ICTs in Latin American and the Caribbean countries:
Stylized facts, programs and policies supporting ICTs
Dialogo Regional sobre la Sociedad de la Información
DIRSI
Juan M. Gallego
Luis H. Gutiérrez
April 2015
http://www.iadb.org
Copyright © Inter-American Development Bank. This work is licensed under a Creative Commons IGO 3.0 Attribution-NonCommercial-ShareAlike (CC BY-NC-SA 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-sa/3.0/igo/legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose in its original or in any derivative form, provided that the derivative work is licensed under the same terms as the original. The IDB is not liable for any errors or omissions contained in derivative works and does not guarantee that such derivative works will not infringe the rights of third parties.
Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB’s name for any purpose other than for attribution, and the use of IDB’s logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.
Note that link provided above includes additional terms and conditions of the license.
The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent.
OPTIONAL: Type address for correspondence
OPTIONAL: Type Authors name and email
ICTs in Latin American and the Caribbean countries:
Stylized facts, programs and policies supporting ICTs
Juan M. Gallego[1] and Luis H. Gutiérrez
Sometimes a difference in degree (in other words, more of the same) becomes a difference in kind (in other words, different than anything else) Brynjolfsson and McAfee, 2014.
Executive summary
Adoption and usage of ICTs have been slow and not widespread in the social and economic tissue of Latin American and the Caribbean -LAC countries. On one side, there exists a digital divide at the society between countries and within each of them. On the other side, there is also a digital gap in ICTs adoption by firms. Large and medium enterprises use and have access to Internet, but small and microenterprises lag way behind. Even more, adoption of advanced ICTs is still low for all firms at these economies. The backwardness in ICTs’ adoption and usage is exacerbated when one adds the fact that a small fraction of the society has high connectivity broadband.
Therefore, the digital ecosystem is still weak and lacks assertiveness, despite that governments at the region have been recently pushing the digital agenda. But, bolder programs are needed. The success of public initiatives is guaranteed if there exists a competitive environment for internet and telecom service providers as well as by a strong participation of the private sector like public-private partnership. In particular, the engagement of large firms is necessary to increase ICT diffusion in SMEs that are part of their production chains. Additionally, good institutional coordination among different government agencies is critical for improving the ICT policies design and implementation.
The relevance of those well designed ICTs policies is strengthened by the empirical and qualitative evidence for Chile, Colombia and Uruguay that indicates a positive impact of ICTs Investment on firm innovation and productivity.
As a part of the digital ecosystem the IT industry plays an important role, but we observe large heterogeneity on LAC region. There are two big players, Brazil and Mexico, with relatively well-developed software and hardware industries oriented to domestic market. On the other side, Costa Rica and Uruguay emerge as IT producers and exporters. In between there are medium sized countries like Argentina, Colombia, Peru and Ecuador looking for positioning well either in their internal markets or in external ones. To increase the performance on the IT industry and complement the ecosystem, in addition to what was said above, public policies on ICT must be accompanied with industrial programs that go beyond well-known horizontal industrial policies.
1. Introduction:
ICTs are present in everyday life of people, firms, governments and all stakeholders of modern societies. The pace of adoption of these technologies conveys challenges and opportunities for all the nations. But it also brings risks and potentially harmful effects in the case of not introducing them timely. Countries face challenges on how to ease the introduction of those technologies in different areas of the day-to-day life, for instance in education, in health activities and in firms’ production processes. However, for those societies behind the digital frontier, the backwardness in ICT access and usage offers opportunities for all the stakeholders. Governments might design more inclusive and ambitious digital agendas. Individuals and households could enhance their capabilities including human capital accumulation and increasing labor productivity. And foreign and national capitals could decisively invest in hardware, software, and human capital capabilities to exploit further the technologies.
Therefore, if the introduction of ICTs is not done timely and inclusively, developing economies, and in particular Latin American and Caribbean countries (LAC henceforth), will keep falling way behind the advanced digital economies. That seems trivial to say but given the astonishing pace of development of what has been called the “second age machine” countries that would not introduce new ICTs will be in frank disadvantages related to innovation, performance, productivity and competitiveness and social and economic development. Nowadays, the pervasive presence of ICTs, the convergence of networks, the development of competing networks, the convergence of broadband and industry creates what some call a digital ecosystem where users are active players, and governments face not only policy and regulatory challenges but also play a critical role of strengthening that ecosystem. Governments in LAC must keep pushing their digital agendas that promote the access and usage of ICTs by all stakeholders and where they also play a driving role.
The rapid and unprecedented rise of information and communication technologies -ICTs- have transformed the existence of the nowadays societies. How have Latin American societies, individuals, households, firms and governments kept up with the dynamic and growing trends of ICTs? How the societies in the region have kept the pace of the digital agendas put in motion in digitally developed nations? In the next paragraphs, we will make a detailed review of main stylized ICT facts of the region and try to offer some responses to those complex questions. In order to proceed, we will first make use of international ICT indexes, and then, present country indicators at both society and firm levels that will allow the reader to see how backward the region can be as a whole compared to South Korea, one of the leading digitized countries in the world, and to ascertain the progress some countries may have had in the last years.
Figure 1 presents the ICT development index for 18 Latin American countries, compared with the index for the top country in the ranking.[2] The LAC region lags well behind the top country for the years 2002 and 2013. However, and bearing in mind that the index could underestimate the actual existing gap given the large importance of the diffusion of basic ICTs, the region has somehow closed the gap to the best world performer. The average ICT indicator at 2002 was close to be one third of the top country’s score and eleven years later it reduced to almost one half of the top scorer country. Also, the ratio between the worst score country in the region to the top world country was almost five times in 2002 but that relation fell to about three times in 2013. In addition, that progression has presented heterogeneity among countries in the region; some have progressed at a more rapid pace than others. For instance Argentina, the top scorer in 2002 got 3.1 while Honduras, the worst country reached only 1.3. That is, an almost 2 and a half ratio. In 2013, Uruguay became the leading country with a score of 6.3 while Nicaragua the laggard one obtained only 3 as score. This is close to just a 2 times ratio. Other facts are that Colombia was one of the countries that showed major progression in the information society; Chile and Uruguay have permanently been in the vanguard countries in the region; and most of the Central American countries, i.e., El Salvador, Guatemala, Honduras and Nicaragua have not been able to keep the pace of the remaining countries in the region[3].
Another broad indicator on how large a society is digitalized is the number of subscribers to fixed broadband per 100 inhabitants.[4] The figure 2 presents the trends of this indicator for LAC countries, South Korea and the average of OECD members at the years, 2001, 2006, and 2013. LAC countries barely had fixed broadband subscribers by 2001 with only Chile (0.43), Argentina (0.25) and Panama (0.25) reported some subscribers. Those figures were so different for digitized economies like South Korea that had almost 17 subscribers per 100 inhabitants and the average of the OECD was only close to 3. By 2006, some countries did push further the deployment of such kind of networks like Chile with a level of 6.2 subscribers per 100 inhabitants. By that year, South Korea increased its number of subscribers up to 30 per 100 people and the OECD average mounted up to 17. By 2013, the subscribers to fixed broadband in South Korea kept increasing to get to 38 and so did the average of the OECD. In Latin America, it is notorious the level reached by Uruguay up to that year. From having only about 3 subscribers per 100 people in 2006 it rocketed to 21 in 2013. Argentina, Chile, México, and Brazil were the only countries that overcame the threshold of 10 subscribers per 100 people.
Having broadband access does not translate automatically to having high broadband connectivity. The graph presented above only tells us about a given number of subscribers of broadband but without giving precise information about what it is understood by broadband[5]. High broadband connectivity is important because “High-speed, affordable broadband connectivity to the Internet is a foundation stone of modern society, offering widely recognized economic and social benefits.” (ITU 2014) Figure 3 gives the reader a better picture of how close or far L.A. countries are from leading countries in terms of high broadband connectivity, like South Korea. It presents the average connection speed.
Clearly, differences in degrees have become differences in kind. On one hand, the average connection in South Korea was about five times faster than the average connection in Uruguay the leading Latin American country on digitalization and about twenty three times faster than the average connection in Bolivia, the most lagged one. On other hand, 81% of connections in South Korea were above 10 Mbps in the third quarter of 2014, while only 7% of connections in Uruguay, the most digital society in L.A. was above that threshold[6]. In a society like South Korea, where individuals, households, firms and the remaining stakeholders enjoy a high broadband connectivity, the opportunities open to them in their daily life, pleasure activities, time employment, educational developments, better personal performance, among others are enhanced and are more numerous than those open to those players in developing countries like LAC.
The previous figures have clearly shown that LAC countries are well behind the developed nations in terms of the broad concept of the information and knowledge society. But how do LAC households fare in terms of access and usage of basic ICTs? This subsection presents the available and (most) updated information regarding some basic ICTs like Internet and computers using the national surveys of household, sources that provide more reliable information of the actual access and usage of ICTs in the society. Table 1 illustrates the stylized facts of Internet access at home, households with computers and mobile or cellular phones for nine LAC countries.
Some interesting facts are worthy to highlight. The first one is that there exists a wide digital gap of household Internet access between and within those countries. The highest percentage of access is found in Chile (65%) and Uruguay (60%). However, in rural areas or in small cities apart from the country capital the percentages happen to be quite low, i.e., 22% in Ecuador and 15% in Brazil. This shows that asserting that Internet is diffused in a country hides wide differences in access. Second, computer use at home is higher, again, in Chile and Uruguay while it is quite low in Ecuador, and in rural areas of Brazil and Colombia. Third, as expected the countries that lead the ITU’s ICT development index did show higher Internet household coverage as well as computer use at home.
Table 2 supplements the information provided in the previous table by presenting data for holding of computers at home and Internet access at home for six countries for the lowest and highest level of income for which data is available. The digital difference between the poorest and the richest does really become a difference in kind, i.e., the more opportunities open to the richest in exploiting the connectivity in all daily life activities compared to the few the poor enjoy. As can be observed, only 22% and 10% of the population in the lowest level of income in Argentina and Brazil could afford to have a computer while 85% and 98% of the richest segments of those countries did have one. Similar divide is found regarding access to Internet at home. In Brazil the 10% of the poorest households had Internet, in Costa Rica the percentage amounted to 20%, and in Uruguay 23% of the poorest families had it.
This brief introduction has provided strong evidence showing that access to two main basic information and communications technologies like computer and Internet at home are not quite spread through the societal tissues of main Latin American countries. If as shown above, the quality of average (high) broadband connectivity across Latin American countries is also relatively low compared to a developed nation like South Korea, the digital backwardness is substantial. This is despite the (more) continuous efforts governments of the region have recently put in motion in the last decade or so through their digital agendas and fiber optic deployment plans.