Latin America’s Digital Transformation and Technological Revolution

The revolution of technology has been transforming people’s lives faster than ever, especially with automation being responsible for completely changing  the process of production in all kinds of industries. Specifically, this has resulted from the digitalization of manufacturing, which has made objects capable of connecting and communicating with each other without human intervention. On the one hand, this technological revolution will optimize costs, time and processes. On the other hand, it will present numerous challenges to the workforce, employers, companies and governments, since automation will replace millions of jobs around the globe. In this vein, this article discusses the challenges and implications of the technological revolution for Latin America.   

What are the challenges? 

The first challenge for most of the Latin American countries is infrastructure, which is not new as this has been an on-going issue for decades for the majority of countries in the region. The key elements of the current technological revolutions such as, Artificial Intelligence (AI), Augmented reality (AR), Big Data, the Internet of Things (IoT) and others, requires high speed internet connection in order to work properly, an issue that is far from being resolved in the region. 

It is true that internet access in Latin America has increased in the last few years, but improvements are still needed. Although two-thirds of Latin Americans have some sort of Internet access, their conditions are limited. Internet services lack quality, the supply in rural and non-central areas is deficient as well given that people in these areas usually do not have satisfactory equipment to navigate and access the Internet effectively. Even though more than 70%of the population has some internet access, this is only because of the increase in mobile phone penetration in the region, particularly  throughout the poorer regions. When considering data on the percentage of citizens who have access to computers from home, it is evident that digital inclusion is far from the ideal (figure 1): 

Figure 1 – Access to computers from home (Total, % of all households, 2005 – 2019) 

Besides that, prices are expensive when compared with the quality of the service. The coronavirus pandemic has shown that most of the countries still have a critical issue in supplying their citizens with the telecommunications service and proper conditions necessary to transition to the digital era. 

Another critical area is education. Countries will face issues not only to educate their new generations, but also to develop and train the current workforce to be able to work in the new technological environment. Considering that the majority of the economical production is derived from the service-related industry, the risk of automation in this sector could push millions of workers out of their jobs. Data from the World Economic Forum´s research shows that more than 40% of Latin American workers spend a moderate amount of time in routine work, and 27 % of them are employed in operational jobs (functions that could be easily replaced by automation).  

At this point, the risk of automation could also harm the industries related to goods production. Albeit this sector already has some sort of automatization, there still exists plenty of capacity for technological expansion. Specialists estimate that more than 44 millions workers in textile, electronics, automotive, agriculture and  transport industries could be replaced. In fact, most of the economies rely on the exploration of natural resources and on the commercialization of commodities, basing their activities in low-skilled jobs.  

Moreover, Latin American countries have been struggling to achieve relevant levels of education in fundamental areas, such as mathematics, sciences and reading (figure 2). The region has the biggest skills gap in the world, with higher levels of informality. For example, in Brazil, 30% of the population are functionally illiterate, meaning that three out of ten adults are incapable of reading, writing or doing basic math properly. In Latin America as a whole, this number surpasses 35 million people, corresponding to 10% of its total population. It is not a surprise that 31.6% of companies in the region struggle to find qualified workers (compared to 21% of the global average). 

Figure 2 – Percentage of students at each level of proficiency on PISA Mathematics Scale (2006)

Consequently, education is a critical area for countries which are facing challenges in efficiently transitioning to the digital age, mostly because roles in the information of technology, software development, engineering, data science and other high-tech sectors are expected to grow substantially. As a matter of fact, Latin American countries are far behind other regions around the world in investments in Research and Development.

At the same time, technological revolution will demand more soft skills, such as creativity and empathy, abilities that are unlikely to be developed by the current educational system. Although human labor will be more valued in certain kinds of services, especially those where contact with humans is seen as a benefit – education and teaching, health, caretaking, design, etc, the current educational system is not able to develop these kind of skills, which are not usually included in formal education curricula.  

Finally, the last important challenge to be highlighted is regarding the state’s regulation. The regulatory environment is important because it could facilitate or create difficulties to companies and entrepreneurs in their ability to adapt to the  use of the new technology. For example, governments could simplify the regulation on startups and high-tech companies, as well as facilitate enterprises’ access to high-quality imported machinery, improving the promotion of technology-transfer

In this sense, The Doing Business 2020 report shows that Latin America and the Caribbean have a lower score (59,1) of ease in doing business in comparison to the OECD countries (78,4) and to the global average (63). Also, the region has the highest average of hours to comply with tax obligations (317 hours a year in comparison to global average of 234), and the number of days it takes to start a Business is also high (figure 3). These facts illustrate that a complex regulatory environment, incapable of fostering competition, innovation, and stability for investors and entrepreneurs, could jeopardize the investments on new technologies, impeding the development of new business and the growth of small and midsize companies in the region. With this scenario, it is likely that investments in new technologies will be preferably made outside the region

Figure 3 – Number of days it takes to start a business, 2003 and 2009

What does the technological revolution mean for Latin America? 

The current technological revolution is a great opportunity for the region overall. At this moment new technologies are transforming goods and services in the region, with startups  leading this change. For example, the Brazilian fintech “Nubank” is a completely digital bank that has improved competition in the financial sector by offering no-fee services to its clients. Another initiative is “Kingo energy“, the Guatemala-based startup that provides low cost solar energy for rural communities, supplying electricity to more than 2.5 millions of people in Central America by just using a battery box and a solar panel.  

It is not difficult to realize that the development of these and other initiatives will be boosted once the challenging factors highlighted – infrastructure, education, and the regulatory environment – are transcended. These challenges should be properly addressed in order to lead to positive long-term development for the region, otherwise, countries will remain behind, struggling with their old issues and the new ones that will stem from the new digital era that is coming.  


The views, thoughts, and opinions expressed in this article belong solely to the author, and do not reflect the views of Conversationally Speaking Magazine.
Lincoln Telhado
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Lincoln Telhado is a government relations specialist based in Brasilia, Brazil. He received a master’s degree in Political Science from the University of Brasilia. His research interests include accountability and democratic institutions, and policy diffusion in Latin America, with a special focus on Brazil.

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