Nearshore Americas

The Latin American Economies Desperate for a Digital Awakening

The United Nations estimates that Latin America is headed for its deepest recession in a century. The Covid-19 pandemic is set to cause a more than 9% contraction in GDP this year, with more traditional markets such as commodities and tourism driving the slump.

This is bad news for the entire region. But the effects could be particularly painful in countries such as Bolivia, Haiti, Honduras and Nicaragua, which had the lowest levels of GDP per capita before the pandemic hit.

Mercedes Mateo Diaz, the lead education specialist at the Inter-American Development Bank

Mercedes Mateo Diaz, the lead education specialist at the Inter-American Development Bank, believes the lessons from the pandemic are clear: digital transformation is the only path forward for the region.

“It’s clearer than ever that [Latin America] cannot be economically dependent on commodities,” Mateo Diaz told Nearshore Americas. “We need to innovate to economically survive in a world in which commodities are too economically volatile.”

Editor’s Note: The theme of Digital Awakening is taking on even greater importance as the economic pain of the pandemic is met with the fast-expanding opportunities offered in digital commerce. In our special “The Exchange” coverage, Nearshore Americas offers up two very promising case examples of digital enterprises thriving and performing at a world-class level: The brilliant role of curator played by the Honduras tech organization Hello Iconic and the inspiring case of Haiti’s NouKod, which continues to pick up momentum due in large part to its determined founder. 

Early Promise

The Inter-American Development Bank (IDB) argues that Latin America should pivot towards the supply of digital services as they are not subject to the same scarcity restrictions as natural resources. Mateo Diaz points to several examples of promising initiatives already underway in Latin America’s lowest-income countries.

“In the past 15 years in Bolivia, for example, the software industry has experienced an important growth and the city of Cochabamba has been the center,” Mateo Diaz said.

Fundación Jala, an educational research foundation in Cochabamba is currently working with teachers and students in more than 80 secondary schools to improve mathematics and logical thinking skills. The organization has trained more than 17,500 students in the city.

Bolivia Cochabamba
Cochabamba, Bolivia

JaqueMate (Checkmate) is an innovative project developed by the foundation. The platform is designed to assist students in transitioning to a STEM discipline, with the aim of eventually positioning them in the software industry. So far, more than 1,000 graduates have found tech jobs through the program.

The IDB is also running a coding and digital skills course for young people in Honduras, with the aim of creating opportunities that reduce the need for migration. In Nicaragua, Deloitte is heading an effort to train young people to tackle cybersecurity threats. Meanwhile, in Haiti, the software services startup NouKod is training young people from low-income backgrounds in programming and English.

Inequality of Access

While such initiatives are promising, there are still significant barriers to digital transformation in these countries.

“In Latin America, we have low performing education systems, large youth unemployment and a mismatch in skills,” Mateo Diaz said. “Even if you realize that you need to train more people in STEM and digital skills there are financial constraints. In the current context budgets are strained.”

Diego Angel Urdinola, human development economist for the Education Global Practice at the World Bank

Diego Angel Urdinola, human development economist for the Education Global Practice at the World Bank, agrees these countries are a long way from creating an environment that is conducive to providing IT services at scale.

“I would say that technical universities and institutions in Latin America need to start working together with employers,” Angel Urdinola said.

The economist is an advocate of shorter training courses that respond directly to the needs of employers, rather than traditional three and four-year IT degrees.  However, shorter courses are by no means a universal panacea. The problems facing Latin America’s poorest countries are systematic and structural.

The OECD Program for International Student Assessment (PISA) indicates that only 64% of Latin American households have access to a computer for schoolwork.

“My feeling is the pandemic is going to produce more inequality,” Angel Urdinola said. “The people who have the systems are going to start to use them more and develop skills to use them better.” On the other hand, unaddressed connectivity issues will deepen “inequality between the users and non-users.”

Mateo Diaz argues that Covid-19 is already triggering a learning crisis in the region.

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“We are seeing an increase in inequality of access,” she said. “But we are also starting to see inequality of outcomes. Some estimates talk about the potential of a year’s difference in learning between rich and poor kids.”

On top of the educational obstacles, ecosystems in Bolivia, Haiti, Honduras and Nicaragua also struggle to draw investment because of their smaller populations,

“These countries don’t attract tech companies because they don’t have enough skilled people to work for those companies,” Mateo Diaz said. “However, you don’t get enough skilled people because you don’t have jobs for them.”

Faced with this dilemma, partnerships between public and private entities are essential for attracting interest. Mateo Diaz said the survival of these tech ecosystems depends on “learning coalitions” emerging between different stakeholders, including government agencies, the private sector, educational institutions, telecommunications and broadcasting networks.

“The maturity of those systems in digital terms is very incipient,” Mateo Diaz said. “These countries need to strengthen and engage their ecosystems.”

What does it take achieve great outcomes in Nearshore services? If you would like to share an exciting case study or news story drop me a note — Steve Woodman, Managing Editor


Stephen Woodman

Stephen Woodman is an independent journalist based in the Mexican city of Guadalajara. He has six years’ experience covering business and culture in Latin America. Stephen has been published in numerous international media outlets, including The Financial Times, BBC News and Reuters. To share story ideas, drop him a note here

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