Latin America and the Caribbean: digital transformation key to recovery and building back better, says new report
Digital transformation can help Latin America and the Caribbean (LAC) region recover more quickly from the COVID‑19 crisis, according to the Latin American Economic Outlook (LEO) 2020: Digital Transformation for Building Back Better.
The report is jointly produced by the Development Centre of the Organisation for Economic Co-operation and Development (OECD), the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), CAF Development Bank of Latin America and the European Commission.
“LEO 2020 is a very timely report. It will help foster dialogue across LAC countries and with the international community around how we can make the most of digital transformation in the current context of COVID-19 crisis,” said Iván Duque Márquez, President of the Republic of Colombia.
LEO 2020 documents the pandemic’s dramatic impact on the most vulnerable and marginalised. Microenterprises have been hit particularly hard: 2.7 million of them are likely to close, entailing the loss of 8.5 million jobs. On the eve of the crisis, 40% of workers in LAC economies did not have access to any form of social protection, and 60% worked informally.
“We expect more than 45 million additional people to fall into poverty. The socioeconomic crisis makes a new development model more urgent than ever. Digitalisation could be a powerful tool to overcome the structural challenges of the region, only if it is considered as a comprehensive way to foster progressive structural change, through policies for the generation of new sectors, quality jobs, the development of capacities and innovation.”, said Alicia Bárcena, Executive Secretary of ECLAC
“The crisis has created the momentum for long-overdue reforms that can help spread the benefits of digital transformation to achieve inclusive and resilient growth. It also highlights the urgent need to bridge the digital divides between territories, families, students, workers and firms”, said Ángel Gurría, Secretary General of the OECD.
According to LEO 2020, the crisis is exacerbating a set of interlinked, structural challenges, including high inequality and informality, low productivity, and deficient public services and institutions.
The good news is that digital transformation can help LAC economies out of the crisis by stimulating business innovation and new consumption models, transforming production systems and value chains, re-organising economic sectors, and introducing new conditions of competitiveness. Digital tools can also support better access to services, including health and education. Finally, they can help improve governance, putting citizens at the centre of policymaking.
As European Commissioner for International Partnerships Jutta Urpilainen pointed out, “Digital transformation presents the EU and Latin America and the Caribbean with an opportunity to devise together innovative solutions and address structural challenges. An opportunity also to tackle inequalities once and for all. The European Union’s digital single market is an example of how digital integration can focus on including citizens and supporting businesses. But we must not forget that to benefit, access is a must.”
“Digital transformation offers a unique opportunity to boost productivity and to provide better public services in Latin America and the Caribbean. With Covid-19, the region has accelerated its digital processes, but there is still a long way to close the gap with advanced economies”, added Luis Carranza, Executive President of CAF.
Yet the report warns of a rough road ahead. Internet access, in particular, is far from universal: in 2018, 68% of the population in LAC used it regularly – almost twice the share in 2010, but far behind the OECD average of 84%. In addition, while 75% of the richest population in Latin America uses internet, only 37% of the poorest population does. The difference between the rich and the poor is much higher (almost 40 percentage points) than in OECD countries (below 25 percentage points). Digital transformation comes with stark challenges, with over 20% of jobs in some countries likely to undergo some kind of automation. Therefore, the region needs massive new investments in education and training to equip workers with the necessary digital skills.
The 2020 edition of LEO outlines a series of public policy recommendations to better co-ordinate the many digital agendas proliferating in LAC countries, and highlights the importance of linking these with broader National Development Plans (NDPs), 16 of which are analysed in the report. Clear responsibility and adequate implementation power are crucial for the success of these agendas. The report also stresses that, in order to make the most of digital transformation at local, national and international levels, international partnerships need to be renewed. Taxing the digitalised economy effectively and fairly, for example, requires strong international co-operation. Similarly, through stronger regional co-operation, LAC countries could strengthen their domestic digital capacities.