The social and economic benefits of a Latin American digital market

Today nobody doubts that the creation of a single digital market in Latin America would be one of the greatest landmarks in the modern history of the region.

At the economic level it would be a strong boost for a sector that's not only destined to become one of the engines of global growth in the upcoming decades, but that also has enormous possibilities for expansion in Latin America. In fact, according to a recent report between 2005 and 2014, digitization contributed USD 208.7 billion to regional GDP, and represents 5.13% of the Gross Product of Argentina, Brazil, Colombia and Mexico combined.

From a social perspective, the benefits are also evident: a Latin American digital market would contribute to expand and speed up broadband services and, at the same time, encourage the creation of new enterprises and quality jobs, and facilitate the exchange of goods and services online.

Given such obvious benefits, why hasn't a single digital market for Latin America been created?

The answer, the experts agree in, has to do with the absence of regional public policies, with too heterogeneous national regulatory frameworks and digital infrastructures that don't respond to the demand of the digital economy.

"The main obstacles for a regional market to be a reality are the lack of coordination in terms of standards and regulation and the deficiencies in infrastructure and freight transport. Therefore, in the coming years it will be necessary to coordinate public policies and business initiatives that are carried out in the different countries within the regional integration blocks, "says Mauricio Agudelo, CAF ICT expert.

Agudelo adds that it will also be essential to improve digital infrastructures, create an entrepreneurial climate of services and digital applications and that companies and individuals adopt new technologies.

Setting up a regional digital market isn´t cheap

The economies of the OECD, for example, allocate 50% more resources to the expansion of communication networks in per capita terms than the average of Latin American and Caribbean countries. Currently, the region only spends a little more than Africa and some emerging countries in Asia Pacific. With these levels of investment, it will be difficult to take advantage of the benefits associated with the digital economy, or reduce social gaps.

According to Agudelo, "the obsolescence of certain institutional and regulatory frameworks slows the accelerated development of the digital ecosystem, and the absence of modern policies that respond to the reality of the digital revolution limits sustainable competition, the development of infrastructures, the promotion of greater connectivity , the development of the digital industries, or the digitization of the production chains of the countries "

How far have we´ve come and how much is left

According to a study published by CAF -the development bank of Latin America-, among the main challenges that arise for the digital market to become a reality is to unify some regulatory frameworks that to date have been developed independently and as a function of the national needs. In addition, problems related to digital infrastructure, limitations of companies and individuals to participate in online transactions or restrictions on individual access to the Internet also hinder the use of cross-border synergies.

The same report assures that a regional digital market would allow the free movement of goods, digital services and capital linked to the digital industry, would offer easily accessible services with compatible regulations between countries, would establish an intraregional scheme of free competition -without restrictions or arbitrary barriers- and guarantee the protection of the consumer and personal data, regardless of their nationality or place of residence.

There are some initiatives today that can be seen as the embryo of the regional digital market. Such is the case of the dialogue mechanism known as the Digital Agenda for Latin America and the Caribbean (eLAC2018), which incorporates the emerging challenges of the digital revolution and studies the feasibility of a digital market in the region. In addition, it analyzes the impact of digital developments on public policy, and has become a tool to boost access and infrastructure, the digital economy, e-government, Internet governance, social inclusion and sustainable development. There are also initiatives that should be strengthened within regional blocks such as the Pacific Alliance, the CAN, Mercosur and the Mesoamerica integration project.

This would be a first step in what should be a Latin American digital market that can compete with advanced economies and help close the technological gaps in the region. In addition, a unique and efficient digital market will be vital to introduce new technologies in the countries of the region and improve our international competitiveness.