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The digital revolution is far from Latin America

The Internet of Things requires advanced digital infrastructures

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by Robert Valls

Self-driving cars that avoid traffic accidents. Drones that deliver your daily purchases of food, clothes, technology to your doorstep, or directly to your window. Mobile phones that let you control all the appliances in your home remotely and even suggest when and how to use them.

You may have seen these scenes in a movie, or read about them in an article about the everyday uses of the Internet of Things (IoT), but the reality is that we are still far from the technological revolution being able to permeate the daily lives of Latin Americans.

It is true that the innovation and ambition of Big Tech and leading technology companies mean that the IoT is already a reality in well-established sectors in the most developed countries, and that their drive will mean that these technologies will be available in all countries in a short time. But it is also true that the Internet of Things requires advanced digital infrastructures that can be massively deployed, something that is currently difficult to imagine in regions such as Latin America. 

For example, for automated cars to work, it is essential that streets and roads are equipped with technologies that enable autonomous, efficient and safe driving. And for a drone to deliver a hamburger to your front window, you will need to have the physical and digital infrastructures necessary to receive it safely.

This reality indicates, on the one hand, that countries with better digital infrastructures will benefit more from IoT, both for the development of related industries and for economic performance and social returns. On the other hand, it shows that IoT deployment threatens to widen the already wide gaps between advanced economies and developing regions.

An initial diagnosis of the state of digital infrastructures in Latin America indicates that significant progress has been made over the past three decades, but that the digital ecosystem remains ill-prepared to face the challenges posed by the IoT. In fact, a recent study indicates that Latin America invests four times less in digital infrastructure than OECD countries, and this partly explains the lag of its digital economies. Therefore, a large part of these investments should be focused on universalising broadband connection, whose main enemy is the insufficient interconnection between different countries and the current infrastructures.

“The region shows moderate progress in its digitalisation and the gaps with other regions of the world have not been significantly reduced. If the region continues to lag behind in areas such as the digitisation of productive sectors, innovation for the development of digital industries, the preparation of the workforce for a digital economy, and low investment in quality digital infrastructure, it will be difficult to include the population in the benefits of the digital era and accelerate labour productivity,” says Mauricio Agudelo, Telecommunications expert at CAF.

CAF studies show that a better regional interconnection infrastructure would reduce the cost of international transit by 38%, which would imply a reduction of up to 8.3% in real broadband tariffs. For this reason, the institution is promoting a Digital Hub of interconnection in Panama that would give the region the opportunity to improve the end-user experience, improve connectivity, reduce costs and have a regional offer that covers the needs of South America, Central America and Mexico. In addition, it is financing the construction of the first submarine cable between Latin America and the Asia-Pacific, in what will be the first digital gateway to the Pacific. This project has also received interest from Brazil, Argentina and Ecuador.

Institutional modernisation for the digital economy will also be crucial in the process of preventing the digital divide from exploding. Among the measures that public institutions can adopt are the promotion of public policies that favour connectivity, accessibility, security, trust, users’ rights and free competition in the provision of digital services.

Another necessary measure, according to Agudelo, is based on the “development of digital industries, promoting actions to improve and facilitate access to a greater supply of digital goods, services and products”.

The Internet of Things is set to revolutionise traditional industries and is likely to substantially change the social and commercial patterns we know. Latin America is facing a trend that will determine its economic future in the medium term, and will be decisive for its integration into global value chains.

Robert Valls, Senior Executive of Communications at CAF (Latin American Development Bank).