Latin America Advisor

A Daily Publication of The Dialogue

How Fast Is Latin America Moving on Digitalization?

Digitalization is a key part of Latin American countries’ economic advancement and inclusion efforts, a top World Bank official said last month.

Increased digitalization in Latin America “is key for enhancing economies and improving inclusion in the region,” Carlos Felipe Jaramillo, the World Bank’s vice president for Latin America and the Caribbean, said in an interview the institution posted in January. But now, the challenge for countries in the region is how to “build on this momentum to create incentives for further digitization in ways that speed economic diversification and growth,” Jaramillo added. Which countries are already achieving economic growth through digitalization? What types of initiatives have seen the most success in this area? What headwinds are governments and private companies encountering in providing services and conducting commerce online?

Eleonora Rabinovich, head of government affairs and public policy for Spanish speaking Latin America at Google: “Latin America is at a critical technological crossroads as it strives to adopt disruptive technologies, such as AI, in a responsible and meaningful way. Collaboration among stakeholders will be essential to promote the large-scale adoption of these technologies, as no single economic actor can achieve these goals alone. At Google, we share this goal and have taken a bold and responsible approach to AI, managing advantages and risks while we develop our own products. Latin American countries are at different stages of adopting policies and promoting initiatives to harness the benefits of AI for economic development. CENIA’s Latin American Artificial Intelligence Index provides a comprehensive overview of the region’s progress and its challenges in embracing AI, reflecting a broader commitment to understanding and leveraging digital transformation for economic development. According to our Digital Sprinters framework, achieving sustainable and inclusive economic growth through digitalization requires a combination of physical and human capital, technology and competitiveness. Investing in cloud computing infrastructure, for instance, has proven highly successful in advancing digital economies, as it leverages the power of AI. That said, governments and private enterprises face significant challenges in realizing the full potential of digitization. They must address the need for robust cybersecurity measures, the digital divide to ensure equitable access, and regulatory frameworks that balance innovation, among others, to unlock the full economic potential of digitalization and create a more inclusive and resilient future for the region.”

Ione Amorim, economist at the Brazilian Institute of Consumer Protection (IDEC):“Digital inclusion in Latin America is advancing quickly and with many challenges, such as social inequality, environmental preservation, a high level of investments and the need to improve education and professional training. The biggest obstacles are the issues of privacy, data protection, cybersecurity, regulation of artificial intelligence and the actions of transnational provider companies. Legal issues are fundamental to ensuring digital inclusion. Data protection, cybersecurity, freedom of expression and other challenges require an in-depth legal approach. Digital transformations have contributed to enabling quick access to information, breaking the barrier of distance and intensifying connectivity. An example in Brazil was the creation of Pix, with instant transactions, generating digital inclusion through the practicality of innovation. The best performing countries in Latin America in the digital inclusion ranking in 2023, according to the Global Innovation Index, were Brazil, which came in first place, followed by Chile, Mexico, Uruguay and El Salvador. These countries face additional connectivity and communications infrastructure challenges and data privacy security issues. Brazil has the second-highest rate of digital crime, behind Mexico. It is necessary for countries to advance at the same speed as technological innovations to ensure that laws are adequate to protect the digital environment, privacy and cybersecurity. It is also necessary to establish jurisprudence on the responsibility of transnational companies and access providers with global operations.”

Nathalia Foditsch, director of international programs at Connect Humanity: “A recent study by the United Nations’ Division of Productive and Business Development of the Economic Commission for Latin America and the Caribbean (ECLAC) unveils that, when juxtaposing Latin America with advanced economies, the region lags behind in sectoral digital transformation. However, it’s noteworthy to emphasize three sectors where Latin America outpaces advanced nations in the proportion of intermediate digital inputs: construction, financial services and real estate. Within Latin American countries, in the realm of digital technology adoption, the manufacturing sector holds a more advanced stance compared to agriculture, transportation and storage. In the specific case of Brazil, the thousands of small providers stand out as crucial actors in bringing the Internet to all corners of the country, and consequently, are a key part of the country’s digital transformation. But are these providers up-to-date with digitalization trends? In addition to investing in equipment, it’s important to take care of the internal functioning of the company itself, so that it becomes ‘investment ready.’ This means, for instance, using management software to optimize routines and automate activities. We have seen a wide variation in the level of preparedness regarding the investment readiness of these providers, given that their profiles vary significantly. We are making efforts to level the playing field.”

Lourdes S. Casanova, senior lecturer and director of the Emerging Markets Institute at the Cornell S.C. Johnson College of Business at Cornell University: “One of the most successful initiatives in Latin America has been Brazil’s instant mobile payment system, Pix, which Brazil’s central bank launched it November 2020 in collaboration with private banks. Its high adoption is based on its ease of use and affordability (it is cheaper than credit cards). One only needs to register a unique key (such as a mobile number). Now, the total number of payments using Pix in Brazil is higher than the total payments done by all credit cards combined and cash payments. Small and medium-sized enterprises, both large and small, can generate QR codes to facilitate payments, control their finances and, eventually, have better access to credit. It is not surprising that Brazil is also exploring the launch of the Digital Brazilian Real (DREX) later this year. The success of Pix is the result of an innovation eco-system that has facilitated the growth of Internet banking and spread of e-government services. In 1998, Brazil introduced electronic voting to avoid fraud, simplify counting and reduce the cost of elections. Brazil also has one of the most advanced electronic tax-filing systems, which facilitates tax collection and reduces costs. These are examples of the achievements digitalization has brought in Brazil and how digitalization can simplify and lower the cost of payments and facilitate the functioning of governments at a lower cost.”

Alberto Arebalos, chief executive officer of MileniumGroup Inc.: “The digitalization of economies across Latin America has been instrumental in fostering economic growth and enhancing inclusivity. Countries in the region have embarked on various initiatives to leverage technology for development. Among the most successful initiatives are the ones being implemented in Brazil, which has a robust e-commerce sector, and where the government has launched various digitalization projects, such as the Digital Brazil Project, which is aimed at expanding access to digital services. Mexico’s efforts to digitalize its economy includes initiatives to increase Internet connectivity, digitalize government services and support fintech development. These efforts have contributed to economic growth by improving access to financial services and reducing the cost of doing business. Chile has high Internet penetration rates and a strong digital government strategy. The country has focused on digitalizing public services and promoting digital entrepreneurship. Colombia has made significant strides in digitalization through its Live Digital plan, which aims to increase Internet access, digital literacy and the use of digital technologies in businesses. This has spurred growth in the digital economy and improved competitiveness. And despite all its current economic and social problems, Argentina’s digitalization efforts have focused on expanding broadband access, supporting the tech startup ecosystem and digitalizing government services. These initiatives have contributed to economic diversification and growth. Despite these successes, there are several headwinds facing digitalization efforts in Latin America. There remains a significant gap in Internet access between urban and rural areas, and among different socio-economic groups. Inconsistent and sometimes burdensome regulations can hinder the growth of digital businesses and the adoption of digital services. As digitalization increases, so does the risk of cyber-attacks, which can undermine trust in digital services. Also, inadequate digital infrastructure in some areas limits the potential for digital expansion and economic growth. While digitalization has already contributed to economic growth in several Latin American countries, governments and private companies must keep working together to create an environment that supports the continued growth of the digital economy, ensuring that the benefits of digitalization are widely shared across the region.”


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