Digitalization, Value Chains and the New Normal

The current stage of the COVID-19 pandemic has prompted major changes in the day-to-day life of families, businesses and governments.

The perception of risk that has been accumulating has now revealed its true magnitude, and it is impacting individual and—increasingly—collective behavior, with changes in consumption patterns and social dynamics.

This reality was already being discussed globally before SARS-Cov-2. The expected increase in the world’s population to 9.7 billion by 2050 and the resulting demand for food could require a 50-percent rise in production. This means that we are facing a complex challenge where health care, mobility restriction measures and social behavior patterns are determining the need for adaptation of local, regional and global value chains, in order to ensure productivity with stable growth in quantity, but mainly in quality and safety.

Furthermore, demand for telecommunications services has soared to unexpected levels since March 2019, becoming a critical need for the population, based on access to data services for telework and other online activities, to ensure continuity of a number of daily tasks that previously required direct physical contact. This has further exposed the digital divide between countries in the region and higher income countries, as well asymmetry within each country’s territories.

While the majority of the population stayed at home, a key priority for the support of health measures actively promoted by governments was continuity in the supply of goods of the basic foodstuffs and essential services. These value chains saw the need to reinvent their business models and, like never before, remote and delivery services proliferated and adapted to the need to avoid physical contact between people.

There are many sectors that rely strongly on mobility and physical presence of people, which remain deeply impacted and are yet to reach pre-pandemic levels in their operations. There are also sectors, however, that have managed to stay afloat, while others have emerged with innovative business models achieving significant growth. This would not be possible without digitalization. Inventiveness, but also the speed in adapting business models has allowed to sustain the supply of goods and services, revealed new productive opportunities and has rapidly helped going digital in the daily life of every human being.

In this new scenario, countries and each of the stakeholders in the value chains are faced with the challenge of maintaining and expanding the coverage of their services and the supply of goods, in the face of the additional challenge of achieving higher levels of efficiency. In this area, for example, the Blockchain is a tool that can help improve efficiency by chaining digital solutions for operations-related processes in each of the different links of value chains, including activities or roles in the public and the private sectors.

For the private sector in general, regardless of the place in the chain of a particular company in its industry, supply chain and payment chain support are vital issues that can determine the sustainability of the business, and therefore become opportunities for the development of digital solutions that allow efficient but also traceable and secure management, for each operation or transaction. This is also a connecting link with service providers, for official agencies that act as comptrollers or promoters of investments and exports, and those that provide personnel, inputs, machinery or financing.

CAF is actively working on different fronts to support this digital transformation of production and supply chains in the region. First, by supporting countries in the expansion of the digital ecosystem by developing broadband communications infrastructure to support the expansion of digital internet-based services and solutions for households, governments and businesses; and second, in promoting and deepening the digitalization of processes in the different value chains by facilitating access to digital solutions that help improve efficiency in their operation, as a key instrument to boost productivity and competitiveness, but also for economic resilience and recovery.