Student: Plavanescu Constantin-Codrin

Business Administration

Thesis coordinator: lect. Univ. Dr. Patricia Bertea

” Adopting new technologies: The early adopters’ behavior in

using new digital product.”
 TABLE OF CONTENTS

INTRODUCTION 1
Chapter I - Towards a sustainable digital society 3
1.1. The systemic impact of digital disruption 3
1.2. The difficult balance between digitization and sustainability 5
1.3. The deployment of 5G networks: a key to the new models of production and
industrial organization 7
1.4. Telecommunications Go to the Cloud: the transformation of the Sector 8
1.5. The digital transformation driven by 5G networks will have a significant economic
impact but will require large investments 10
Chapter II - Digitization for social well-being and inclusion 13
2.1. Distance education: essential but inaccessible to many 14
2.2. Digitization, labour market and employment 17
Chapter III - Digital improvement 23
3.1. Advanced analytics and artificial intelligence 27
3.2. Virtual reality and augmented reality 29
Chapter IV - Digital future: empowerment and cross-cutting 42
4.1. Widespread access 44
4.2. Digitalization for the productive development 45
CONCLUSIONS 48
References 49
 INTRODUCTION

Digital technology has grown exponentially, and its use is now worldwide. Thanks to
the ubiquity of smartphones and the accompanying access to information, social networks and
audio-visual entertainment, widespread and continuous connectivity has reached a sizeable
portion of humanity. Accelerating technological progress in the digital universe has made
everyday use of devices and applications that use cloud computing, big data analytics,
blockchain, or artificial intelligence. The technological revolution, coupled with major
companies changing their strategies for using digital technology, has led to the rise of global
platforms.
Technological progress has also been accompanied by negative social consequences,
such as excluding a significant portion of the world's population from the benefits of
digitization. The main reason is that their income prevents them from having access to
meaningful connections - quality things, device access, the fixed line at home, and adequate
capacity for daily use. This creates a severe demand gap, with good coverage but not reflected
in connectivity or usage. Other issues are highlighted, such as the prevalence of fake news and
cyberattacks, increasing risks to privacy and personal data security, and the mass production
of e-waste.
The balance between the benefits and costs of digitization is still unresolved, taking
place in a less favourable global context than was predicted over a decade ago. Geopolitical
struggles, often cantered around patents, digital standards and manufacturing, have
significantly weakened the ability to act on multilateral decisions. The environmental crisis has
reached the level of an environmental emergency, or, according to some analysts, an
environmental disaster. Rising inequality and exclusion of vulnerable groups in many countries
make it difficult to create social and political systems that can adequately control digital
development.
The COVID-19 pandemic has exacerbated all these problems, plunging the world into
its worst economic crisis since World War II, with consequent negative impacts on jobs, wages
and the fight against poverty and inequality. increase. Digital technology has become an
essential tool to deal with the impact of the pandemic. However, the benefits derived from its
use are limited by structural factors such as connectivity (access, use, speed), social
inequalities, productivity heterogeneity, and low competitiveness, as well as restricted access
to data and information, information management, among other factors. (“Digital technologies

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for a new future - CEPAL”) Thus, before some countries of the world, new opportunities and
new challenges open.
The region will be the hardest hit by the crisis and will have to face long-standing
problems from a position of greater structural weakness. It will have to overcome the slow
economic growth of the last seven years, the fall in investment and the stagnation of
productivity and at the same time, it will have to resume the fight against poverty and inequality
with force. Overcoming these problems will require you to implement a strategy of great
momentum for economic, social and environmental sustainability that leads to a progressive
structural change based on strong creation and incorporation of technology to diversify the
productive apparatus. The fall in investment and the stagnation of productivity and at the same
time, it will have to resume the fight against poverty and inequality with force. Overcoming
these problems will require you to implement a strategy of great momentum for economic,
social and environmental sustainability that leads to a progressive structural change based on
a strong creation and incorporation of technology to diversify the productive apparatus. the fall
in investment and the stagnation of productivity and, at the same time, it will have to resume
the fight against poverty and inequality with force. Overcoming these problems will require
you to implement a strategy of great momentum for economic, social and environmental
sustainability that leads to a progressive structural change based on a strong creation and
incorporation of technology to diversify the productive apparatus. Within this framework, this
paper seeks to contribute to the debate and action for the deployment and use of digital
technologies at the national and regional levels, to support development processes. For this, its
content has been organized into four sections.
In the first, the systemic effects of digital disruption are considered together with the
necessity to transition to a sustainable digital society.
In the second, the effects of digitization on social well-being and equality are analysed,
the need to universalize access to these technologies is raised, and the cost of this is evaluated.
Third, the relationship between digitization and productivity and its impact on
agricultural, manufacturing, and service production chains is studied, and reference is made to
some policies to advance post-pandemic recovery with productive transformation.
Finally, in the fourth, the state of the digital agendas in the region is analysed,
particularly concerning data management, and recommendations are presented to strengthen
regional cooperation and the process towards a regional digital market.

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 Chapter I - Towards a sustainable digital society
1.1. The systemic impact of digital disruption

Since the late 1980s, the digital revolution has transformed the economy and society.
First, a connected economy developed, characterized by the widespread use of the Internet and
the deployment of broadband networks. Then, a digital economy developed as a result of the
expansion of the use of digital platforms as business models for the supply of goods and
services. And now progress is being made towards a digitized economy that bases its
production and consumption models on the incorporation of digital technologies in all
economic, social and environmental dimensions.
As a result of the adoption and integration of advanced digital technologies (fifth
generation (5G) mobile networks, Internet of Things (IoT), cloud computing, artificial
intelligence, big data analytics, and robotics, among others), We are moving from a
hyperconnected world to a digitized world in economic and social dimensions. In this world,
the traditional economy —with its organizational, productive and governance systems—
coexists with the digital economy —with its innovations in business models, production,
business organization and governance—. This gives rise to a new digitally intertwined system
in which models from both worlds are integrated and interact, resulting in complex ecosystems
that are in organizational adaptation, These dimensions of digital development are in permanent
evolution, in a synergistic process that has effects on activities at the level of society, the
productive apparatus and the. This makes the digital transformation process highly dynamicand
complex and, therefore, constitutes a challenge for public policies to the extent that it demands
permanent adaptation and a systemic approach to national development. The adoptionof digital
technologies and artificial intelligence - as general-purpose technologies - marks a new stage,
that of the digital economy, within this framework. 5G networks will enable the convergence
of telecommunications and information technologies, changing the structure anddynamics of
the sector.
At the societal level, digital disruption generates changes in communication, interaction
and consumption models reflected in a greater demand for devices, software with more
functionalities, cloud computing services and data traffic, as well as Basic digital skills for the
use of associated technologies. In turn, the digital economy represents for consumers the
possibility of accessing information and knowledge of all kinds in various formats, as well as
goods and services, and more agile non-face-to-face forms of consumption. The evolution

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towards the digitized economy would make it possible to satisfy consumers with intelligent
products, in many cases associated with advanced services with a high degree of
personalisation. All this means an increase in consumer welfare, accompanied by a
reconfiguration of the digital skills necessary to carry out more advanced digital consumption
and face the new labour demands resulting from the new production models. On the other hand,
new forms of consumption are associated with potential benefits derived from reduced
materialization and more sustainable environmental decisions to the extent that they are based
on more and better information (for example, that related to the environmental footprint of a
product) or reward more environmentally friendly practices. For example, Alibaba-affiliated
fintech company Ant Group implemented an app on its payment platform that has engaged
more than 500 million Chinese citizens in carbon-saving consumer activities, which has
generated a change in citizen behaviour. Users earn "green energy" points if they engage in an
action that helps lower carbon emissions, including paying bills online or walking to work. As
users accumulate enough points virtually, a real tree is planted. Around 122 million trees have
been planted in some of China's driest regions since Ant Forest and its partner non-
governmental organizations launched in August 2016 (UNEP, 2019).
The development of the digital economy has led to a radical change in the value
proposition of goods and services, by reducing transaction and intermediation costs and
exploiting the information from the data generated and exchanged on digital platforms. These
digitally enabled models promote the generation and capture of data that, when processed and
analysed with intelligent tools, allow for the improvement of decision-making processes and
optimization of the offer. This gives rise to greater agility in operational processes, market
segmentation, and product customization and transformation. Data and digitized knowledge
become strategic factor of production (CEPAL, 2016). All this entails the need to make
regulatory changes in a variety of matters.
The digital transformation of the productive sector occurs in the form of new
management, business and production models that ease innovation and the introduction of new
markets, and that generate disruptions in traditional industries. The development of the
industrial Internet, intelligent systems, virtual value chains, and artificial intelligence in
manufacturing processes speed up innovation and increase productivity, which has a
favourable impact on economic growth. In addition, all this drives the transformation of
traditional industries through automotive technology (auto-tech), agricultural technology
(aggrotech) and financial technology (fintech), among others. In particular, smart production
models can increase competitiveness with a smaller environmental footprint,

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 On the other hand, a similar process should take place in the public management models
of State agencies, to meet the demands of citizens and improve government action. The
adoption of these technologies by these institutions would increase the efficiency and
effectiveness of service delivery, such as health, education, and transportation. It would also
improve citizen participation in democratic processes, increase transparency in government
operations, and ease more sustainable practices. Smart city solutions are a transforming
element due to their potential social, economic and environmental impact, especially in a
region where 80% of the population is concentrated in cities.
However, despite all this potential, digital development that is not governed by
principles of inclusion and sustainability can reinforce patterns of social exclusion, as well as
unsustainable exploitation and production practices. Although digitization can greatly
contribute to all three dimensions of sustainable development (growth, equality and
sustainability), its net impact will depend on its degree of adoption and its governance system.
In the current situation, the economic and social crisis generated by the COVID-19
pandemic and physical distancing measures have precipitated many of the changes proposed
by favouring online channels in an attempt to maintain a certain level of activity. This
acceleration of digital transformation in production and consumption seems irreversible. The
pandemic has made the need to reduce digital divides more relevant and has shown the
importance of these technologies, for example, in contact tracing applications. To advance the
reactivation, digital technologies must be used to build a new future through economic growth,
job creation, inequality reduction and greater sustainability.

1.2. The difficult balance between digitization and sustainability

Digital technologies foster green innovations that contribute to sustainable

development by reducing environmental impact and optimizing the use of resources. As these
technologies evolve and converge with biotechnology and nanotechnology, they could lead to
exponential innovations that contribute to a sustainable future. Digitization has both positive
and negative impacts on the environment. On the one hand, it can dematerialize the economy
by enabling the supply of digital goods and services that represent an increasingly important
part of the economy and of exports; The increase in the importance of services that are provided
digitally decreases travel and, with it, emissions. A deeper change in consumption is expected
with the development of the product as a service (PaaS) model, which allows comparing the
desired result of using a product without buying it. Under this modality, mobility as a service

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(MaaS) appears, which allows combining transport services from public and private providers
through a unified gateway that creates and manages trips. With this, carbon emissions are
reduced, and the space occupied by vehicles is perfected, which favours progress towards
achieving more sustainable cities. that allows you to combine transportation services from
public and private providers through a unified gateway that creates and manages trips. With
this, carbon emissions are reduced, and the space occupied by vehicles is optimized, which
favours progress towards achieving more sustainable cities. that allows you to combine
transportation services from public and private providers through a unified gateway that creates
and manages trips. With this, carbon emissions are reduced, and the space occupied by vehicles
is optimized, which favours progress towards achieving more sustainable cities.
On the other hand, new business models, such as the gig economy, make it possible to
optimize the use of existing resources by multiplying the possibilities of using capital goods.
Thus, for example, the offer of accommodation services increases without the need for more
hotel construction, or the offer of urban mobility services is increased, taking advantage of the
idle time of vehicles. In this way, the demand for units is not increased, with the consequent
savings in materials and energy. For their part, urban navigation applications reduce transport
times and emissions. In the productive sector, the incorporation of artificial intelligence into
decision-making processes makes it possible to optimize the management of resources towards
a smaller environmental footprint in areas such as the exploitation of natural resources,
manufacturing, logistics and transport, and consumption. Digitization also enables the
disintermediation of activities, reducing their transaction costs and the links of the value chains,
with the consequent savings in energy and inputs.
The #SMARTer2030 study of the global initiative for sustainability eGlobaL e-
Sustainability Initiative (GeSI) estimated that, by implementing digital solutions in different
sectors of the economy, the total global emissions of carbon dioxide equivalent (CO2e) could
be reduced by 12 gigatons (Gt) by 2030, promoting a path towards sustainable growth.
Applications in the manufacturing and agriculture sectors would make up the second-largest
share of this reduction, and mobility solutions would make the smallest share. Real-time traffic
information, smart logistics and lighting, and other digitally enabled solutions could reduce
CO2e by 3.6 Gt, which includes emissions savings from missed trips. Smart manufacturing,
including virtual manufacturing, customer-centric production, circular supply chains and smart
services could reduce 2.7 Gt of CO2e. In addition to reducing carbon emissions, other benefits
would be the increase in the yield of crops by 30%, the saving of more than 300 billion litres

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 of water, the reduction in oil demand by 25,000 million barrels per year and the decrease of
135 million vehicles in the global vehicle fleet (GeSI, 2015).
On the other side, increased digital development has negative repercussions related to
energy consumption (data centers and networks), environmentally damaging manufacturing
methods (screens), and business models that promote frequent gadget replacement. As with
data in general, more use of audio and video solutions would result in higher energy usage.
However, despite significant growth in subscriptions and data traffic, the information and
communications technology (ICT) sector's electricity usage and carbon footprint increased
between 2007 and 2015, but at a far slower rate. The intensity indicators reveal that there has
been a significant improvement in energy use and carbon footprint production.
Additionally, the development of advanced technologies such as 5G, the Internet of
Things and artificial intelligence would help reduce global carbon emissions by up to 15%, that
is, almost a third of the 50% reduction proposed for 2030, through the development of solutions
for the energy, manufacturing, agriculture and exploitation of natural resources, construction,
services, transport and traffic management sectors (Ekholm and Rockström, 2019). This can
offset part of the negative effects of the production and use of these technologies, which imply
a large consumption of energy —1.4% of the world total—, a massive generation of electronic
waste (e-waste) and the exploitation of resources. such as copper and lithium (Malmodin and
Lunden, 2018).

1.3. The deployment of 5G networks: a key to the new models of production and industrial
organization

The fifth generation of mobile networks (5G) will be disruptive for industrial
organizations and production models due to its technical characteristics (higher transmission
speeds, reaching up to 20 Gbps), ultra-reliable low latency (less than one millisecond), greater
security of the network, massive communications between machines and energy efficiency of
the devices. Thus, the deployment of these networks will allow wireless broadband services to
be extended beyond the mobile Internet to complex Internet of Things systems, with the low
latency and high reliability necessary to support critical applications in all economic sectors.
5G mobile networks will enable innovative uses in virtually every industry. Based on the offer
of enhanced broadband experiences, Massive Internet of Things and mission-critical services
may enable innovative uses that offer segmented latency levels (see diagram I.5). Although
edge computing can be used in a 4G environment, the conjunction with 5G networks and

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artificial intelligence (AI) is expected to enable new uses in vertical industries and accelerate
the adoption of models. of Industry 4.0, facilitating increases in productivity and
competitiveness, and improvements in sustainability.
5G networks make it possible to build smart factories and take advantage of
technologies such as automation and robotics, artificial intelligence, augmented reality and the
Internet of Things at different stages of the value chain (see diagram I.6). Having real-time
access to information for decision-making throughout the entire value chain is a fundamental
competitive advantage to make efficient use of resources and better meet demand. Cloud-based
solutions make it possible to better integrate the various stages of the chain. The same software
can be used for the design, simulation and deployment of the configurations and instructions
to run physical production lines, which allows to make operations more flexible and improve.
This type of solution replaces traditional assembly processes and increases flexibility in the
reconfiguration of production plants in response to changes in the product or demand. They
make it possible to optimize processes and reduce costs, as well as reduce delivery times,
improve logistics management and capture the attention of consumers. Other more pertinent
applications include planning and design systems, field devices that offer information for
comprehensive process optimization, and industrial automation and control systems. In
addition, the incorporation of artificial intelligence in decision-making processes makes it
possible to optimize resource management towards a smaller environmental footprint in areas
such as the exploitation of natural resources, manufacturing, logistics and transportation, and
consumption. In addition to promoting sustainable industrialization, digital transformation can
offer social and environmental value from the development of education, health, transport, city
and teleworking applications, as analysed in Chapter II.

1.4. Telecommunications Go to the Cloud: the transformation of the Sector

Telecommunications service operators (OST) must be more competitive (reduce their

capital and operational expenses) and increase service agility. 5G technology opens up an
opportunity for them because it allows them to virtualize network functions with lower
operating costs. Likewise, it allows automating and making processes more flexible, with the
consequent scalability and greater dynamism in network management. Network operators will
become providers of digital services, which represents a disruption of the business model of
the sector. The transition to network virtualization started with 4G technology and will be
completed by 5G technology. By layering fixed and mobile services, network virtualization

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enables resource managers to provide each company or individual user with the services they
need. This is how industry, health services, education, transportation, work and home life, and
cities can make innovative uses that will require various levels of latency. Cloud computing is
one of the dynamic and enabling elements for the processing of enormous amounts of data
generated based on the increasing connectivity of things.
Edge computing will be complementary to cloud computing, which will be delivered
in a decentralized or distributed manner as demanded by different services (network gateway,
customer premises, or edge devices) such as on-call hyper-scale (higher latency). These new
requirements coincide with a parallel process occurring among telecom companies, who are
turning to "virtualization" to cut down on network expenses while improving the security,
agility, and analytical power of the data they transport. A new convergence between the
telecommunications industry and the information technology sector, which offers public cloud
services, is the result of these requirements and developments. Globally, traditional
telecommunications providers such as AT&T and Verizon are working with cloud service
providers such as Microsoft and Amazon to add edge computing to network hubs to implement
5G technology. Both will need each other to achieve an infrastructure capable of providing
connectivity and computing capacity to companies and devices. Therefore, it is to be expected
that more and more associations will emerge between these actors to develop the new offer of
integrated services that make access to the technologies of the fourth industrial revolution
viable. Evidence of the transformation in the sector is the sale or separation of the business into
two: one that operates the infrastructure network and another that operates the service itself. A
little over a decade ago, the operators controlled all the passive and active elements of the
telecommunications infrastructure. Currently, telecom operators are opting to break up
vertically, setting up companies specializing in the management of their real estate assets or
selling their towers and sites to new infrastructure network operators. At the end of the first
quarter of 2019, in Latin America and the Caribbean, more than 50% of the tower park was in
the hands of specialized companies and not those operators (Euromoney Global Limited,
2019). The separation of network management from service provision is motivated by
specialization and the need to have sufficient scale to be efficient in in-service provision.
Telecom operators are opting to break up vertically, setting up companies specializing in the
management of their real estate assets or selling their towers and sites to new infrastructure
network operators. At the end of the first quarter of 2019, in Latin America and the Caribbean,
more than 50% of the tower park was in the hands of specialized companies and not those
operators (Euromoney Global Limited, 2019). The separation of network management from

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service provision is motivated by specialization and the need to have sufficient scale to be
efficient in in-service provision. Telecom operators are opting to break up vertically, setting up
companies specializing in the management of their real estate assets or selling their towers and
sites to new infrastructure network operators. At the end of the first quarter of 2019, in Latin
America and the Caribbean, more than 50% of the tower park was in the hands of specialized
companies and not those operators (Euromoney Global Limited, 2019). The separation of
network management from service provision is motivated by specialization and the need to
have sufficient scale to be efficient in in-service provision. At the end of the first quarter of
2019, in Latin America and the Caribbean, more than 50% of the tower park was in the hands
of specialized companies and not those operators (Euromoney Global Limited, 2019). The
separation of network management from service provision is motivated by specialization and
the need to have sufficient scale to be efficient in in-service provision. The separation of
network management from service provision is motivated by specialization and the need to
have sufficient scale to be efficient in in-service provision.
Changes in business models are transforming the industry. The virtualization of
networks and the needs to process large amounts of data lead to a convergence with the
information technology sector that promotes the entry of new players. Maximizing the benefits
of technological innovation requires a clear vision of these challenges and adapting the
regulatory framework to encourage the development of new value chains.

1.5. The digital transformation driven by 5G networks will have a significant economic
impact but will require large investments

The transition to 5G technology began in late 2018 in the United States, China, and the
Republic of Korea, and is expected to begin rolling out more systematically in Latin America
and the Caribbean in 2021. At the same time, the development of high-performance satellites,
added to the new models of use of the radioelectric spectrum exempted from licences, such as
Wi-Fi, will be engines of innovation to increase connectivity alternatives and improve
coverage. The deployment of the modalities of the evolution of 4G technology towards 5G
could increase the GDP of Latin America between 229,000 and 293,000 million dollars by
2030 (Katz and Cabello, 2019). This result derives from two scenarios. On the one hand, a base
scenario, of urban-suburban deployment, focused on first- and second-tier metropolitan centres
with network speeds and capacities that will continue to be consistently lower in rural areas.
On the other, a maximum national scenario, where the experience of speed and quality of

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services are more uniform in the areas where 95% of the population is concentrated. This
measurement is supported by accounting for three areas of impact of mobile expansion:
1. Impact on digital transformation: benefits in connectivity, digitization of homes and
the productive system, and growth of digital industries.
2. Impact on GDP growth: the effect of the level of digitization on GDP due to
investment in network deployment, but mainly because of spillover effects (positive
externalities) in the economy as a whole.
3. Impact on the GDP of certain industrial sectors: the spillover effects materialized
from the increase in operational efficiency, as well as the improvement of the productivity of
certain industrial sectors.
The adoption of use cases eased by the technological leap could cause a combined
impact on the efficiency of companies and the public sector, as well as on the scope and
coverage of services. At the sectoral level, it is estimated that the most important benefits from
the substantial improvement in quality and efficiency would occur in public services (health,
education, security, including smart city services such as traffic management). Considerable
value growth is also expected in professional services, manufacturing and logistics, trade and
services, and agribusiness.
The investment in capital goods to deploy these networks in the six countries
considered varies between 50.8 billion dollars in the urban-suburban scenario and 120.07
billion dollars in the national III scenario (maximum impact). This implies that
telecommunication service operators would have to increase their annual capital expenditures
between 10% (base scenario) and 40% (largest scenario) concerning their current values. The
deployment of 5G technology requires installing a denser network with greater capillarity. In
addition to the telephone antennas, among other elements, small cells must be installed to
extend coverage and fibre optics to connect the facilities.
Infrastructure sharing can be a solution to face such a level of investment. However, it
poses challenges for regulation, since the greater the sharing, the greater the risk of anti-
competitive conduct. The attention of the regulatory authorities should increase with the
consolidation of the number of operators and wholesale networks, and with the sharing needs.
In addition to transmission networks, it is necessary to provide the region with a greater
information technology infrastructure that supports the exponential growth of data and the
provision of new cloud services. According to the Datacentre Technologies Cooling Market
Map (Thompson and Wentworth, 2019), there are 151 data centres in the region, located in 24
countries: 118 in South America and 33 in Central America and the Caribbean. The region has

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made very little investment in data centres relative to its population (Thompson and
Wentworth, 2019). For example, Argentina has 30,000 operational square meters with a
population of 44 million people, the same space as Austin (Texas) with 1.9 million.
Cloud services have gained prominence as drivers of digital transformation. The cloud
offers flexible information technology resources that enable transformations in business
models and in the provision of services, agility in the commercialization processes and the ease
of experimenting with new services without the need for new information technology
resources, in addition, to offering greater cybersecurity. Governments and businesses have been
slow to embrace the cloud in their operations, but this trend has been accelerated by physical
distancing measures. Teleworking, telemedicine, tele-education, videoconferences, video on
demand, electronic commerce, electronic banking and online public procedures have become
widespread and have become part of daily life. The most widely used application is software
as a service, with solutions such as email, video conferencing, office applications, customer
relationship management, resource planning, workflow automation, and security. In addition,
it enables the use of support tools for electronic commerce, such as conversational robots
(chatbots) and messaging, which expand communication channels with customers.
In short, the impacts of the digital revolution have become more visible and have
intensified with the pandemic, reinforcing ongoing trends in the long term. As will be seen in
the next chapter, the applications linked to the remote provision of education, health and
shopping services, as well as those that allow teleworking and social connections, have
increased and have permeated large areas of society as a whole. society, although the digital
gaps prevent the universalization of its use and its impacts. On the other hand, despite the
positive effects of dematerialization, digital development has maintained, or even exacerbated,
growth patterns that are intensive in the use of energy and raw materials, increasing the
generation of greenhouse gases and waste. The positive effects are present and perceived, but
so are the negative effects. Taking advantage of the former and reducing the latter requires
changing the pattern of digital progress and directing it towards inclusion and sustainability.
This process is not automatic and involves all economic and social sectors. It is necessary to
integrate the digital revolution into a great push for sustainability through a progressive
structural change that develops the digital sector in the region through strong investments,
promotes the adoption of these technologies in the productive apparatus and governments, and
universalizes access and development abilities for its full use. The sign of the final result will
depend on the implementation of strategies.

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 Chapter II
Digitization for social well-being and inclusion

The digital revolution has changed and will continue to change consumption,
production and business models. In addition to increasing the productivity and well-being of
users, these changes can be combined with objectives of growth, employment, inclusion and
environmental sustainability (ECLAC, 2020c). However, this does not happen automatically,
rather the development and adoption of digital solutions are strongly conditioned by structural
factors. In countries with excessively heterogeneous production structures, not very diversified
in terms of products, with highly informal and precarious labour markets, and with
socioeconomic restrictions on access and connectivity, there is a significant part of society that
cannot appropriate the value they generate. digital technologies.
In particular, connectivity – understood as the broadband service with an adequate
speed and the possession of access devices – conditions the exercise of the rights to health,
education and work, at the same time that it can lead to an increase in socioeconomic
inequalities.
A digital development that does not respect human rights in the digital environment
(digital rights) and that is not based on principles of inclusion and sustainability can reinforce
patterns of social exclusion and unsustainable methods of resource exploitation and production,
in addition to exacerbating its negative environmental impacts. In this case, the net effect will
depend on the articulation between business strategies and policy actions aimed at directing
digitization towards development with equality and sustainability.
Inclusion –as a way of being or being part of society– is affected by the digital
revolution and the adaptation and response capacity of people, society, markets and States.
Furthermore, the pandemic and mandatory confinement have made it necessary to find new
ways to maintain social and civil practices through digital platforms. For this reason, it is urgent
to strengthen digital citizenship linked to the participation of the population in the digital
society and economy. To this is added the understanding of the new forms of power and the
new public sphere that emerges from the digital, dominated by a few global companies.
Although it could be thought that the digital space is a continuation of the analogy space, it
also implies new tools and forms of participation (CEPAL, 2016; Claro et al., Digital
citizenship demands new skills and abilities to be part of this new way of being a citizen. This
prevents many people from taking advantage of the opportunities offered by new technologies,

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if actions are not formulated to make these opportunities visible and match them. Thus, public
policies are increasingly relevant to ensure that the changes resulting from the digital
transformation allow faster progress in inclusive social development and do not widen the gaps
in a region with high levels of inequality in various dimensions of development.
In 2019, 66.7% of the inhabitants of Latin America and the Caribbean used the Internet.
This result, notable in terms of the speed and scope of the diffusion of the use of technology in
the region, was possible because the incorporation of technological advances has been
combined with very competitive strategies of private or public companies (depending on the
country in question). ), and with the implementation of policies to support and regulate the
sector. Despite this great progress, one in three inhabitants of the region has limited or no access
to digital technologies due to their economic and social condition, particularly their level of
income, their age, and the location of their home.
The context of the pandemic has highlighted the benefits derived from the use of digital
technologies in different economic and social spheres. However, it has also shown that these
benefits are not available to all people due to the different dimensions of the gaps in access and
use of these technologies. The gaps in access, use and skills, as well as opportunities for
inclusion in an increasingly digitized world, are reproduced following the axes of the matrix of
social inequality in the region, which, among other dimensions, includes socioeconomic level,
the stage of the life cycle, territorial location, ethnic or racial origin and gender inequalities
(ECLAC, 2016). One of the main determinants of access is people's income level.The lowest
income quintiles are those with the most people and households excluded from Internet access.
Despite the increase in access between 2010 and 2018, the gaps based on income are still
present. On the other hand, there are great differences in the situations of the countries of the
region. The type of device and the possibility of staying connected in different places
significantly affect the development of digital skills in children and adolescents. Its
predominant access modality is a cell phone from home and the least frequent is the ubiquitous
type with multi-device, that is, access from various places and through various devices, which
would be related to a greater development of digital skills.

2.1. Distance education: essential but inaccessible to many

The experience and approach to the digital world vary according to the life cycle, sex
and educational level. The young population shows greater achievements in cognitive skills
and those related to the world of work. The general educational level plays an important role

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in the acquisition of these types of skills and there is a clear gap between the achievements of
men and women. In these three dimensions (age, educational level, and sex), the percentage of
the population with high levels of achievement is much lower in the countries of the region
than in those of the Organization for Economic Cooperation and Development (OECD).
Despite this greater familiarity of the younger population with the digital world, among
15-year-old students, the perception of their self-efficacy in the use of digital media is, at best,
mediocre (8.7 on a scale from 0 to 15). In addition, this self-perception is distributed unequally
according to socioeconomic level and sex, with a disadvantage for women (ECLAC, 2020c).
These gender gaps can then be perpetuated if we consider that only 35% of women enrolled in
science, technology, engineering and mathematics careers. In this context, to contain the
pandemic, as of March 2020, most of the countries in the region totally or partially suspended
face-to-face education and established strategies to continue their studies through digital media.
Thus, for students with quality access to the Internet and who live in environments withgreater
digital skills, this crisis can be an opportunity to continue, and even improve their learning,
given the great potential of virtual resources (CEPAL/UNESCO, 2020; ECLAC, 2020c).
However, a large proportion of students have weak access to digital equipment at homeand few
skills to take advantage of that opportunity. Their lesser learning can lead to greater repetition
and school dropout.
In 2018, 79% of 15-year-old students from the 10 countries in the region that
participated in the PISA test had Internet access at home and 61% had a desktop computer.
These levels are significantly lower than the average for OECD countries (92% and 82%,
respectively). In addition, access to these types of devices at home is very uneven. In seven of
the countries that participated in that study, between 70% and 80% of students in the highest
socioeconomic and cultural quartile had a laptop at home, a situation that only 10% or 20% of
students in the first quartile. These differences are repeated for all the digital devices
investigated (CEPAL/UNESCO, 2020).
In 2018, only 60% of students in the region were prepared to accept a distance education
model using digital media for the training of essential cognitive skills (language, mathematics,
science and social sciences). The remaining 40% were not prepared to continue their studies
virtually (CEPAL/OEI, 2020).
The most frequently taught digital skills in school are safe and critical use of the Internet
(for example, considering the consequences of posting information online or how to decide
whether to trust available information). The frequency with which skills that require greater
technical management and knowledge are taught is less. In all cases, OECD students would

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have a higher level of training in school in this area than those in Latin America (CEPAL/OEI,
2020). Added to this is the gap in the capacity of teachers and parents to support learning
processes through platforms. Faced with this, teachers and officials of the education system
have raised responses to the emerging demands during the pandemic, which has often meant
an overload of tasks,
In this context, the role of adults in the digital training of the new generations is still
important. The Kids Online studies identify three types of mediation: active (adult guidance
and accompaniment), restrictive (prohibition of accessing certain websites, using web cameras
or disclosing personal information) and monitoring (supervision of the sites or the connection
time) (Livingston & Helsper, 2010). Active mediation is the most important for the
development of digital opportunities for children and adolescents; in particular, it is important
for risk prevention, skill training and self-care strategies. The Kids Online studies in Brazil
(2016), Chile (2016) and Costa Rica (2018) have identified gaps in the type of mediation that
children and adolescents receive. The highest levels of active mediation in the home are
registered in the population with the highest socioeconomic level, except for Chile, where the
middle classes stand out. This is of particular relevance during periods without face-to-face
classes when the continuation of studies must be done from home.
Digital transformation offers new tools for the health sector. The widespread use of the
Internet allows a new perspective on health care by overcoming the logic of face-to-face care,
which has been seen during the pandemic. Among health interventions through digital or
electronic means (cyberhealth or e-health), there is a growing interest and use of telemedicine
as an alternative to face-to-face care, in which the use of digital technologies allows remote
clinical services to be provided and use mobile devices for monitoring (mobile health or m-
health), teleradiology or telerehabilitation (Oliveira, 2020). However, access to these services
requires a digital infrastructure,
From a public health perspective, digitization supports the transition from curative to
preventive medicine, helps put patients at the centre and empowers them, and makes
management and delivery of services more efficient, safe, and cost-effective. (Odone and
others, 2019). The restrictions on quality care arise from the small number of general
practitioners and specialists to care for the most vulnerable population due to their economic
condition or because they live far from the main urban centres. eHealth can help bring care
closer to these groups.
During the pandemic, new technologies have made it possible to offer rapid responses
to the different phases of the crisis. Digitization strengthens the predictive ability, and the use

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of artificial intelligence facilitates detection, prevention, response and recovery, as it reinforces
diagnosis, epidemiological surveillance, contact tracing or service automation. As in other
areas of well-being, there are socioeconomic, cultural and geographical determinants that lead
to disparities in access to health, which translates into care that is not timely and of reduced
quality for the most vulnerable. The healthcare sector is still lagging in the use of high-quality
data for the digital transformation of healthcare.

2.2. Digitization, labour market and employment

Before the pandemic, digital technologies and their applications in economic activities
were causing radical changes in labour markets and people's skills. Changes in production and
consumption patterns driven by the pandemic have accelerated the adoption of digital
technologies in many sectors and are magnifying their effects on labour markets. During the
periods of confinement and restriction of face-to-face activities, digital technologies have been
essential to keep jobs and business activities. The possibility of working from home has
allowed many companies, organizations and institutions to limit the socioeconomic impact of
the crisis. The potential of teleworking to mitigate the impact of the crisis in the region is
conditioned by informality and connectivity. Informal employment —which in 2018 reached
more than 50% of the total— is concentrated in sectors that require physical interactions and
cannot be conducted remotely. On the other hand, the quality of connectivity in the countries
affects the possibility of teleworking. As seen above, in the region most countries do not reach
the average levels necessary to simultaneously conduct high-consumption activities. Different
surveys conducted in the countries of the region show that only around a fifth of the employed
have been able to work from home during the pandemic. Informal employment —which in
2018 reached more than 50% of the total— is concentrated in sectors that require physical
interactions and cannot be conducted remotely. On the other hand, the quality of connectivity
in the countries affects the possibility of teleworking. As seen above, in the region most
countries do not reach the average levels necessary to simultaneously conduct high-
consumption activities. Different surveys conducted in the countries of the region show that
only around a fifth of the employed have been able to work from home during the pandemic.
Informal employment —which in 2018 reached more than 50% of the total— is concentrated
in sectors that require physical interactions and cannot be carried out remotely. On the other
hand, the quality of connectivity in the countries affects the possibility of teleworking. As seen

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above, in the region most countries do not reach the average levels necessary to simultaneously
carry out high-consumption activities.
Faced with the insufficiency of unemployment benefits and the change in consumer
demand, on-demand work platforms have been opportunities to supplement the income of
households and the most vulnerable people. During lockdown periods, logistics and food
delivery apps significantly increased their number of users (in many countries in the region,
downloads increased by more than 50%). At the same time, the absence of specific labour
regulations means that on-demand platform workers carry out their tasks without protection or
labour rights, which increases their labour and social vulnerability.
Many of the changes in labour markets driven by the pandemic will continue beyond
the emergency phase. As long as a vaccine is not found and widely disseminated, teleworking
will allow many companies to continue working and producing, it will reduce social contacts
and mitigate the spread of the virus. At the same time, changes in consumption patterns will
increase the presence of on-demand platforms.
In this context, taking advantage of the potential of new digital technologies in labour
markets without deepening the region's structural inequalities requires:
• making Internet access universal; to devices and applications, as well as digital
literacy programs.
• develop digital skills and rethink social protection systems, and
• design regulatory frameworks for digitized labour markets.
Financial inclusion refers to public and private initiatives to provide access to financial
services to households and companies that, for various reasons, are excluded from the
traditional financial system, as well as promoting the effective use of products that promote
inclusion by of productive agents that operate with the traditional financial system (CEPAL,
2018).
Financial exclusion is explained by factors associated with supply and demand. On the
supply side, the greatest restrictions on credit are given by:
• the risk perceived by financial institutions, which translates into high interest
rates and restrictive conditions for applicants and
• a low expected return on the investments necessary to the inclusion of certain
population groups.

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 On the demand side, entry barriers have to do mainly with the lack of financial
education, the lack of identification with the products offered, and the costs associated with
compliance with legal regulations and regulatory (ECLAC, 2018).
The use of digital technologies in the financial sector has helped address some of the
biggest obstacles facing financial inclusion. Its application has modified the way in which the
traditional activities of the financial sector are carried out (financing, investment, trade,
payments, planning, among others), with strong implications for final consumers (OECD,
2018). In particular, in relation to financial inclusion, digital technologies have expanded the
offer (new business models, new products and suppliers), have replaced or changed the role of
intermediaries and associated costs, and have made it possible to take advantage of economies
of scale and scope, and have made it easier and faster to design specialized products for certain
segments.
Person-to-person (P2P) platforms allow investment, trade, credit and financing
operations to be carried out at a much lower cost and with easier processing than using the
services of an intermediary. Some examples of business models through these platforms are
the donations of funds in exchange for a future reward, loans or investment in exchange for a
return, equity-based platforms in which individuals receive participation in the companies
financed and those that manage cross-border payments and eliminate the payment of the spread
of exchange rate. Furthermore, these platforms offer services and products such as the
professional design of portfolios of investment that, due to its cost and complexity, are
generally limited to certain segments.
Digital technologies have helped reduce the fixed costs associated with infrastructure
and increase the scale of production to expand the coverage of services to previously excluded
populations. An example is the use of mobile telephony for the population in rural areas, which
constitutes a widely used and low-cost platform for the financial sector to the extent that its
infrastructure is installed.
Internet-based companies, and particularly those using big data tools, find it easier to
design specific products and services for certain market segments. A successful application of
such tools is the collateral-free cash advances offered to small and medium-sized enterprises
(SMEs) by the payment processor Worldpay and by a London-based non-bank financial
institution Liberis. Based only on the sales projection analysis, the amount and term that each
benefited SME can meet is determined. In this way all loans granted are adjusted within these
limits. The efficiency savings in internal processes and the reduction (OECD, 2018) of overall
costs that financial institutions achieve through the application of digital technologies are

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important for financial inclusion. This is so because often the costs of risk studies to grant a
credit exceed the risk-adjusted return, as is also the case for SMEs and low-income households
in the region (ECLAC, 2018).
On the demand side, financial exclusion is also associated with the misperception of
low utility and difficult use of financial services. In terms of financial education and bringing
providers and consumers closer together, digital technologies facilitate consumer access to
information, help customers make comparisons between products and make informed
investment decisions. In addition, they support the monitoring of financial operations and
access to courses. All these factors cooperate to create a financial culture that encourages
demand. An alternative to the tools of the traditional financial system is the use of mobile
money. Mobile money accounts include the ability to transfer money and make and receive
payments through your mobile phone. They are available to the unbanked population and have
a network of physical points with wide coverage that looks to guarantee access, particularly for
the population outside the traditional financial system.
A smart city is an urban development model based on the adoption of digital
technologies (Internet of Things (IoT), 5G networks, artificial intelligence (AI), big data, cloud
computing, autonomous vehicles, and others) to perfect efficiency. of the city's operations and
services in order to increase the quality of life of its inhabitants and contribute to improving
the environment. The precariousness of public transport, prominent levels of vehicle
congestion, air pollution, waste management and access to drinking water, health and
education, as well as insecurity, are problems that urban development policies face, and for
which smart city models can be a solution.
The conception of a smart city must include three elements: the physical infrastructure
that supports the delivery of services to citizens (road, sanitary and electrical networks, among
others), the digital infrastructure that enables connectivity through devices and sensors
connected by high-speed communication, and applications that enable intelligent data
management to optimize processes and improve quality of life and sustainability.
According to the 2020 Smart Cities Index report from the International Institute for
Management Capacity Development (IMD), Singapore, Helsinki and Zurich are the main smart
cities in the world due to their prominent level of infrastructure development of technological
solutions in health issues and mobility.
The transformation of a traditional city into a smart city is complex, since it involves a
great diversity of actors and coordination between agencies and departments of the public
sector, in addition to needing human resources with adequate training. In the countries of the

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region, the development of smart cities is being carried out with different degrees of planning
and coordination. In some cases, cities have a strategic plan; In others, specific initiatives are
implemented, many times without including the digital modernization authorities and without
coordination with other instances. The cities with the greatest digital development are the
largest and those with the highest per capita product. To drive the development of smart cities,
clear governance is needed that considers local aspects in areas such as the deployment of
traditional infrastructure (roads, health and others) and digital, and the development of human
capital. This must be coupled with a national governance framework that promote digital
development (5G networks, Internet of things and others) and regulate technological risks, such
as data privacy and cybersecurity threats. All this is vital to provide confidence to citizenship
in the use of digital technologies.
The essential requirement for effective participation in the digital age is broadband
access to high speed in significant conditions of affordability. For this, it is necessary to expand
the coverage of the fixed broadband and improve mobile broadband connection speed. The
costs associated with the connection of households and the necessary devices, added to the
difficulties in financing the digital infrastructure (for example, fiber optic cables) are obstacles
to digital inclusion. For that reason, ensuring affordability of access and devices is crucial.
Based on the prices of the mobile and fixed broadband Internet plans, and the electronic
devices, the annual cost of a basic digital basket that includes connectivity plans is estimated
monthly, a laptop, a smartphone and a tablet (ECLAC, 2020c). In order to guarantee access to
unconnected households, on average, the countries of the region should make an investment of
order of 1% of GDP, although with large differences between them.
Demand subsidies could be used to help lower-income households finance the
contracting of telecommunications services and the basket of access devices. Nevertheless, the
fundamental thing is to coordinate public-private actions tailored to each country that meet the
socioeconomic, geographic, age and gender criteria. In this scope, a regulatory sandbox
environment can be implemented (sandbox) in which it is allowed the direct management by
the operators of part of the resources, who must provide access funds universal or other funds
aimed at massifying telecommunications services to allocate them to cover the costs of
providing services to lower-income households. The relevant authorization could be subject to
compliance with conditions established by the regulator that encourage competition between
service providers to offer better conditions in order to obtain that authorization. This measure
can be complemented with actions aimed at making regulations more flexible. For example,

P a g e 21 | 50
they could adopt measures regarding net neutrality that encourage the use of education services,
health and government by applying zero fees to access them.
In relation to access to devices, taxes can be temporarily reduced on imports and sales
(for example, value added tax (VAT)) of defined devices by the regulator, as well as promoting
public-private partnerships with suppliers and manufacturers to produce the devices at a
regional level with a low cost and thus improve the supply conditions.
The monthly values of the basket oscillate between 0.32% and 7.29% of the monthly
GDP, with an average 1.8% for the countries in the sample. Regarding the financing
mechanisms of the basic digital basket, according to each case and given the great variation in
costs, a part could be covered with the universal access funds or through similar mechanisms
that exist in each country. These universalization efforts must be conducted within a framework
in which the Internet is conceived as a public good, with safe and universal access, so that the
entire population can take advantage of its opportunities and benefits. This process must go
hand in hand with the universalization of social protection.
Physical accessibility implies paying special attention to groups excluded from the
digital technologies, such as the population with disabilities, affected by the lack of equipment
with resources to facilitate their access or because the majority of this population lives in homes
in situations of poverty (Meresman and Ullman, 2020). Addressing the challenges of digital
inclusion implies considering not only physical accessibility, but also development of skills
and the guarantee of rights to promote digital citizenship without leaving anyone behind. With
technological change and digitization, new forms of citizenship and participation put pressure
on the public institutions with new power dynamics that must be kept in mind to exercise
citizenship and strengthen civic engagement and democracy.
In this area, the countries of the region must define and agree standards for the
protection of privacy, rights and accessibility, as well as principles of inclusive design in digital
spaces (ECLAC, 2020a). To advance on these issues, it is essential to implement articulated
strategies in the digital, social and the economic in order to develop intersectoral instruments
to overcome barriers and gaps. Thus, in addition to considering digital technologies in social
policies, goals of inclusion in digital policies and investment in innovative technologies.

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 Chapter III
Digital improvement

Taking a longer-term perspective, the last 60 years have seen a growing divergence
between the region's productivity and that of the more developed and emerging economies,
which has become particularly accentuated since the 1980s (see graph III.1). Contrary to what
happened in the developed countries and the emerging economies of Asia, the countries of the
region have not reaped the benefits of the great waves of technological transformation,
particularly the digital revolution that began in the 1990s and the most recent and still incipient
was 4.0. In contrast to what has happened in the region, high-growth economies have seized
the opportunity to accelerate productivity through large investments and commitments to the
adoption of innovative technologies. For example, after the second half of the 1960s, the
Republic of Korea experienced rapid growth accompanied by the sectoral transformation of its
industry and the massive incorporation of technology in its productive activities. Similarly,
around the 1980s, Taiwan Province of China carried out an ambitious plan to industrialize the
economy. Currently, its technological sector is one of the most competitive worldwide,
especially with regard to the production of electronic components and computers. Around the
1980s, the Chinese province of Taiwan carried out an ambitious plan for the industrialization
of the economy. Currently, its technological sector is one of the most competitive worldwide,
especially with regard to the production of electronic components and computers.
Graph III.1. Latin America and the Caribbean and selected countries: evolution of productivity, 1950-2019 (Per
worker in thousands of dollars)

Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of The Conference Board,
Total Economy Database [online] https://www. conference-board.org/data/economydatabase/total-economy-
database-productivity.

P a g e 23 | 50
 The low dynamism of productivity in the region is mainly due to little productive
diversification and the concentration of production in intensive activities in natural resources
(agriculture, fishing, mining and some industrial sectors) which, although they are strongly
exporting sectors, operate with little articulation with the rest of the productive structure and
do not have significant effects in terms of technological spill overs and capacity building. These
marked disparities and structural heterogeneity can also be seen in the productivity gaps
between small and large firms, which are substantially larger than those observed in other
countries and regions. The labour productivity of a medium-sized company in Latin America
is, on average, less than half that of a large company, a figure that drops to 23% in small
companies and only 6% in micro-enterprises. On average, in Latin America the difference in
productivity between microenterprises and large companies is seven times greater than that
registered in the European Union.
Productivity growth is the central engine of sustained economic growth. Thus, in the
long term, increasing productivity is the only way to support income growth and access to
essential goods and services. Since the first industrial revolution, the introduction of innovative
technologies has contributed to improving the productivity of companies and the economy as
a whole. In a first approximation, technical progress is the basis of productivity growth. For
this reason, the development and incorporation of innovative technologies in production
processes is essential for growth (see figure III.2).
Graph III.2
Latin America and the Caribbean: productivity per worker and technological maturity, 2010-2018
(In thousands of constant 2017 dollars and in technological maturity index)

Technological maturity index

Rest of the world Latin America and the Caribbean
Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of World Bank, World Development Indicators [online
database] https:// databank.worldbank.org/source/world-development-indicators.
Note: The technological maturity or readiness index measures the agility with which an economy adopts existing technologies to improve
the productivity of its industries, with emphasis on its ability to take advantage of information and communication technologies (ICT) in
daily activities and production processes for greater efficiency and competitiveness.

P a g e 24 | 50
 Profitable adoption of new technologies depends on the capabilities and factor
endowments of firms and countries. The productive structure, the technological intensity in the
industry and the dynamics of the companies are key to exploiting the full potential of digital
technologies. Given the structure and the limited level of technological sophistication of the
productive sector and the business structure in the countries of Latin America and the
Caribbean, it is not enough to promote and facilitate the adoption of technologies.
Strengthening the digital ecosystem requires structural policies that support technological
sophistication, innovation and productivity. Although the impact of digital technologies on
productivity is conditioned by the productive structure and by the structural characteristics of
companies, digital transformation generates important changes in the organization of
companies and market dynamics (see diagram III.1 ).

Diagram III.1
Impact of digitization on companies and their environment
The disruptive changes in companies and their environment derived from the advances
in digitization have recently accelerated with the COVID-19 pandemic and the increased use
of digital technologies in response to this situation. The adoption of digital technologies has
become even more of a priority to boost productivity and quality employment. There are many
possible impacts of technical change and there is a strong positive correlation between the
technological intensity of the productive structure and the productivity of the economy

P a g e 25 | 50
(CEPAL, 2018); At the microeconomic level, the digital transformation affects productivity
and growth through four mechanisms that improve the efficiency and effectiveness of
companies. Beyond the direct impacts on businesses, digitization produces major changes in
the competitive dynamics of the value chain and in consumers. New business models are giving
rise to a growing participation of new “digital native” players that bring with them multiple
implications for market dynamics and the economy in general. In some sectors, such as
commerce, there is direct competition between the traditional offer and digital disruption. The
greater prominence of digital channels can lead to the displacement of traditional players and
channels and the need for the latter to adapt, develop their own digital channels and integrate
into other players' digital platforms. In some activities, the level of digital disruption.
The implementation of strict sanitary protocols —mainly through the combination of
testing, isolation, disinfection measures and the use of protective equipment— together with
restrictions on the use of the capacity of the premises and distancing have made it possible to
restart part of the activities in most of the countries of the region. However, there is still a long
way to go to recover the levels of dynamism prior to the pandemic. Even when a vaccine is
available, many of the current changes are expected to continue to affect the industry.
Therefore, its transition to a "new reality" is essential.
Digital transformation can accelerate that transition. First, digital platforms allow the
development of “contactless” alternatives to mitigate the effects on the core of the business.
For example, many museums in the region have developed “one hundred percent virtual”
experiences that allow visitors to visit spaces and exhibits and interact with them from a
distance. However, these alternatives have been only limited and insufficient substitutes to
contain the negative effects on the traditional business model. Beyond developing digitized
versions, many players are creating or expanding business models through digital technologies
with a greater focus on the local population. For example, many hotels have taken advantage
of the delivery boom to offer food delivery service, in some cases creating new exclusive fine-
dining experiences at home. Some airlines have promoted courier services for door-to-door
international purchases. Local tourism organizations have created e-commerce platforms to
allow local businesses and restaurants to continue to provide some services.
Digital transformation can also promote the recovery of traditional activity. For
example, the use of traceability applications makes it possible to optimize confinement times
and ensure a rapid response to potential infections.
Digital tools also make it possible to manage some impacts of the crisis. The Barceló
hotel chain is combining voice recognition with predictive algorithms to detect which

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customers are most likely to cancel their reservations and what their level of satisfaction is, to
optimize capacity management and provide better service. Digital transformation can lead to
value consolidation and increased profit concentration by intensifying “economies of scope”
and superstar or “winner takes all” dynamics.
The combination of these factors, along with changes in consumer habits (preference
for digital channels and speed of delivery) leads to the rise of digital platforms. On the other
hand, the digital transformation also generates an approach and an optimization of the supply
chain by reducing transaction, distribution and marketing costs. This process brings with it an
increase in the disintermediation of the chain and the relevance of direct sales channels, as in
the case of tourism.
Finally, in some sectors, digitization generates a transfer of value to consumers that
materializes in higher consumer surpluses due to lower prices, greater transparency, and lower
search costs. An example is the digitization of the music industry, in which 96% of the profits
from technology would have gone to consumers (Nordhaus, 2005).
The coexistence between value creation mechanisms and transfer dynamics means that,
at the macro level, a positive and significant relationship between digitization and productivity
growth is not always observed, particularly in periods of transition and disruption. In this
context, the region has a window of opportunity to implement the necessary structural reforms
and adapt its regulatory framework to define where to position itself in the techno-economic
trajectories towards which the world is heading.
In the era of digital transformation, public and private activities seek to take advantage
of the revolution in efficiency caused by the use and management of large volumes of data,
and thus benefit from the new economies of scope and scale.
The new Industry 4.0 technologies make it possible to trigger changes in the production
processes of emerging economies to achieve gains in productivity and competitiveness that are
sustainable over time.

3.1. Advanced analytics and artificial intelligence

The use of algorithms and high computational power machines allows the
identification of patterns and predictive analysis to facilitate learning and automated decision
making. It generally involves the combination of traditional analytics methodologies (such as
regressions, search algorithms, or linear optimization) with machine learning techniques,
which employ methods such as clustering algorithms, dimensionality reduction, deep learning

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networks, and neural networks. By 2023, advanced analytics is expected to represent a market
worth more than $270 billion globally.
Internet of things: The use of sensors and actuators allows the use of intelligent and
interconnected devices or products, accessible or traceable remotely. The Internet of Things
(IoT) allows the development of “smart networks” to automate or improve the effectiveness of
production and distribution processes, particularly when interacting with technologies such as
advanced analytics. The main applications of the Internet of Things are in smart cities, smart
industry, telemedicine and smart homes.
Advanced robotics: Advances in artificial intelligence, computer vision, sensors,
motors, and hydraulics allow robots to perform increasingly complex tasks, with less repetitive
and predictable patterns. Industrial robotics, for example, represented a $12 billion market in
2016 and its annual growth rate between 2016 and 2023 is expected to be 4.4%. A particular
dynamism is observed in terms of service robots. For example, the sale of logistics robots
increased by 110% between 2018 and 2019, while that of medical robots increased by 28% in
the same period.
Cloud services and digital platforms: digital or virtual platforms are spaces on the
Internet that facilitate the execution of applications or programs in the same place to satisfy
different needs. Most digital interactions happen remotely in the cloud, reducing the need for
storage and processing on local computers and devices. Cloud computing allows computing
services to be obtained through a network that reduces usage costs and facilitates the
transmission of information. By 2023, these services are expected to represent a market of more
than 350,000 million dollars worldwide.
Blockchain: a chain of blocks acts as a digital ledger that works with a single, agreed
and decentralized registry to validate information and transactions. The registry is distributed
in several nodes of a network and in each block a number of valid records or transactions is
stored, as well as information regarding that block and its link with the previous block and with
the next one through a unique digital fingerprint. As new records are created, they are first
verified and validated by network nodes, and then added to a new block that is linked to the
chain. In addition, if that information is stored encrypted, its confidentiality can be guaranteed,
since only whoever has the encryption key can access it. This would allow, for example, to
unify health records in a safe and convenient way, as the medical history of each patient. The
pharmaceutical industry could use this technology to verify drugs and prevent counterfeiting.
Autonomous and semi-autonomous navigation: includes vehicles maneuverer without
human intervention or with reduced intervention. It includes both cars, trains and trucks as well

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as drones piloted by an operator. Drones can be used in several types of projects, such as
underwater research, search for shipwrecks, and salvage operations. They are used very
especially in facilities far from the coast (offshore) to complement the inspections required by
the hull of ships. Unmanned aircraft have been used mainly to carry objects to remote places
and in disaster areas, since they have the advantage of being able to reach and deliver to remote
places.
3D print: belongs to the family of techniques known as additive manufacturing.
Additive processes allow objects to be built by creating and consolidating layers, as opposed
to moulding or subtractive techniques. The development of machines capable of printing
objects has captured increasing attention in recent years. However, there are still doubts about
its true potential. While some enthusiasts see it as a new industrial revolution, many others take
a more skeptical view, considering the limitations of the technology and the still low levels of
adoption. Beyond this, 3D printing still has significant acceleration potential both in terms of
direct manufacturing of products and parts, as well as in the development of tools and moulds,
for example, of personalized medical implants. In order to achieve osseointegration,
manufacturers use 3D printing to precisely control the porosity of the surface, thus better
simulating actual bone structure.

3.2. Virtual reality and augmented reality

The use of immersive technologies such as virtual reality and augmented reality allows
you to reinvent the way you create and experience content. For example, at Stanford
University's Centre for Neurosurgical Simulation and Virtual Reality, virtual reality is used to
plan complex brain surgeries (for example, for tumour removal) in detail from simulations that
are created from information obtained from computed tomography. The use of immersive
technologies has multiple impacts for businesses, such as reducing production costs through
virtual prototypes and lowering barriers to entry for updated content creators.
New technologies can be used at all stages of the operation of different sectors and
activities. They are specific sources of value for companies and businesses that require a clear
articulation of business needs and the impact of the solution, and a sharp vision on how to use
the solution to be incorporated. The potential of these technologies is not common in all
economic activities; it depends on each sector, its degree of sophistication and articulation with
other activities, the incorporation of technology and the skills and abilities of its workers, as
well as the context in which companies and businesses operate. The adoption of new

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technologies imply a reconfiguration of the entire production chain, with the definition of new
links, services and companies, which opens opportunities for sectoral diversification andskills
development. Below are three sectoral cases with high transformative potential for the region
in the agribusiness, manufacturing, and trade sectors and chains.

Diagram III.2
Dynamic potential of digital technologies

Advanced analytics and artificial intelligence Agriculture

internet of things

advanced robotics
Manufacture

forms

Trade

-autonomous navigation

The agro-industrial sector is one of the main engines of exports in Latin America and
the Caribbean and one of the sectors with the highest share of employment in many economies
in the region. However, with few exceptions, their productivity is significantly lower than the
average for the region and that of the most developed countries.
The digital revolution is an important opportunity to boost the productivity and
sophistication of the agricultural sector. Digital technologies can help farmers produce more
efficiently and develop sustainable solutions to climate change. For example, the addition of
sensors to conventional agricultural machines, such as tractors, sprayers and combines, allows
them to be transformed into networks of smart devices with performance monitors, autopilot
or sensors for seed distribution and spraying. The use of advanced analytics would make it
possible to process the information produced by sensors and satellites to optimize production
processes and the use of applications activated by the Global Positioning System (GPS). The
incorporation of autonomous or semi-autonomous vehicles would reduce operating costs and
energy consumption, as well as increase safety and precision. Digital technologies have
exciting potential throughout the production chain, from the purchase of inputs to the
marketing of goods.

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 Numerous digital platforms function as online geographic information systems that
allow all the information to be in the cloud and access it from any device, anywhere in the
world and at any time. For example, from satellite imagery it can supply normalized difference
vegetation index images. The platforms also allow establishing monitoring routes, which they
can be followed with the help of the mobile application, prepare a report of what is observed
in the field and take georeferenced photographs that illustrate the observed situation.
The use of the robot can reduce waste by 10% in a 100-hectare soybean field. To harness
the potential of robotics in agricultural production, Farm Wise is developing an autonomous
robot that routinely and efficiently cuts crop weeds, covers large areas on a daily basis, and
improves the condition of fields. For the cultivation phase, intelligent irrigation management
is a digital solution to one of the most relevant activities of agricultural production. The
installation of a set of sensors makes it possible to detect soil moisture levels and, based on
these records, automate the irrigation process. The adoption of digital technologies also
facilitates the smart management of harvesting the crop. Through analytical tools, the data
obtained from sensors and external information (weather forecast or customer needs) is used
to determine the optimal collection moments. In terms of logistics, the main transnational grain
companies (Archer-Daniels-Midland (ADM) Company, Bunge, Cargill, Louis Dreyfus
Company (LDC) and COFCO) have created an alliance to standardize data and digitize global
grain transactions. agricultural shipments, using digital technologies such as block chains and
artificial intelligence, which would increase the transparency and efficiency of the chain
worldwide.
Digital platforms also ease the relationship with customers and suppliers, promoting
greater trust in customers and generating new services through digital relationships. The
platforms function as an online marketplace that offers the producer inputs, tools, agricultural
machinery, and specialized vehicles. In addition, these platforms allow users to post ads,
advertise their brand and get the statistics of those posts to know their reach. Not only can you
know the number of visits to each publication, but also the geographical origin and impact
according to the category in which they participate. On the other hand, digital technologies
affect consumer preferences and decisions, mainly through their interaction with information.
Technology allows the collection of information, its storage, its analysis and its exchange
before, during and after the consumption of food. The use of this information can improve the
consumer experience according to their preferences, as it makes it easier for intermediaries to
refine their product offerings. This can also have important effects on the mode of production
and its impact on the environment, since a well-informed consumer can express preferences

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for products that minimize the ecological damage of their nutrients (for example, organic,
ecological and minimal footprint products) of carbon stamps and labels, beyond the use cases
of these new technologies at the business level, their development brings with it a
reconfiguration of the entire chain. In the first place, there is a growing participation of
companies linked to the provision of services based on knowledge applied to productive
processes in agriculture. Secondly, there is a growing appearance of specific equipment
(agroparts) intended for precision agriculture (for example, yield monitors). Finally, the greater
relevance of new technologies could lead to a transfer of market power to the companies that
provide this type of solution.
The manufacturing sector plays a significant role in many economies in the region,
particularly in Brazil, Mexico, Argentina, Costa Rica and other Central American countries.
As can be seen in figure III.5, in recent decades the sector has been characterized by low
dynamism, accompanied by stagnant productivity and a drop in the manufacturing sector's
share of employment from 16% in 1980 to 12 % in 2018.
Graph III.5
Latin America and the Caribbean and the United States: productivity of the manufacturing sector, 1980-2018

(Value added per worker in thousands of constant 2010 dollars and percentages)

Relative productivity between Latin America and the Caribbean and the United States
United States: manufacturing sector productivity
Latin America and the Caribbean: percentage of employment in manufacturing
Latin America and the Caribbean: manufacturing sector productivity
Economic Commission for Latin America and the Caribbean (ECLAC).

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 Manufacturing is not only at the centre of the digital revolution, but also has the greatest
potential to catalyse the use of new technologies, generating better jobs and synergies with
other sectors of the economy.
Digital technologies can streamline the supply chain and production, and speed time to
market. In addition, the increasing automation and digitization of the sector can lead to
important reconfigurations in the chain; for example, to the reversal of relocation dynamics
(offshoring) to give rise to processes of near relocation and relocation (nearshoring and
reshoring), as well as a growing transfer of value from production to design, research,
development and innovation, and services.
Some of the main applications of new technologies in the manufacturing sector are
concentrated in the real-time monitoring of orders and supplier logistics, in virtual development
systems, in machine-to-machine (M2M) communication, in the Customer lifecycle monitoring
and management and in the automation of business processes with the support of artificial
intelligence. There are many examples of the use and application of digital technologies in the
manufacturing sector. In the extractive industry, and particularly in the oil industry, for
example, sensors and automatic learning equipment can be applied to regulate and correct the
pumping system in a well to increase production and prevent failures.
The Argentine oil company YPF uses this technology provided by Schneider Electric
(through its EcoStruxure platform) in its extractive processes with which it can optimize the
operation of wells in real time. Augmented reality makes it possible to control factories from
a tablet, with precise and detailed data from all areas of a plant. For example, a crane simulator
fitted with a virtual reality headset can be used to train personnel to operate the controls
accurately. The system produces statistics of the process and determines the percentage of
failures and energy consumption in each sector. One of the providers of this technology in the
region is Schneider Electric with its EcoStruxure platform, specially designed for production
plants.
On the other hand, artificial intelligence and machine learning can contribute to the
reduction of costs in the sales and purchases of inputs by predicting the demand and supply of
goods and services. Other apps are sales oriented; For example, the introduction of virtual
agents improves customer service at a low cost; the increase in profit before interest and taxes
can reach 13%.
Used for both short- and long-distance transportation and logistics tasks, autonomous
navigation devices enable reduction of labour costs and capital expenditures by automating
productive vehicles, such as autonomous heavy machinery in mines and quarries, or

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autonomous trucks for long-distance transport. Data from Argentina indicates that the use of
autonomous trucks would lead to a 45% reduction in logistics costs.
Virtual and augmented reality devices used in product design can reduce production
and maintenance costs through improvements in the design and composition of goods (for
example, with virtual proofing of objects). One application of this technology is the use of
smart glasses for assembly guidance, a detailed and virtual way of guiding the worker through
the assembly, which reduces human errors in the assembly line. Wearing smart glasses is also
a digital solution for equipment repair technicians, as remote assisted repair streamlines the
process.
The Internet of Things provides digital solutions associated with the distribution and
logistics phases with which processes can be optimized and costs reduced. These include the
geolocation of the cargo and the fleet, the optimization of routes, the monitoring of
environmental conditions and the control of the cold chain.
The complementation between these technologies in the stages of a chain allows
progress in the development of smart factories. Brazil has the only two factories in Latin
America and the Caribbean that are part of the World Economic Forum, a global network of
advanced factories that serve as inspirational cases to adopt new technologies. The Groupe
Renault plant in Curitiba has a worker-centric approach, accountability and employee-to-
employee connectivity. In this factory, an interconnection platform has been developed
throughout the value chain that includes suppliers, customers and workers. The results have
allowed it to increase productivity by 18% without large capital investments. MODEC's
(developer and operator of floating oil rigs) offshore facility in Rio de Janeiro uses a
combination of advanced analytics for predictive maintenance, a digital replica of its
processing plant, and a proprietary data platform to accelerate development and scaling
exponential algorithms on floating ships. All of this has enabled it to reduce downtime by 65%.
Commerce is the main generator of employment in the region and one of the sectors
furthest behind in terms of digitization and adoption of digital technologies, which is linked to
its low productivity. Digitization is an opportunity to empower the industry by managing multi-
channel supply chains, automating warehousing and logistics, optimizing store operations,
digital customer acquisition, and transitioning to agile delivery models. with real-time
monitoring. The digital transformation is causing strong changes throughout the entire chain.
The intensification of economies of scope, changes in consumer habits and the growth of
electronic commerce are giving rise to a growing role of digital platforms. It is estimated that
in 2019, 1.92 billion people bought goods and services online and that e-commerce sales

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exceeded $3.5 trillion worldwide. Among the main digital commerce platforms in the region
are Mercado Libre, Amazon, AliExpress, Wish, eBay, Shopify and Tien Danube.
The increasing disruption of the chain makes the barriers between the different links
increasingly blurred and the traditional distinctions between “trade”, “manufacturing” and
“logistics” less and less relevant. In increasingly modular chains, increasing pressures for
disintermediation and reintermediation are seen. While retailers have traditionally been a link
between industry and consumers, manufacturing is increasingly moving towards B2C-to-
consumer models.
In addition, the emergence and expansion of new intermediate players that work between
commerce and consumers is appreciated. For example, in the food chain we can see the
consolidation of home delivery companies, such as Rappi, Glovo, or Uber Eats. The growth of
this type of player is a complement – and a risk – for players in the sector, mainly in terms of
capturing the customer relationship and transferring market power downstream.
Despite the growing pressure for further digitization, physical stores still play a key role,
particularly in terms of interacting with goods and providing a distinctive experience.
However, it is probable that a transformation –at least partial– of the role of physical spaces
will be observed (for example, as a place for recommendations or socialization), as well as a
greater integration between physical and digital experiences (for example, order and pay for a
store product with a cell phone photo). There are multiple applications of new technologies
that can help transform the operation and customer experience. For example, virtual reality and
augmented reality devices provide substantial improvements in customer service and are an
innovative way in which brands can advertise. This technology is used, for example, for the
projection of clothing in stores, which is extremely attractive to customers. In Latin America
and the Caribbean, Muvit developed and implemented motion sensors to create commercial
applications such as 3D changing rooms and avatars and a virtual rehabilitation platform.
Likewise, through artificial intelligence algorithms, prices and promotions can be
optimized according to customer characteristics and increase consumer satisfaction. In Latin
America and the Caribbean, companies like Jampp provide this type of solution, which can
increase billing and sales. The platform helps advertisers promote their apps globally and win
back users who have installed the app but are inactive. One of the benefits of the service is that
it optimizes the purchase of traffic based on the level of activity of the users in the application.
On the other hand, the use of autonomous navigation devices can substantially reduce
the labour costs and capital expenditures associated with the delivery of packages in a nearby

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area, as well as the costs of long-distance transportation, through the use of trucks. autonomous.
For example, Alphabet's, the parent company of Google, has a drone delivery service in
conjunction with FedEx and Walgreens that delivers health and wellness products. This service
makes it possible to improve the speed of product delivery and reduce costs, in addition to
generating efficiency in fuel consumption, since the drones use an electric energy system
(Business Insider, 2020).
In Latin America and the Caribbean, the digital transformation of the sector is still in
its early stages, with a focus mainly on electronic commerce. During the COVID-19 pandemic,
businesses have seen the opportunity that having an online presence represents to reach
consumers, this has remained Demonstrated in the significant increase in the number of
business websites in Brazil, Chile, Colombia and Mexico between March and August 2020
compared to the previous year. During April alone, the web pages of active companies
increased by 800% in Colombia and Mexico, and around 360% in Brazil and Chile compared
to the same month in 2019.
The largest increases in online presence have been recorded on transactional business
sites (active presence) and on e-commerce platform sites. In Brazil and Mexico, the number of
new e-commerce sites grew by more than 450% in April 2020 compared to the same month in
2019. Meanwhile, sites with an active presence in Colombia and Mexico increased in the order
of a 500% during the same period (ECLAC, 2020).
During the pandemic, commerce and delivery platforms gained an unusual role both
for consumers and for those who offer their products and services, since they have been able
to keep their stores running, generate income, and maintain their collaborators or those who
work as delivery drivers. The exponential increase in the use of these platforms, which would
be irreversible, opens up an opportunity for the digitization of the trade chain and raises the
need for countries to strengthen the payment system (which is key to secure and efficient
remote interaction). ), their regulatory and normative frameworks, as well as competition
policies to avoid market concentration and excessive payment for services.
Small businesses and traditional businesses face obstacles to adopting digital
technologies at scale and productively, including a lack of financial resources, adequate
infrastructure and equipment, or digital skills. However, there are other inhibitors of digital
transformation with a relevance that varies significantly depending on the stage of digitization
in which the company is. To promote productive transformation, it is necessary to identify the
obstacles that companies face, as well as the necessary enablers to advance in each stage of

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digitization. Diagram III.3 presents the four main enablers to facilitate productive
transformation:
Knowledge and consideration: The priority consist in recognizing the importance of
digital transformation. In a significant percentage of companies, this recognition does not exist,
particularly about digital adoption at a sufficiently granular and precise level. The companies
that are lagging do not have access to information and knowledge about digital tools and their
benefits, nor about the relevance of their use for their activity. In Argentina, ignorance about
technologies is one of the relevant obstacles to foster greater adoption among less digitized
companies. On the other hand, in Colombia, 12% of companies consider that the lack of
information on available technologies is a major obstacle to innovation, while 41% believe that
it is of medium importance,
Access and adoption: Once the potential of digitization is recognized, companies need
to have the right resources and access to those solutions. This includes financing to be able to
acquire the solutions and access to providers with affordable solutions, as well as a normative
and regulatory framework that facilitates this type of transaction. The lack of resources is the
main obstacle to innovating in Colombia, according to data from DANE (2018) 42.6% of
companies assign a high importance to this factor. Likewise, difficulties in accessing financing
are the second obstacle: 32.1% of companies consider it highly relevant. The lack of access to
financing is also one of the main obstacles to the adoption of digital technologies in the case
of industries in Argentina.
Application and use: access to a solution is not enough to create value. In addition, it is
necessary to have the necessary capacities to apply the technologies appropriately. This implies
having basic equipment, the skills to implement the solution, a minimum set of digitized data
and an organizational culture that allows its adoption and use.
Scale transformation: Despite the fact that many companies have started the path towards
digitalization, very few “digital disruptors” manage to fully capture their potential.
A digital transformation at scale requires a set of internal and external conditions,
typically seen in digital-native companies or incumbents that manage to quickly design and
integrate an appropriate digital strategy.
The great differentiators to reach this point include having state-of-the-art infrastructure
and equipment; talent that allows not only to implement basic tools, but also to design and
adapt solutions to local needs; an agile digital culture that permeates the organization; the
availability of big data; the development of cyber resilience, which makes it possible to

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safeguard information and prevent and mitigate cyber-attacks, and the existence and
identification of a demand that values and promotes this type of innovation.
Diagram III.3
Enabling factors of digital transformation

Economic Commission for Latin America and the Caribbean (ECLAC).

Low educational quality is a brake on the adoption of new technologies. In particular, the
systems to manage the transition to technological change are poorly developed. Despite the
fact that coverage and access to basic, secondary, and technical-professional education have
increased in most countries, there are no positive results in terms of quality. Having educational
systems with connectivity, devices, and teaching skills to develop logical thinking and
problem-solving skills, as well as socio-emotional and collaborative work skills, are key
elements to assimilate and exploit new technologies.
The scores that the region obtains in the classification of the PISA tests in mathematics,
reading and science are lower than the average of the member countries of the OECD. This
should be an element of concern that leads to action. Only a small percentage of young people
finish their studies in the estimated time. Less than 20% of students between the ages of 24 and
35 have completed tertiary or university studies in Argentina and Brazil, in contrast to almost
50% in OECD member countries. On the other hand, most students continue to choose
traditional majors (law, social sciences, or humanities) and few opt for technical or science,
technology, engineering, and math (STEM) majors. Although economies are taking important
steps in their digital transformation, generating value at scale and in an inclusive way is a
pending task. The region's digitization dynamics reflect patterns of marked inequality in terms
of productivity and income. This digital divide has become even more relevant and negative in
the context of the COVID-19 pandemic.

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 The COVID-19 crisis has posed unprecedented challenges for the preservation of health,
economic growth, social well-being, and political stability in the region. In this context,
bridging digital divides and advancing digital transformation is essential for a rapid recovery
and progressive structural change. To support investment and financing for innovation:
• Immediate actions are necessary to increase the incorporation of digital technologies in
production processes and overcome the low levels of investment in innovation.
• Governments must implement fixed capital investment amortization mechanisms to
promote investment in equipment and machinery, and in new technologies and plants.
Beyond immediate needs, promoting access to financing is essential for the adoption of
productive technologies, particularly in MSMEs. Governments should implement programs to
increase the creditworthiness of businesses, for example through collateral support, and
promote new financial solutions. In situations in which correcting market failures requires
greater public leadership, direct interventions should be considered, such as the introduction of
financing lines with affordable rates and promotion regimes focused on the adoption of new
technologies. It is necessary to increase the depth of the venture capital markets (beyond seed
capital) to reduce the gap between traditional venture capital investors, such as SoftBank or
Kaszek Ventures, and accelerators, such as NXTP Labs or Start-Up Chile. Public development
banks must provide risk capital through investments with the private sector, especially with
pension funds. To boost the ecosystem of digital ventures:
• It is necessary to promote the development of programs, digital platforms, and financial
and agricultural technologies (fintech and aggrotech) to strengthen the ecosystem of
technological ventures of all sizes.
• Governments can create an appropriate environment for attracting and developing
investment through push and pull regimes (for example, through tax exemptions) and
through strengthening the capacities of promotional agencies.
• It is convenient to promote the use of digital platforms and strengthen meeting spaces
in the digital ecosystem (such as the Centre for the Fourth Industrial Revolution of
Medellín), as well as promote coordination and cooperation in the ecosystem and
between it and the rest of the economy.
• It is necessary to promote the development of clusters and areas with adequate
regulatory and tax environments and access to infrastructure and skills.
To ensure connectivity and access to digital payments:

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 • The public and private sectors must work together to facilitate the deployment of the
connectivity network and promote its adoption in a sustainable way. One of the
priorities must be to facilitate the deployment and access to 5G networks and services.
• Logistics must be strengthened by increasing the efficiency of customs processes,
solving last-mile delivery problems, and reducing transportation costs.
• Access to digital payments should be universalized and their records used to reduce
uncertainty about creditworthiness, which would mitigate risk for financial institutions,
reduce costs, and facilitate access to credit. Governments must continue to fund digital
tools for transfer mechanisms and drive the growth of transactions and user bases.
Beyond infrastructure, a regulatory framework must be developed that balances the
interests of investors and businesses and protects consumers against fraud and cyber risks. To
help MSMEs:
• A comprehensive approach is required in the design of productive digitization policies
focused on MSMEs. This is related to the consideration of enabling environment,
technology and factors specific to the sector and line of business.
• Active work with business chambers is needed. The dimension of the impact and scope
of these programs will depend on the ability to relate to the productive fabric and
collaboration with business associations.
• It is also necessary to strengthen aspects of monitoring the results of digitization
programs and SMEs. It is critical to have evaluation systems that allow measuring the
result, but that also serve to correct the programs and projects.
• In addition to connectivity, an approach must be implemented that provides clear and
effective information about the benefits of digitization, and that allows MSMEs to learn
about the relevant uses of digital technologies and develop the necessary capacities to
implement them. To create the activities and skills of the future:
• Dealing with disruption in labour markets requires a continuous, granular, and long-
term approach to help workers adapt. Governments should facilitate these transitions
through unemployment insurance programs, incentives for hiring, and support in
mediating between job supply and demand.
• The public sector must work with the private sector (including digital platforms) to
advance in closing the skills gap in activities that demand jobs.
Vocational training programs must pay attention to the demands of companies for
specific skills and aptitudes. Hybrid learning models, which combine traditional teaching with

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in-company training, are effective in reconciling the increased need for learning time with
maintaining the flow of labour income. Digital education services that help identify skill gaps
and design customized programs based on market needs should be strengthened. Online talent
platforms that help individuals connect more effectively with job opportunities and create new,
more flexible ways of working need to be promoted. In addition, they can speed up recruitment
processes and reduce search times through search and selection algorithms.
To adapt regulation in order to create and adopt digital opportunities:
• Competition defence policies have to adapt to changing environments with increasing
concentration and increasingly blurred sectoral boundaries.
• Regulations must be implemented so that digital platforms are more transparent and
accountable about their decisions and their handling of information.
• Attention must be paid to B2B services whose growing role (for example, in the
delivery of food at home) can increase prices in such a way that it makes it difficult for
MSMEs to participate.
Regulation must adapt to changes in employment dynamics. Regulators have to balance
creating job opportunities with protecting the interests of workers. It is necessary to strengthen
the institutional fabric to promote coordination and cooperation between sectors. This requires
creating spaces that promote the generation of shared value between companies, individuals
and the government. These efforts must be complemented with a continuous improvement of
institutional quality focused on boosting productivity and strengthening institutional
cooperation.

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 Chapter IV
Digital future: empowerment and cross-cutting

The pandemic has once again highlighted the importance of the State and its institutions
in protecting the rights of citizens and ensuring basic needs in terms of education, health and
work. Likewise, the Internet and associated technologies have become essential instruments
during the crisis to continue with economic and social activities. In this scenario, digital
policies acquire a renewed urgency and relevance, both to enhance the opportunities that are
presented, and to reduce the adverse effects. In this way, the digital agendas must be at the
centre of the plans and strategies for economic reactivation and recovery.
The current situation is the time for a change in digital policies, moving from information
society policies to development agendas based on digital transformation, that is, it is time to
move towards a new era of agendas digital. The World Summit on the Information Society in
2003 and 2005 called for the adoption of information and communication technologies (ICTs)
as development tools. This prompted the countries to work on the definition of information
society agendas, mainly focused on reducing the digital divide and promoting electronic
government, as well as raising awareness about the possibilities offered by these technologies,
especially in the fields of health and education. The enthusiasm of the first years led to
institutional adjustments for its implementation; however, over time these agendas lost priority
in the debate and in policy actions.
The multipurpose nature of digital technologies means that their effects are transversal
in terms of activities and sectors. In addition, various levels of government have responsibilities
related to these digital technologies and their economic and social effects and the protection of
rights. The regulatory approach is no longer only the responsibility of the sectoral entity
specialized in telecommunications. Regulatory bodies related to data protection, consumer
protection and competition also have responsibilities. Innovation and investment policies in the
digital sphere are essential for productivity and economic growth. For their part, local
governments also develop digital technology projects, and their actions must be articulated
with national policy. Managing this complex network of relationships requires a holistic vision
of digital policy at the national level and its articulation between different actors and levels of
government.
The success of digital agendas depends on institutional and organizational factors,
especially linked to the formulation of intersectoral policies, the establishment of strategic

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priorities, multisectoral coordination, financing, the application of incentives, the adaptation of
regulatory frameworks and legislation, and the application of measurement and monitoring
instruments.
The most widespread characteristics are the creation of intergovernmental coordination
committees or commissions and the establishment of goals and indicators. On the other hand,
public consultations for the design of strategies, the creation of multisectoral coordination
mechanisms and documents that explicitly record the budget in the agendas are less frequent.
Despite the fact that many of the indicated characteristics are mentioned in the digital agendas,
the consolidation of these elements is not clear, or, in many cases, it is recent. For example,
although there are countries with inter-institutional coordination mechanisms for monitoring
digital agendas, in very few cases have they been consolidated. There are also few experiences
of public consultation mechanisms for the design of digital agendas.
The characteristics of the institution with the responsibility of executing the digital agenda
is another determinant of success. In several countries of the region there are specialized
ministries at the sectoral level on information and communication technologies,
telecommunications or science. Thus, a hierarchical level is assigned suitable for the design
and implementation of digital policies.
In other countries, second-level entities or organizations have been created in charge of
leading these strategies, generally linked to the office of the presidency, which also ensures an
important hierarchical level and articulation capacity. On the other hand, there are countries
with collegiate bodies that bring together the institutions linked to that policy or with sectoral
ministries in the areas of economy, commerce, industry or public administration that led the
agenda. Finally, in one case a regulatory body has been established as the authority in charge.
Regarding the thematic content of the digital agendas, the largest number of policy measures
are in the areas of infrastructure, access and broadband, enabling environment (regulatory
reforms), digital government and education. In almost all countries, actions related to the
creation of digital skills, the digitization of small and medium-sized enterprises (SMEs) and
cybersecurity are included. Less frequent are the policies to promote the ICT industry,
coordination with local governments and health. Issues related to gender, local content, the
environment and the development of 5G networks are even less considered. A large part of the
digital technological development initiatives is carried out by local governments in projects on
mobility, security and innovation within the framework of smart city strategies. On the other
hand, there are initiatives led by sectoral ministries in education, health and government. The
regulatory framework is also dispersed and falls on various authorities.

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 4.1. Widespread access

The essential requirement for effective participation in the digital age is high-speed
broadband access under meaningful affordability conditions. To do this, it is necessary to
expand the coverage of fixed broadband and improve the connection speed of mobile
broadband. The costs associated with the connection of households and the necessary devices,
added to the difficulties in financing the digital infrastructure (for example, fiber optic cables)
are obstacles that stand in the way of digital inclusion. For this reason, it is crucial to ensure
the affordability of access and devices. Based on the prices of mobile and fixed broadband
Internet plans, and electronic devices, the annual cost of a basic digital basket that includes
connectivity plans is estimated monthly, a laptop, a smartphone and a tablet (ECLAC, 2020c).
In order to guarantee access to unconnected households, on average, the countries of the region
should make an investment of the order of 1% of GDP, although with great differences between
them.
Demand subsidies could be used to help lower-income households to finance the
contracting of telecommunications services and the basket of access devices. However, the
fundamental thing is to coordinate public-private actions tailored to each country that meet
socioeconomic, geographic, age and gender criteria.
In this area, a regulatory test environment (sandbox) can be implemented in which direct
management by the operators of part of the resources is allowed, who must provide universal
access funds or other funds aimed at massifying telecommunications services. to allocate them
to cover the costs of providing services to lower-income households. The relevant authorization
could be subject to compliance with conditions established by the regulator that encourage
competition among service providers so that they offer better conditions in order to obtain said
authorization. This measure can be complemented with actions aimed at regulatory flexibility.
For example, net neutrality measures could be adopted that encourage the use of education,
health and government services by applying zero fees to access them. Regarding access to
devices, import and sales taxes (for example, value added tax (VAT)) on devices defined by
the regulator can be temporarily reduced, as well as foster public partnerships. -private
partnerships with suppliers and manufacturers to produce the devices regionally at a low cost
and thus improve supply conditions.
The monthly values of the basket range from 0.32% to 7.29% of monthly GDP, with an
average of 1.8% for the countries in the sample. Regarding the financing mechanisms of the
basic digital basket, according to each particular case and given the great variation in costs, a

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part could be covered with universal access funds or through similar mechanisms that exist in
each country. These universalization efforts must be carried out within a framework in which
the Internet is conceived as a public good, with safe and universal access, so that the entire
population can take advantage of its opportunities and benefits. This process must go hand in
hand with the universalization of social protection. Likewise, it is necessary to make visible
the barriers to access by age, by territory, by Indigenous or Afro-descendant population, by
gender and by income in order to address them quickly and efficiently, taking into account their
specificities. Physical accessibility implies paying special attention to groups excluded from
digital technologies, such as the disabled population, affected by the lack of equipment with
resources to facilitate their access or because the majority of this population lives in households
in a situation of poverty (Meresman and Ullman, 2020).
Addressing the challenges of digital inclusion implies considering not only physical
accessibility, but also the development of skills and the guarantee of rights to promote digital
citizenship without leaving anyone behind. With technological change and digitization, the new
forms of citizenship and participation put pressure on public institutions with new power
dynamics that must be taken into account to exercise citizenship and strengthen civic
commitment and democracy. In this area, the countries of the region must define and agree on
standards for the protection of privacy, rights and accessibility, as well as principles of inclusive
design in digital spaces (ECLAC, 2020a).
To advance on these issues, it is essential to implement articulated strategies in the
digital, social and economic spheres in order to develop intersectoral instruments to overcome
barriers and gaps. Thus, in addition to considering digital technologies in social policies,
inclusion goals must be incorporated into digital policies and investment in new technologies.
Within the framework of the seventh ministerial conference on the Information Society in Latin
America and the Caribbean, for example, the creation of a regional fund for the universalization
of ICTs was proposed. This initiative, which will be coordinated with other ongoing initiatives
being carried out by multilateral organizations, is expected to generate resources to develop
infrastructure and universal access projects.

4.2. Digitalization for the productive development

Taking a longer-term perspective, the last 60 years have seen a growing divergence
between the region's productivity and that of the more developed and emerging economies,
which has become particularly accentuated since the 1980s (see graph IV.2). Contrary to what

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happened in the developed countries and the emerging economies of Asia, the countries of the
region have not reaped the benefits of the great waves of technological transformation,
particularly the digital revolution that began in the 1990s and the most recent and still incipient
was 4.0. In contrast to what has happened in the region, high-growth economies have seized
the opportunity to accelerate productivity through large investments and commitments to the
adoption of new technologies. For example, after the second half of the 1960s, the Republic of
Korea experienced rapid growth accompanied by the sectoral transformation of its industry and
the massive incorporation of technology in its productive activities. Similarly, around the
1980s, Taiwan Province of China carried out an ambitious plan to industrialize the economy.
Currently, its technological sector is one of the most competitive worldwide, especially with
regard to the production of electronic components and computers. Thus, the region's
productivity gap with respect to the technological frontier has widened in recent decades,
generating insufficient performance to sustain population growth.

Graph IV.2
Latin America and the Caribbean and selected countries: evolution of productivity, 1950-2019 (Per worker in
thousands of dollars)
The low dynamism of productivity in the region is mainly due to little productive
diversification and the concentration of production in intensive activities in natural resources
(agriculture, fishing, mining and some industrial sectors) which, although they are strongly
exporting sectors, operate with little articulation with the rest of the productive structure and
do not have significant effects in terms of technological spill overs and capacity building.
These marked disparities and structural heterogeneity are also seen in the productivity
gaps between small and large companies, which are substantially greater than those observed
in other countries and regions. The labour productivity of a medium-sized company in Latin

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America is, on average, less than half that of a large company, a figure that drops to 23% in
small companies and only 6% in micro-enterprises. On average, in Latin America the
difference in productivity between microenterprises and large companies is seven times greater
than that registered in the European Union. This productivity gap is linked to the low dynamism
of productivity in the region. The stagnation of productivity is the result of a dual dynamic in
which a strong dynamism of productivity in large and technology-intensive companies
contrasts with a setback or stagnation of this in the vast majority of small companies, which is
often It is related to its lag in the adoption of new technologies (Andrews, Criscuolo and Gal,
2016). The size of the company is a crucial determinant of investment decisions in information
technologies in all branches of activity. And in this sense, the returns to innovation are linked
to the presence of complementary inputs, such as skills and financial resources, which are
typically found in large companies (Tello, 2017).
Productivity growth is the central engine of sustained economic growth. Thus, in the long
term, increasing productivity is the only way to maintain income growth and access to essential
goods and services. Since the first industrial revolution, the introduction of new technologies
has contributed to improving the productivity of companies and the economy as a whole. In a
first approximation, technical progress is the basis of productivity growth. For this reason, the
development and incorporation of new technologies in production processes is essential for
growth.
Profitable adoption of new technologies depends on the capabilities and factor
endowments of firms and countries. The productive structure, the technological intensity in the
industry and the dynamics of the companies are key to exploiting the full potential of digital
technologies. Given the structure and the limited level of technological sophistication of the
productive sector and the business structure in the countries of Latin America and the
Caribbean, for example, it is not enough to promote and facilitate the adoption of technologies.

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 CONCLUSIONS

Strengthening the digital ecosystem requires structural policies that support

technological sophistication, innovation and productivity. Although the impact of digital
technologies on productivity is conditioned by the productive structure and by the structural
characteristics of companies, digital transformation generates significant changes in the
organization of companies and market dynamics.
The disruptive changes in companies and their environment derived from the advances
in digitization have recently accelerated with the COVID-19 pandemic and the increased use
of digital technologies in response to this situation. The adoption of digital technologies has
become even more of a priority to boost productivity and quality employment. There are many
possible impacts of technical change and there is a strong positive correlation between the
technological intensity of the productive structure and the productivity of the economy
(CEPAL, 2018); At the microeconomic level, digital transformation affects productivity and
growth through four mechanisms that improve the efficiency and effectiveness of companies.
Beyond the direct impacts on businesses, digitization produces significant changes in the
competitive dynamics of the value chain and in consumers. New business models are giving
rise to a growing participation of new “digital native” players that bring with them multiple
implications for market dynamics and the economy in general. In some sectors, such as
commerce, there is direct competition between the traditional offer and digital disruption. The
increased prominence of digital channels can lead to the displacement of traditional players
and channels and the need for the latter to adapt, develop their own digital channels and
integrate into other players' digital platforms. In some activities, the level of digital disruption
can reach the point where digitization becomes a matter of survival given the demands of the
"new consumer", such as the intermediation of tourism services, particularly in the context of
the pandemic.
In the era of digital transformation, public and private activities seek to take advantage
of the revolution in efficiency caused by the use and management of large volumes of data,
and thus benefit from the new economies of scope and scale. The new Industry 4.0 technologies
make it possible to trigger changes in the production processes of emerging economies to
achieve gains in productivity and competitiveness that are sustainable over time.

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