Digital Transformation for 21st-Century Latin America

If Latin America is able to close the digitalization gap with OECD countries by 2030, we would create a productivity impact that could help us grow above 3% annually (according to ECLAC’s preliminary estimates for 2019, the region recorded average growth rates of 0.1%, while projections for 2020 are around 1.3%).

This convergence would also create more than USD 700 billion of additional growth by 2030 and more than 400,000 jobs annually. 

But all these constraints are contingent on the ability to efficiently manage data, knowledge and innovation, areas where the region is still lagging and will determine Latin America’s position in the 21st century.

Currently, 244 million Latin Americans, i.e. 38% of the population, do not have access to the internet, and this social gap exacerbates inequality in access to knowledge and opportunities. This means that those with and without immediate access to information cannot conduct business transactions or use financial and government services or perform online operations. This gap is wider within countries of the region, between the urban and rural populations, as well as between men and women and between young people and older adults. 

A recent study by the Center for Telecommunications Studies in Latin America suggests that reaching OECD digitalization levels by 2025 requires a USD 160 billion investment, 60% more than currently estimated. And much of this investment should focus on universalizing broadband connection, which is hindered mainly by inadequate interconnection between different countries and current infrastructures.

These inefficiencies, together with asymmetries in data traffic flows between the region and the US and Europe—major content generators—result in high transit costs for Latin America and a low quality in access to content and information by companies and households.

The development and consolidation of interconnection infrastructure to and from the region is crucial. CAF studies show that better regional interconnection infrastructure would reduce the cost of international transit by 38%, which would entail a reduction of up to 8.3% in real broadband rates. Therefore, we are investing a significant volume of funds in determining the feasibility of the first large Digital Hub of regional internet interconnection in Panama, and supporting Chile’s government in the feasibility study to lay the first submarine cable between Latin America and Asia Pacific, the first digital gateway to the Pacific. This project has also aroused interest from Brazil, Argentina and Ecuador. 

From the global perspective of infrastructure, the digital revolution implies that while the availability of energy, transport, drinking water and sanitation services infrastructure will remain a core element of integration of our countries’ economies and territories, digitalization will disruptively impact the development of new data collection, processing and analysis capabilities.

Transport and intelligent logistics chains, autonomous vehicles, the development of smart grids will help add new sources of supply and distribution to power grids, and water resource management, among many other issues will critically depend on our ability to actively improve connectivity associated with data management and processing technologies.

Thus, the commitment of CAF’s Digital Agenda is clear: expanding Latin America’s digital ecosystem by developing broadband communications infrastructure that supports the expansion of internet-based services for households, governments and businesses. 

To this end, we will continue to work mainly on the following fronts:

• The deployment of digital infrastructure: by developing national, interregional fixed and mobile major networks and undersea cables that support advanced information communication services, as well as the utilization of public data infrastructures to generate social and economic value.

• Institutional modernization for the digital economy: supporting the development of public policies that promote connectivity, accessibility, security, trust, user rights and free competition in the provision of digital services.

• The development of digital industries: promoting actions to improve and facilitate access to a greater supply of digital goods, services and products. Creating value from the region for the region.

• The digitalization of households: supporting digital inclusion initiatives, with measures aimed at connectivity and penetration of internet-based platforms that help improve quality of life.

• Digitalizing production of economic sectors: based on mature and emerging technologies (IoT, cloud, Big Data) to boost productivity and efficiency of economic sectors.

• Digitalization of the State and Digital Public Services: promoting the use of connectivity, new technologies and the use of data in the various sectors of public administration, at national and subnational level, with a view to improving efficiency of the public sector and delivery of services to citizens and businesses.

Latin America cannot lag behind in building a digital agenda. It is up to us, regardless of the sector, to lay the foundations in order for digitalization to translate into opportunities for progress and quality of life for Latin Americans.