Internet Regulation in Latin America: Will Governments Screw Up a Good Thing?

Every year, January brings an avalanche of reports from leading organizations and analysts that warn us about the risks and trends for the next 12 months. From AT Kearney’s Year-Ahead Predictions, to Fitch Solutions’ Key Themes or the McKinsey’s CEO agenda in 2022, consultant firms are keen to offer their definitive view of key business themes for the year ahead.

This year, Nearshore Americas pays particular attention to the political risk report published by consultancy Eurasia Group, and in particular what they define as a top risk in 2022: ‘the technopolar world and the battle for the digital space’. 

The report makes for interesting reading: “The European Union (EU) will pass new laws in 2022 that put curbs on some big tech business practices. US regulators will advance antitrust cases and start the lengthy and contentious process of writing new rules for digital privacy. China will continue to pressure its tech companies to align with national priorities determined by the state. And governments in India and elsewhere will put restrictions on the kinds of data that can leave their borders,” it reads. 

“Amazon, Apple, Facebook, Google, and Twitter are no longer merely large companies; they have taken control of aspects of society, the economy, and national security that were long the exclusive preserve of the state” —  Ian Bremmer

The battle for regulating the internet and rearranging the rules in which technology service providers operate will be significant. Eurasia Group’s report specifies the most important battlefields being in the US, EU and China, but what will the process of internet regulation look like in Latin America? And how these processes will affect Nearshore technology services? 

“Maybe the main issue when we talk about internet regulation in the [Latin American] region is that legislators see this phenomenon from a political and not a technical perspective,” Lucas Jolías, OS City Latin America Director, told Nearshore Americas recently.

“In a large segment of the political class, there is a profound lack of knowledge about science, technology and innovation. There needs to be greater emphasis in education for the people and organizations engaging in legislative and regulatory actions, particularly when it is increasingly obvious that the modern nation state is in a weak position when it comes to regulating social and economic processes connected to technology. At the same time, we have all the growth of large tech corporations that in many cases are able to compete with governments and impose their view of the world as the law,” he added. 

The governing of the digital space by tech corps is key. Ian Bremmer, President and Founder of Eurasia Group, recently wrote an op-ed for Foreign Affairs Magazine in which he set out the evolution of tech companies as geopolitical players beyond nation states. 

“Big tech can be part of the solution” — Fabro Steibel

“Amazon, Apple, Facebook, Google, and Twitter are no longer merely large companies; they have taken control of aspects of society, the economy, and national security that were long the exclusive preserve of the state. The same goes for Chinese technology companies, such as Alibaba, ByteDance, and Tencent. Nonstate actors are increasingly shaping geopolitics, with technology companies in the lead,” reads his article.

The geopolitical agenda of governments and large tech corporations informs how other businesses and individuals develop. A good example of this is the boom in Nearshore outsourcing of the last few years. Though this has been a multi-factor trend, the reality is that the trade and political tensions between the US and China during the Trump administration incentivized the decision of many companies to relocate physical and digital supply chains away from Asia to countries such as Mexico, Costa Rica, Colombia and Brazil. 

Internet Regulation and Innovation 

For Jolías, Latin America has become an epicenter of innovation in some areas. 

“The region is no longer completely dominated by certain local monopolies or big North American companies. For example, when we talk about financial technology software. We’ve seen many companies emerging in this space and building and exporting this service,” said Jolías. 

However, many analysts consider that after a decade of laissez-faire technological innovation, now many governments in the region are trying to catch up and regulate technological services. 

“Legislation often comes from fear,” he said. “Very few countries have active legislative processes. Most legislations in Latin America are reactionary in essence and respond to political cycles and interests instead of the long-term wellbeing of society.” 

In other countries such as Mexico, innovation has disappeared from the agenda at the top of the political class, explained Elisa Munoz, a Mexico City-based management consultant and IT outsourcing expert.

“With the past administration we saw an attempt to move legislation at the same rhythm that technological developments. Today, the federal government doesn’t seem interested in these processes. The current administration abandoned the innovation issue and it is now basically outsourcing it to the private sector. The private sector should lead in these issues, however there is a role that the government should play and they are not fulfilling that at this point,” she said. 

For Fabro Steibel, Executive Director of Rio de Janeiro’s Society and Technology Institute, regulating technology in Latin America needs to take into account that this is the most unequal region in the world. 

“Big tech can be part of the solution, when you look at the great products and services that these large companies offer is amazing. However, we need to think about regulation for these companies, not because we want to punish them but because we have to think in terms of the development agenda,” said Steibel.

“In our countries, often 20% of the population doesn’t have access to the internet. People don’t have a bank account, or access to running water. We need to take this into account because Big Tech doesn’t have a policy agenda for Brazil, Argentina or Mexico. They have a global plan and then translate it to the local reality,” he added.

Without a coherent and regional legislative effort Latin America risks falling behind on important global trends. The region’s political leaders should understand these larger geopolitical movements as well as new approaches to concepts like sovereignty. 

“Politicians like to talk about state sovereignty but they forget about the sovereignty of an individual or a company to interact in the digital space. Reproaching these issues from a different perspective will serve the region’s development,” concluded Jolías.