The impact of digitalisation and globalisation in Latin America

Political and social change has been accompanied by the impact of digitalisation and globalisation in Latin America.

Reading time: 5 min

 Eduardo Salido, 

Public Affairs and Policy Manager, Telefónica

The beginning of the millennium implied the definitive economic upturn for Latin America after two decades of losses, once during the debt crises of the ‘80s, and another from the economic turmoil brought on by monetary, fiscal, and other crises during the mid ‘90s. Thanks to the wonderful decade of commodities, unheard of growth rates for the region were achieved between 2002 and 2012, thus recovering part of the time lost in the previous two decades. The adjustment, which follows every expansive period, arrived to the region between 2013 and 2015 coinciding with some noteworthy political realities such as the deaths of Hugo Chávez in Venezuela and Fidel Castro in Cuba, the end of iconic left-wing governments with special ideological and economical influence in the region, like the governments of Lula (Brazil) and Kirchner (Argentina), or the peace process that was initiated in Colombia.


In recent years this process of political and social change has been accompanied by the impact of digitalisation and globalisation in Latin American companies.


Earlier this year, in a lucid article in the newspaper, El País, Enrique García, former President of the CAF Development Bank of Latin America highlighted the importance of rethinking the impact of globalisation not only in the developing world but also in emerging markets. In this sense the global and regional development banks are undertaking a key task when it comes to rethinking their role as providers of public policy in the context an increasingly more global economy and a time of continuous technological disruption in which we now live.

On the 7th September the 20th Edition of the CAF – Development Bank of Latin America – Annual Conference took place in Washington. At this Conference the President of the CAF, Luis Carranza, made an analysis of the economic cycles that Latin America has gone through in recent decades and the public policy decisions that have enabled them to overcome recessions and reduce poverty levels as has never been seen before in the region. According to the vision of the current President of the CAF, it was the political and social agreements that enabled the region to overcome the crisis of the ‘80s and ‘90s. He specifically highlighted the agreements made for the macroeconomic stability of the ‘80s and changes for equality in the decade starting in the year 2000.



The Washington consensus aimed to make the macroeconomic problems of the ‘80s right. Some of the common problems faced by most Latin American economies at the time were: high fiscal deficits, excessive leverage from many economies, high inflation, crises stemming from falling oil prices and economies with little diversity. The effects of the debt crisis (in the ‘80s) and its later by-products (the Mexican Tequila crisis, the Brazilian crisis of ’98, the Argentine Corralito) gave rise to unpleasant social and economic consequences (high unemployment, increasing poverty and inequality, social unrest, etc.) although the macroeconomic stability agreement was arduous, it enabled the macroeconomic variables of the region to be put right. 

In the words of Luis Carranza, it was in fact the social and economic problems that led to the launch of equality agreements and accords against poverty. The end of the ‘90s and the 2000s were marked by public policy whose ultimate goal was to reduce inequalities and provide a better quality of life for Latin Americans.


Thus, we have seen the rapid development of infrastructure (as an element of social cohesion) and in particular in telecommunication structures which have been critical for the regional development since the end of the decade.


Run parallel to the infrastructure policy, social spending programmes have been developed to include economic development in the most disadvantaged sectors. These policies have resulted in a decrease in the rates of inequality from 50 to 24% in a period of 10 years, in most countries in the region. Likewise, an additional phenomenon is also being seen, the emergence of a growing middle class in the region, representing about 35% of the current population compared to 21% which represented this group 15 years ago.

All advances made in the region over the past 15 years are today at a turning point. The fall in the price of raw materials along with a number of factors (among others: US economic policies, growth in Asia and in particular China, opening of trade negotiations with the EU) make this a particularly delicate and significant moment for Latin America. As President Carranza highlighted, the growing middle class is a vulnerable one. 39% of the Latin American population is at risk of falling into poverty and thus the achievements of the past 15 years are now at stake. A new agreement is essential, an agreement to fortify and consolidate these social and economic achievements.


Latin America has the necessary foundations to achieve these economic goals, but a new agreement founded on two fundamental objectives of economic policy will be needed: An agreement for competitiveness and productivity in the region.

Behind both these goals there is an underlying reality that the region can not forget: globalisation. The globalised world requires public policies that take into account these realities. Closing the doors on globalisation (or in other words on commercial and investment exchanges) is not the way to bring progress and prosperity for Latin American citizens. Instead, committing to economic openness (as the group of countries of the Pacific Alliance is considering) and productivity as an essential element to be able to compete in the globalised economy. Initiatives such as digitalizing and connecting the Latin American industry, the commitment to innovation as a competitive element, increasing their presence in the international environment in order to have their say in major transnational agreements which will be signed in the coming years and maintaining the macroeconomic foundation are the pillars for a social agreement that could lead Latin America to be an key player having sway in the global sphere. 



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