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Digitalization, employment, and eduction: the bases for growth in Latin America

 

During uncertain times it's not always easy to find those opportunities that show us the way towards a better future. Latin America is currently at a crossroads. The recent economic crises (the economic growth forecast for 2017 and 2018 is 1.1% and 1.8% of the GDP, respectively), and social crises present a darker future than what is indicated by the age, educational levels, and economic growth potential of a region built on 500 years of history.

During the closing session of the CLT event held in Cartagena (Colombia), “Challenges for the Digital Development of Latin America”, Trinidad Jiménez, Director of Public Policies Global Strategy at Telefónica, highlighted some of the conditioning factors that make this one of the most potentially prosperous regions in the world.

You can listen the speech of Trinidad Jimenez here from minute 30:

 

 

Mexico, Peru, or Colombia have some of the youngest populations on the planet. The cities in the region are known as true economic, commercial, or innovation centres. Medellín has gone from being a city stigmatized by crime in the ‘80s and ‘90s, to being known for its capabilities for innovation and improvement; with 22 million inhabitants, Sao Paulo is bigger than countries like Holland and Belgium, and according to some studies will be the sixth richest city in the world by 2022.

Another global trend that favours optimism is the economic growth centred in metropolitan areas. Something can already be seen in the USA. where, in 2016, more than half of all the companies created were done so in barely 20 metropolitan areas of the country’s 3,000 counties. I can give you some good news. Approximately 80% of Latin America’s population currently lives in cities, and this number will increase to 90% by 2050.

Therefore, if we're facing a young continent with the economic conditions that indicate a prosperous future, why is the region growing at a measly 1.1% in 2017, and 1.8% in 2018?

The region understood its errors in the macro of the ‘90s, and moved beyond them in the 2000s. With just a few exceptions, the macro policies of today are those that region’s economies need. Focus must therefore be placed on the micro. Education, employment, industry, and digitalization are the four pillars on which the Latin American economy is (or isn't) going to be built in the next few years.

 

 

The educational policies are fundamental for the development of the region and a true lever for change, underscored Trinidad Jimenez in her remarks.

 

The best investment for the future of Latin America is to help all the young people of the region, and especially women, reach their potential. Empowering young people through education and developing their capabilities through digital technologies is a smart way of creating inclusive growth, reducing inequalities, and increasing the productivity of countries.

 

Among other, the following measures were highlighted during the session:

  • Strengthening the educational systems in all their stages, improving the programs so that they can adapt to the needs that the market requires.
  •  Establishing public-private agreements to identify the needs of the educational systems.
  • Adapting the current programs to the needs of the future [many of them are linked to the explosion of the digital economy], promoting capabilities in science, technology, mathematics, and engineering.

 

Latin America cannot afford to allow 6 out of every 10 young people who live in underprivileged home to not study or work. Digital technologies also make it possible for education to reach even those with the most difficulties through access to educational contents.

 

If education is important, employment is no less so. Employment is the activity that requires the greatest dedication of time, and is the activity that most citizens depend on for their incomes. Therefore, the future of employment, so questioned nowadays, is a capital issue for any society.

2 out of every 3 young Latin Americans are not prepared for jobs that require technical or professional competencies, and that have complex management. At the same time, 50% of all formal companies in the region report that they have problems covering their vacancies.

Digitalization is going to make the employment market situation even more complex. The potential to create and destroy jobs that new digital technologies have is unknown. What we do know is that that wave of “creative destruction” is going to generate winners and losers.

That's why we can't forget the opportunity offered by that new wave of digitalization. The development of the Digital Ecosystem in Latin America is key for getting back on the road to growth. The degree of digitalization of the economy and society, and the use of digital technologies, influences the levels of well-being and development, as well as of productivity, competitiveness, and growth (it can mean an annual increase of between 0.3% and 0.8% to the per capita GDP), and also the degree of innovation (a five point increase in the digitalization index can increase the innovation index by 17%). And it also has an important effect in terms of employment: a 10% increase in the digitalization index generates a 0.72% reduction in the unemployment rate. No only does it have an impact on jobs associated to the ICT sector. It also has indirect impacts on other sectors of the economy (especially in commerce, financial services, and health).

There is no doubt that the goals and priorities of the productivity strategy of the region’s governments must include the development of the productive sectors’ digitalization, especially focused at SMEs. Public and private collaboration is fundamental for this.

 

The future of Latin America passes through adapting the educational policies, digital transformation policies, and job policies to the current environment. Digitalization is radically changing companies, industries, markets, and entire economies.

 

The productivity and competitiveness problems that are often mentioned and discussed in Cartagena these days pass through establishing complex reforms that include policies that allow sustainable digitalization; in other words, a digitalization that generates wealth and jobs, that is inclusive, and that allows the development of both the leading economies in terms of knowledge and technology, and those that are still not there.

Digitalization is not just telecommunications networks and services on the network. Next generation networks and ultra broadband are the enablers, the necessary but not sufficient condition for the development of the digital economy. The true social transformation that digitalization is allowing has to do with employment, education, new businesses; ultimately, digital life is life itself.

 

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