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Latin America’s Coming Techlash

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By Robert Muggah

Like the rest of the world, Latin America is attempting to thread the needle of the digital revolution, maximizing the far-reaching economic potential of new technologies while limiting social and political disruptions. With a young, highly connected population, there is ample reason for hope, but plenty could still go wrong.

RIO DE JANEIRO – Latin America is going digital, with all the upsides and downsides that this transformation entails. While foreign and domestic investment in digital infrastructure, cloud computing, and e-services are spurring openness, innovation, and economic development, they are also reinforcing digital divides, distorting politics, and exposing governments, businesses, and citizens to cyber threats.

Across the region, broadband and information and communications technology (ICT) is concentrated in wealthy cities and households, and excessive regulation is stifling competition in telecommunications. Cybercrime is off the charts, yet still a neglected threat. And now, a geopolitical battle between the United States and China over the future of 5G puts Latin America squarely in the cross hairs. How the region’s leaders confront these challenges in the coming years will have generational implications.

VIVA LA REVOLUCIÓN DIGITAL

Latin America’s digital natives have been a force to be reckoned with for some time now. In 2019, more than 450 million of the region’s 626 million residents were online, and a similar number owned a mobile phone, allowing them to engage politically, access digital services, and build businesses. Latin Americans are also among the world’s most avid consumers of social media – especially Facebook, YouTube, and WhatsApp. And they’re not just posting their favorite music videos, but also accessing jobs in the formal and informal economies.

Global investors have taken notice, with SoftBank launching a $5 billion dollar technology fund for Latin America just last year. While the region is far from rivaling powerhouses like China, India, or the US, the tech scene is thriving in cities like Buenos Aires, Bogotá, Mexico City, and Santiago. São Paulo boasts the world’s eighth most developed digital ecosystem, and Brazil is home to more than 10,000 tech startups. Regionwide, at least $2 billion was invested in fintech, tele-medicine, ed-tech, and smart-city startups in 2017. And between 2017 and 2019, Latin America produced more than a dozen unicorns (privately held startups valued at $1 billion or more). Spurred on by public and private incubators, talented developers, and low competitive intensity, more and more tech companies operating in the region are homegrown.

 

Against this backdrop, Latin American leaders are bullish about digitization. Governments in Argentina, Brazil, Chile, Colombia, Costa Rica, and Mexico are investing in startup incubators, funding training programs, and nurturing ICT ecosystems. Colombia, for example, has been issuing cultural-development (“orange”) bonds to fund everything from IT companies to fiber-optic cables.

If deployed with inclusion in mind, new technologies could drive growth and improve productivity in Latin America’s sluggish economies. In the public sector, e-services could radically accelerate the process of registering a new business and expand access to goods and services, especially to the most vulnerable. Automation and digitization in manufacturing could boost productivity and create employment opportunities in the knowledge economy, especially for young people. And new technologies are already helping more entrepreneurs tap into larger markets and tailor products to meet consumer demand. 

If poorly implemented, however, new technologies will deepen digital divides. Latin America is already the world’s most unequal region in terms of wealth, income, health, and education. Despite comparatively high telecommunications penetration rates, far too many people and places still have only limited access to the Internet.

There is a strong correlation between online access and inequality. In Colombia, for example, more than three-quarters of the richest decile of households have Internet access in the home, compared to just 11% of the poorest decile. And in Brazil, less than 29% of students say they have access to the Internet in schools (as compared to 55.9% in OECD countries). As is true everywhere, Latin America’s poorer, older, and more rural populations remain disconnected, owing largely to the persistently high costs of digital services and the limited diffusion of broadband. 

Meanwhile, digital technologies are also amplifying political protests and introducing new forms of electoral manipulation. Mass demonstrations against corruption and inequality migrated from social media to the streets in Brazil in 2013, and in Bolivia, Chile, Colombia, Ecuador, and Mexico in 2019. In some cases, governments have pushed back. In Colombia, the government launched its own social-media campaign to prevent mass mobilization, and then confiscated protesters’ phones. In Ecuador, the authorities blocked access to the servers hosting social-media networks. And in Nicaragua and Venezuela, governments have routinely restricted access to Instagram, Facebook, Twitter, and YouTube.

LAW AND DISORDER

A major obstacle to improving economic and digital inclusion is an over-regulated, uncompetitive telecommunications sector. Latin American countries need more robust and independent institutions, as well as new incentives for broadband providers to expand into rural and lower-income communities. Although regulators in Brazil, Chile, Colombia, and Ecuador have experimented with tax cuts to improve coverage and reduce prices, the biggest hurdle is a lack of physical telecommunications infrastructure. The region needs at least $160 billion in investment by 2025 just to reduce the current digital divide.

Complicating matters further, Latin America is a global hot spot for cybercrime and digital malfeasance. The Inter-American Development Bank estimates that cybercrime cost the region at least $90 billion in 2016 alone. Today, the economic impact is probably significantly higher. While the threat from sophisticated groups and foreign governments remains limited, organized crime, espionage, and hacking are commonplace.


 

Part of the problem is that Latin America has very few national cyber-security strategies; as of 2016, four out of five countries in the region had no comprehensive plan in place. Most countries just started developing “computer emergency response teams” (CERTs) and “computer security incident response teams” (CSIRTs) a few years ago. There is also limited public awareness of the problem, and a disconnect between the public and private sectors about how to respond.

Today, the digital economies of Argentina, Brazil, Chile, Colombia, Ecuador, Panama, and Mexico, for example, are ranked among the world’s most vulnerable to digital incursions. Brazil, in particular, tops the global cybercrime rankings when it comes to bank fraud and financial malware, and exhibits acute vulnerabilities in its critical infrastructure. And in Mexico, online fraud is spiraling out of control, such that an estimated 80% of companies are hit by cyberattacks each year. 

Meanwhile, rights groups are growing concerned that some Latin American governments are infringing on civil liberties in their efforts to tackle online (and offline) crime. Some intelligence and police services have demanded that Internet service providers furnish them with information on suspects (and in some cases political opponents). In Brazil, Facebook and WhatsApp were temporarily suspended on several occasions when they failed to provide data for local criminal investigations. More recently, a Brazilian court fined Facebook $1.6 million for sharing 443,000 users’ data with various political campaigns. And, following the spread of misinformation during the 2018 presidential election, Brazil’s electoral authority created an advisory board to investigate potential abuses online.

More positively, there have been improvements in terms of digital freedoms and data protection. Even before the European Union’s General Data Protection Regulation (GDPR) entered into force in 2018, Latin American governments were taking similar steps of their own. Back in 2013-14, Brazilian legislators, shocked by the former US intelligence contractor Edward Snowden’s revelations, fast-tracked a digital bill of rights called Marco Civil Law of the Internet. The country is now expected to launch a data-protection agency in 2020. And Argentina, Chile, and Mexico have also adopted measures to improve data security and safeguard the privacy of their citizens. 

FIREWALLS AND FIREWORKS

Looking ahead, the race to implement 5G will be a top issue for Latin America, as it is for most of the world. The rollout of these new networks, starting this year, will likely add hundreds of billions of dollars to regional GDP over the next decade. The accelerated speed and scale of mobile coverage that comes with 5G could transform entire national economies, especially the agriculture, services, and manufacturing sectors

As a part of their broader rivalry, the US and China are both aggressively courting countries across the region, with Brazil serving as a vital staging ground. Although Brazilian President Jair Bolsonaro is actively seeking stronger ties with his American counterpart, China is Brazil’s largest trading partner. Huawei, the Chinese 5G giant, has invested massively in Brazil, and recently announced a new $800 million plant in São Paulo, adding toanother one that already employs 2,000 people. Brazil’s repeatedly postponed national 5G auction won’t take place before 2021. But whenever it does, Brazilian officials and their Latin American counterparts will likely go with the most cost-effective option – and right now, that looks like Huawei.

 

Latin America’s techlash is on the horizon. As more evidence emerges about the misuse of social-media platforms to influence elections and polarize electorates, the region’s governments are starting to scrutinize and penalize previously invulnerable giants like Facebook and its subsidiaries. Digital-rights campaigners have been agitating for greater net neutrality and stronger data safeguards. Some governments are scrambling to introduce privacy legislation, as well as measures to fight “computational propaganda.” And public and private actors alike are rushing to comply with the GDPR, and to strengthen cyber defenses.

With the debates over everything from digital divides to 5G growing louder, Latin America is facing a tech reckoning. We can expect more fireworks in the years ahead.