During the Era of Markets, the advent of the World Wide Web and a significant decrease in processing costs spurred a digital revolution. At the era's beginning, digital connectivity was almost non-existent, but by 2019, 67% of the global population owned a mobile phone, and 54% were internet users. In stark contrast to the past, where 99% of data was stored in analog format, the modern era sees nearly all data stored digitally.
This digital momentum could be further accelerated by emerging technologies like applied artificial intelligence. Additionally, shifting geopolitics might impact technological development as nations prioritize strategic autonomy amidst a more fragmented global political landscape.
In Latin America, internet usage saw a significant increase in the 2010s, with around two-thirds of the population going online. Despite this progress, the region lagged behind others. For instance, during the same period, developing economies in East Asia not only caught up with OECD countries in terms of fixed broadband subscriptions but also surpassed the OECD average in mobile subscriptions. In contrast, Latin America's gap with the OECD in both areas widened.
Furthermore, disparities in digital access and usage within the region are notable. While Uruguay's internet usage is nearly on par with the OECD average, El Salvador trails by nearly 40 percentage points. A stark example is Peru, where internet usage among the top income earners is around 75%, compared to just 15% among the lowest earners, a disparity four times larger than the OECD average. This digital divide risks exacerbating inequalities, especially considering the skills gap in the region. Less than half of the population in Latin America possesses the necessary computer skills for basic professional tasks, potentially hindering the productivity of businesses, particularly smaller ones. This underscores the region's urgent need to focus on educational and skill development initiatives.
Latin America has historically been slow to adopt new technologies, with mechanized farming being a prime example. The region's use of tractors is roughly a fifth of that in East and Southeast Asia, despite the technology being available for over two centuries. In the realm of digital technology, Latin America also trailed behind; for instance, by 2019, only 2% of the population had adopted mobile money, significantly lower than the rates in Africa.
However, the pandemic catalyzed a surge in technological uptake, particularly in digital payments and e-commerce. A notable example is Brazil, where over half of its population signed up for the Pix digital payment system in under a year. The region has also seen a rise in innovative startups, with 80% of its "unicorn" startups focusing on fintech and e-commerce. This swift increase in technology adoption is impressive and indicates the potential for rapid scaling of existing technologies, even in areas where more established value chains are present.
Despite this progress, the region's investment in research and development is relatively low, at about 0.6% of its GDP — less than a quarter of the average investment in the OECD and China. Latin America contributes less than 2% of global patent applications, with less than a fifth of these originating from the region itself. The region's ratio of intellectual property imports to exports is one of the highest globally, surpassed only by Africa.
As advanced technologies like AI emerge, there's a risk that Latin America could fall behind again. Predictions indicate that AI's economic impact in Latin America could be three to five times lower than in North America and China. The future of Latin America hinges on its ability to not only integrate existing technologies but also to identify and exploit opportunities to advance technological frontiers.
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