A sceptic has come out of the woodwork questioning plans in Latin America and the Caribbean (LAC) to expand the digital economy.
In an article entitled ‘7 Reasons to be Skeptical About Digital Expansion in LATAM’, Bryan Campbell Romero, policy analyst, indicates that there are many reasons why the push might fail or fall short of ambitious goals being touted.
Romero is the investment and policy editor at Nearshore Americas, a regional news and analysis source. In a publication this week Romero pointed to cybersecurity weaknesses in the region and the absence of sufficient funding among his cautionary comments.
He stated, “Latin America is particularly vulnerable to cyberattacks and many countries in the region simply lack the capacity to respond to major cyber incidents. The lack of a security-trained workforce puts many countries in an even more challenging position.”
Noting the drawbacks of insufficient funding for digital buildout, he also stated, “Venture capital [VC] investment only reached 0.09 per cent of Latin America and the Caribbean’s GDP [gross domestic product] in 2019. By contrast, VC investment accounted for 0.62 per cent of US GDP during the same period.”
Romero also points to tax and regulatory systems which are difficult to traverse and regional regulatory and political fragmentation. He, additionally, pulled out of the attic the elephant in many regional ecosystems — that of poor Internet coverage. He commented, “The region suffers from alarming levels of unequal Internet access.”
For many countries in the region, Internet access is an indicator of wealth and income disparities. Romero also cited falling levels of secondary school education in the region.
The analyst placed Brazil as the fastest growing country in the region and maybe the world for digital payments, but contrasted it with the rest of Latin America and the Caribbean where 68 per cent of all transactions in 2020 were made with cash. He finally cited high levels of informality leading to a labour force disconnected from banking and other financial services.
To focus on Brazil, he said, would be misleading, noting that in analysing areas such as telemedicine, e-commerce, or online education Brazil leads as well.
At the same time, the analyst shared research which said that digitalisation of public services, like water and electricity, could lead to 5.7 per cent GDP growth over 10 years in the region.