Latin America’s AI Businesses Represent a Minimal Portion of the World’s Total

Latin America’s artificial intelligence (AI) sector, representing less than 3% of the global total, starkly contrasts with the dominant US and European industries, reflecting more profound regional challenges in embracing digital transformation, according to a recent report by the Economic Commission for Latin America and the Caribbean (ECLAC).

Digital Disparity in Latin America’s AI Landscape

In the rapidly evolving world of technology, Latin America’s position in artificial intelligence (AI) development paints a concerning picture of digital disparity. A recent report by the Economic Commission for Latin America and the Caribbean (ECLAC) has highlighted a stark contrast: the region’s AI companies constitute less than 3% of the global industry, significantly trailing behind the United States and Europe, which boast 37% and 30%, respectively. This digital divide is further exacerbated by the combined investment in AI across Latin America, at most 1.7% of that in the United States or 5% of China’s expenditure.

The historical context of Latin America’s technological landscape offers insight into the current state of digital affairs. The region has long faced structural challenges, including economic volatility, social inequality, and institutional weaknesses, which have hindered its ability to embrace the digital revolution fully. Different from the rapid adoption of digital technologies seen in more developed economies, Latin America’s journey toward digitalization has been slow and uneven, marked by a lack of infrastructure, investment, and policy support.

ECLAC’s report underscores a critical issue: the minimal utilization of digital technologies in the region’s productive sectors significantly limits potential improvements in productivity and competitiveness. José Manuel Salazar-Xirinachs, ECLAC’s executive secretary, emphasized the constraint this places on regional development, pointing out that the digital gap is not merely a technological issue but a comprehensive developmental challenge.

ECLAC’s Digital Development Observatory: A Strategic Response

In response to this pressing need for digital advancement, ECLAC launched the Digital Development Observatory (DDO) with backing from the European Union. This initiative aims to catalyze the region’s digital transformation through the collection and analysis of data across 12 key thematic areas, including connectivity, digital inclusion, e-commerce, and digital government. The DDO represents a strategic effort to compile evidence-based insights to guide policy-making and investment in digital infrastructure and services.

Salazar-Xirinachs highlighted the potential of digitalization as a powerful tool to address the region’s structural problems, from education and health to security and institutional integrity. However, he cautioned that leveraging digital technology for development requires integrating it as a core component of national agendas. This call to action points to a broader need for comprehensive strategies that encompass not just technological adoption but also the creation of an enabling environment for digital innovation.

The challenges are manifold. Despite digital agendas in most countries, ECLAC’s observatory found these plans often need more concrete roadmaps, operational accountability, budget allocations, and evaluation mechanisms. This gap between intention and implementation reflects a systemic issue within the region’s approach to digital transformation, underscoring the need for more robust, actionable strategies.

Moreover, the observatory revealed alarming statistics about the region’s digital presence of micro, small, and medium-sized enterprises (MSMEs). Approximately 70% of MSMEs, constituting more than 98% of the business fabric in many countries, still need an internet presence. This digital exclusion limits their market reach and growth potential and reflects broader disparities in access to digital technologies.

A Call for Intensified Efforts in Digital Transformation

The report also draws attention to the region’s broadband penetration, which remains below 20% of the population, starkly contrasting with Europe’s 40%. This connectivity gap is a fundamental barrier to digital inclusion, affecting economic opportunities and access to information, education, and services.

ECLAC’s findings serve as a clarion call for Latin America to intensify its efforts in digital transformation. The path forward requires a multifaceted approach, encompassing increased investment in digital infrastructure, formulating clear and actionable digital strategies, and fostering an ecosystem that supports innovation and entrepreneurship. It also demands addressing the deep-seated structural issues that have historically impeded the region’s development, from social inequality to institutional weaknesses.

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Latin America stands at a crossroads in its digital journey. As the global economy becomes increasingly dependent on digital technologies and AI, the region’s ability to close the digital divide and harness the potential of digitalization will be critical to its future prosperity and competitiveness. The report by ECLAC sheds light on the current challenges and outlines a roadmap for digital empowerment. It is a call to action for governments, businesses, and society to collaborate to realize the vision of a digitally inclusive and technologically advanced Latin America.