The digital revolution is far from Latin America

Self-driving cars that also prevent traffic accidents. Drones that leave your daily food, clothing, and technology purchases on your doorstep, or directly at your window. Cell phones that allow you to control all the appliances in your home remotely and even suggest when and how to use them.

You've probably seen these scenes in a movie, or you've read about them in some article on the everyday uses of the so-called Internet of Things (IoT), but the reality is that we're still far from seeing that technological revolution permeate in Latin Americans' day-to-day lives.

It is true that the innovation and ambition of Big Tech and leading technology companies make IoT already a reality in well-developed sectors of the most developed countries, and this push will make these technologies 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 deployed massively, something that is currently difficult to imagine in regions like Latin America.

For example, for self-driving 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 be able to deliver a hamburger to your home window, you'll need to have the necessary physical and digital infrastructure to receive it safely.

This reality indicates, on the one hand, that countries with better digital infrastructures will make the most of the IoT, both for the development of related industries and for economic performance and social gains. On the other hand, it shows that the implementation of IoT threatens to widen the already wide gaps that separate advanced economies from 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 unprepared to meet 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 partially explains why its digital economies are lagging. Therefore, much of these investments should focus on universalizing the broadband connection, which has as its main enemy the insufficient interconnection between different countries and current infrastructures.

CAF studies show that better regional interconnection infrastructure would reduce the cost of international transit by 38%, which would involve a reduction of up to 8.3% in current broadband rates. That's why the institution is starting a Digital Interconnection Hub in Panama that would give the region the opportunity to improve the end-user experience, improve connectivity, reduce costs and have a regional offering that meets the needs of South America, Central America and Mexico. Additionally, it is funding the construction of the first underwater cable between Latin America and Asia Pacific, in what will be the first digital gateway in the Pacific. This project has also received interest from Argentina, Brazil and Ecuador. 

Institutional modernization for the digital economy will also be crucial in the process of preventing gaps from widening. Among the measures that public institutions can take are the promotion of public policies that increase connectivity, accessibility, security, trust, user rights and free competition in the provision of digital services.

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

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