases by 100%, and if speeds continue to dwindle, the negative economic impact is likely to materialize.

As regards remote work, the capacity of household broadband is being overloaded, driven by increased cloud work (80% increase in upload traffic) and video conferencing. While the digital divide is an obstacle to important sectors of the Latin American population that rely on internet access to receive health-related information, download educational content to compensate for school closure, or shop online.

The study also highlights that COVID-19 involves further disruption in the labor market caused by the share of the workforce that can transition to telecommuting. An analysis of the CASEN survey for Chile that allocates probabilities for migration to telecommuting in the 7,830,950 surveyed workers shows that only 20.56% of workers continue to work on site (healthcare workers, law enforcement) and 23% are able to work remotely with digital technology. This means that under current conditions, 4,419,530 workers are in the precarious position of not being able to go to work and cannot transition to remote modalities.

These figures raise alarms about the fundamental need to work on the restructuring of operational processes in the productive sector to increase the share of the population that can work remotely, as well as emphasize the training of the most vulnerable social sectors.

The resilience of state institutions in face of the pandemic was another key issue reported in the study. It is based on its ability to continue operating in terms of administrative processes, and to continue delivering public services. A calculation of a composite resilience index of the state shows that, due to years’ work in the development of e-government, certain nations in the region appear to be in a better position to deal with disruptions, namely: Chile, Uruguay, Mexico, Brazil and Argentina.

In view of these findings, the study “The State of Digitalization of Latin America during the COVID-19 Pandemic” recognizes the leading role of digitalization in the recovery from COVID-19 in Latin America and raises the need for our countries to pick up pace in strengthening our digital ecosystems as a multi-sectoral commitment.