Can digitalization save Latin America?
Bertram Niles

When it comes to digitalization, the economies of Latin America and the Caribbean have a lot of catching up to do. 

Doing so, however, offers them the biggest avenue for significant economic transformation following the trauma brought on by the COVID-19 pandemic, according to a new report by the World Bank. 

Latin America has suffered more health and economic damage from the pandemic than any other region. 

The boom that COVID-19 has triggered in digital and e-commerce sectors worldwide is seen by experts as capable of helping Latin America to recover more quickly and foster more resilient economies. 

The bank report titled "Renewing with Growth" says accelerating the use of digital tools could lead to greater dynamism across multiple sectors in the region. 

However, the lending institution cautions that Latin America is not ideally positioned to seize the opportunity. 

From the availability of digital infrastructure to the cost of accessing the internet to the capacity of firms and governments to tap the potential of digitalization, the picture is mixed across a region that remains anchored in cash and checks. As a whole, though, it lags badly on some indicators. 

For example, 68 percent of the area's population were estimated to be using the internet regularly in 2018, well below the OECD average of 84 percent. 

E-commerce still has a way to go in Latin America. /VCG

E-commerce still has a way to go in Latin America. /VCG

The UN Economic Commission for Latin America and the Caribbean (ECLAC) says that at the end of 2017, just 15.5 percent of internet users in the region were paying bills or shopping online. 

But the pandemic has accelerated growth in e-commerce in many countries.  

Data from Brazil, for instance, suggests that 66 percent of internet users bought products and services online during the outbreak compared with 44 percent in 2018, the bank says. 

Latin America's online marketplace Mercado Libre is said by another report to have sold twice as many items per day in the second quarter of 2020 compared with the same period the previous year. 

Many of the customers were new to online shopping. Visa reported that 20 percent of its customers in the region completed e-commerce transactions for the first time in the first quarter of 2020, while PayU saw a 75 percent increase in online customers in the first half of the year. 

Sometimes governments have intervened to help businesses digitally. For example, Costa Rica's government initiated a platform for businesses without an online presence and a smartphone app and texting service to facilitate trade among producers of agricultural, meat and fish products, the UN trade body, UNCTAD, reported earlier this month.  

Substantial growth has also been seen in Latin America in enrolment for digital entertainment services, particularly music and video streaming, and for distance learning, as well as participation in online gaming. 

It is clearly a sign of the times that Mercado Libre became the region's most valuable company in 2020.  

The World Bank report also notes that "against the odds," half a dozen countries in the region have recently seen the emergence of local unicorns – privately-held technology companies backed by venture funds and investors whose valuations exceed $1 billion. 

Health workers push a suspected COVID-19 patient into HRAN Hospital in Brasilia, Brazil, January 7, 2021. Brazil has the highest death count from the pandemic in Latin America. /AP

Health workers push a suspected COVID-19 patient into HRAN Hospital in Brasilia, Brazil, January 7, 2021. Brazil has the highest death count from the pandemic in Latin America. /AP

But some experts are wary that galloping digitalization may also widen inequalities as many will miss out on its benefits. ECLAC says that while 75 percent of the richest Latin Americans use the internet, only 37 percent of the poorest do. 

More than 20 percent of jobs in some countries are also likely to undergo a measure of automation.  

"Therefore, the region needs massive new investments in education and training to equip workers with the necessary digital skills," the UN agency says. 

In addition to the boost digitization could offer financial services, especially payments, the World Bank says trading goods and services through the internet offers a chance for greater integration with the global economy. 

Technology also brings the opportunity to transform the electricity sector by increasing competition and bringing prices down. 

The bank says Latin America and the Caribbean has the most expensive electricity in the developing world, mostly because of inefficiencies, but should actually be boasting of the cheapest as it has the cleanest generation matrix, mainly due to an abundance of hydropower.  

Top Photo: A health worker sanitizes outside the Basilica of Our Lady of Zapopan as part of the preventive measures against the spread of COVID-19 in Zapopan, Mexico, March 27, 2020. /Getty

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