ECLAC Launched Digital Development Observatory to Contribute to Latin America and the Caribbean’s Digital Transformation

The DDO’s first figures reveal major lags in digital technology adoption by the region’s productive sector.

The Economic Commission for Latin America and the Caribbean (ECLAC) unveiled today its Digital Development Observatory (DDO), a new instrument that aims to produce, gather and analyze relevant data and information to identify trends, evaluate progress and support policy formulation and implementation on digital transformation in the region.

The DDO’s website (https://desarrollodigital.cepal.org) contains more than 100 indicators and qualitative information in 12 thematic areas seen as key for countries’ digital transformation, including connectivity and digital inclusion, businesses and productive digital transformation, e-commerce and digital services, digital skills, digital government and artificial intelligence.

“The launch of the Digital Development Observatory marks a significant milestone in ECLAC’s efforts to understand and promote digital transformation in our region. Its goal is clear: to produce indicators and information that would improve the formulation of evidence-based policies in areas of digital transformation in order to drive more productive, inclusive and sustainable development in our countries,” José Manuel Salazar-Xirinachs, the United Nations regional organization’s Executive Secretary, emphasized during the virtual presentation.

According to the Observatory’s data, more than 60% of companies in Latin America and the Caribbean that use the Internet have a passive presence, which means they do not use this tool to make transactions, for example. The situation is even more worrisome in the case of Micro, Small and Medium-sized Enterprises (MSMEs) – which in many countries account for more than 98% of businesses – since 70% of them do not even have an online presence.

But there is not only concern over the gaps in adopting mature technologies such as the Internet in Latin America and the Caribbean, the Commission warns. The scenario is even more alarming upon analyzing emerging digital technologies, such as artificial intelligence (AI). For example, between 2010 and 2021, in terms of private investment, combined investment in AI in all Latin American countries did not surpass 1.7% of the amount invested by the United States, or 5% of China’s total. Similarly, as of September 2023, the region’s AI companies represented less than 3% of all AI companies at a global level (with the United States and Europe representing 37% and 30%, respectively).

This scant use of digital technology in the production framework limits and conditions improvements in the region’s productivity and competitiveness, José Manuel Salazar-Xirinachs stressed. “Stepping up and escalating efforts on digital technological outreach will be key for the region’s future,” stated ECLAC’s highest authority, who thanked the European Union (EU) for its support in building the DDO.

In his opening remarks, Félix Fernández-Shaw, Director for Latin America and the Caribbean at the Directorate-General for International Partnerships (DG INTPA) of the European Commission (EC), described the Observatory “as one more example of all that the EU and Latin America and the Caribbean, and the EC and ECLAC, can do together.” He called for working on a just and inclusive digital transition and for jointly addressing issues such as cybersecurity, artificial intelligence, digital government and permanent monitoring of the state of digital transformation for decision-making purposes.

According to the Observatory’s data, despite progress in recent decades, fixed broadband penetration in the region is at levels below 20% of the population versus the 40% seen in Europe. With regard to connection quality, the region is also below the global average, both for fixed and mobile broadband.

The DDO also indicates that the digital divide by household income level continues to persist. In 2022, Internet penetration in higher-income households was nearly double that of lower-income households in some countries. Furthermore, 77% of urban households in Latin America and the Caribbean have connectivity, whereas that percentage drops to just 38% in rural areas.

The Observatory launched today by ECLAC  also compiles information on national digital agendas, as well as the Digital Agenda for Latin America and the Caribbean (eLAC).

Digital agendas can play a key role in driving the transformations that the region urgently needs, ECLAC says, but in recent years a certain weakening of these instruments has been observed. Although they exist in the majority of countries, they lack concrete roadmaps, operational authorities, budget allotments and mechanisms for evaluation, the DDO reveals.

Digitalization can be a powerful tool for addressing the region’s structural problems along different dimensions, such as education, health, security, justice, institutional weakness and productive transformation, to name a few. But to achieve this, it must be considered a fundamental element in national development agendas and in countries’ and territories’ productive development policies, José Manuel Salazar-Xirinachs concluded.