Latin America and the Caribbean (LAC) boasts rich cultural heritage, abundant natural resources and diverse populations. Despite these strengths, the region remains ensnared by three critical development traps identified by the Economic Commission for Latin America and the Caribbean (ECLAC: slow economic and productivity growth, entrenched inequality and low social mobility, and weak institutional capacities and ineffective governance. These challenges have persisted for decades, with the region’s recent economic performance being particularly concerning. For example, from 2014 to 2023, LAC’s economy grew at an average annual rate of just 0.9% — a figure that pales even against the infamous “lost decade” of the 1980s, where growth averaged 2% per year.
Despite this bleak outlook, there’s a compelling case for optimism: LAC can escape these traps. Central to this optimism is the conviction that digital transformation can play a pivotal role in addressing the region’s most pressing challenges —particularly if we focus on ensuring “real and effective use” of digital technologies.
Over the past decade, LAC has made significant progress in digitalization, with internet penetration doubling and millions of people gaining online access. Despite these advances, significant challenges remain in several dimensions.
First, in the productive dimension —most closely related to LAC’s first trap— the digital divide is clear, stifling businesses and entire sectors, constraining their productivity and capacity to thrive. A recent ECLAC study revealed that over 90% of micro and small enterprises (firms with fewer than 50 employees) lack an online presence. Among those that do, more than 60% have only a passive presence, meaning they do not even use the internet for transactions or other interactive purposes. If such a gap exists with a mature technology such as the internet, we can well imagine that the digital divide in emerging technologies such as artificial intelligence (AI), the Internet of Things (IoT), or blockchain is significantly larger.
LAC countries must intensify efforts to ensure the adoption of digital technologies by businesses, especially micro, small and medium enterprises (MSMEs) to address these gaps This includes scaling up digital extension services, through which MSMEs can receive targeted support to facilitate technology adoption. More generally, at ECLAC we have been insisting on the need to articulate digital transformation efforts with broader productive development (industrial) policies, which includes digitalization of strategic sectors, strengthening digital companies and clusters in the region, and fostering the digital entrepreneurship ecosystem, among others.
Second, in the individual dimension —closely related to LAC’s inequality trap— an important digital divide persists among the region’s population. Approximately 160 million people in the region still lack internet access, and even among those connected, many do not have the resources or skills necessary to fully benefit from digital technologies. This digital divide is particularly pronounced among marginalized and rural communities, where access to education, training and technology is often limited. Indeed, socioeconomic disparities are mirrored in digital access throughout the region.
Addressing this digital divide requires comprehensive strategies that go beyond simply providing access to technology. It also encompasses guaranteeing a real and effective use of technology to address human needs. Digital content should be accessible but also relevant to these needs. Digital literacy and education are another key component —all individuals should have access to the skills necessary to participate in the digital economy. A further issue is affordability; many individuals do not have the necessary resources to cover the cost of connectivity or access devices such as computers. All of these are elements captured by what has been called “meaningful and universal connectivity”.
Third, in relation to LAC’s institutional capacity trap, despite significant progress in digital government over the past decade (i.e. according to the 2022 UN E-Government Development Index, 58% of LAC countries now exceed the global average, with Uruguay, Chile, Argentina, Brazil, Costa Rica, and Peru achieving “Very High” ratings), the region still faces significant challenges in cybersecurity, privacy, and ethical data use, among other elements, to advance toward a robust, safe, responsible, and rights-protecting digital government. In this way, developing modern regulatory frameworks and policies to boost confidence and security in the use of digital technologies in areas such as data protection and digital security is critical.
Overcoming these three development traps hinges on the actions and efforts of individual countries and their territories. Still, regional coordination can amplify national and subnational actions. One successful initiative in this regard is the Digital Agenda for Latin America and the Caribbean, commonly known as eLAC. Since 2005, ECLAC has spearheaded efforts through this policy forum that guides the region’s policy priorities regarding digitalization. In November 2024, in Santiago de Chile, we will host eLAC’s ninth Ministerial Conference, gathering authorities and policy makers to adopt a new version of this agenda.
This new agenda is a pivotal opportunity to harness real and effective use of digital technologies to escape from long-standing regional development traps. It will likely require shifting priorities and, more critically, turning words into action. We must adjust our metrics —moving beyond well-known connectivity indicators into the more uncharted grounds of measuring effective use. We must encourage new stakeholders —beyond those related to the ICT sector, for example — into the conversation. While difficult, we are convinced that leveraging the real and effective use of digital technologies LAC can pave the way for a more productive, inclusive and sustainable future.
