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OECD Secretary-General

Harnessing the Digital Transformation to Boost Productivity in Latin America and the Caribbean

 

Remarks by Ángel Gurría

OECD Secretary-General 

25 October 2019 - Bogota, Colombia

(as prepared for delivery)

 

 

 

 

President Duque, Mrs. Barcena, Ministers, Ladies and Gentlemen,


It is an honour to open the Third Ministerial Summit on Productivity, which is entitled “Harnessing the Digital Transformation to Boost Productivity in Latin America and the Caribbean.” This is a joint event of the OECD Latin America and the Caribbean Regional Programme and the OECD Global Forum on Productivity.


I would like to thank the co-organisers of the event: the National Planning Department of Colombia, the European Union and ECLAC. I would also like to thank our Colombian hosts for all their support.

 

Productivity in Latin America

Productivity is a key ingredient for the inclusive and sustainable development of Latin American and Caribbean countries. Productivity emanates from the efficient organisation of our economies: the dynamism of our enterprises, the quality of our education and research systems, investment in innovative technologies, the dissemination of knowledge to stakeholders, and the availability of an adequate transport infrastructure. These patterns are already well established in the upper layers of the region's business sectors and universities, but many companies are still lagging behind and need the means to be more productive.


Labour productivity is around 40% of that of the European Union, whereas it was more than 75% in 1950. As our 2019 Latin American Economic Outlook notes, the region finds itself in a productivity trap due to an export structure concentrated on sectors with low levels of sophistication, such as agriculture. This export structure presents barriers to entry for new companies and does not generate backward linkages in the economy, which makes it difficult for MSMEs, which are abundant in LAC and which are characterised by low levels of formalisation, to connect with international markets.


An integral strategy of inclusive growth supported by social cohesion and entrepreneurship allows for improved productivity.


The good news is that several countries in the region are already taking steps to improve their productivity levels. One approach has been to promote employment and training programmes that complement apprenticeship. Among others, the BÉCATE programmes in Mexico and "Joven" in Chile, Argentina and Colombia combine education, job training and internships. Chile's associative development programme, PROFO, aims to improve the technical, financial and managerial capacities of SMEs.

 

Digital technologies drive productivity

One of the most powerful instruments for increasing productivity, especially inclusive and sustainable productivity, is the digitisation of our economies, the application of digital technologies to production processes.


Latin America and the Caribbean have taken significant steps in this direction. In 2015, for example, 73% of the countries in the region had already developed a digital strategy, including Colombia, Mexico, Brazil and Argentina. Thanks to these initiatives, rapid progress was made in the region's connectivity. In fact, between 2014 and 2017, over 40 million additional people connected to a fixed network and 86 million more went online. Likewise, in 2018, a Digital Agenda for Latin America and the Caribbean (known as eLAC2020) was agreed on, with seven areas of action.


Connectivity in the corporate sector has also expanded rapidly. Even if levels of business connectivity remain low in the LAC region, several countries have reached levels of business connectivity of 70-80%, implying that many companies in the region have managed to expand their reach, and as a consequence, their potential gains.


It is important that to recognise that digital transformation is not a matter for one ministry or agency. It affects every area of policy, every sector of the economy, and all parts of society. This is why a comprehensive agenda is required and why LAC countries need to develop National Digital Strategies that set out a long-term vision to help people, businesses and institutions embrace the digital transformation.

 

Recommendations for promoting digital transformation in LAC

The OECD report “Shaping Digital Transformation in Latin America – Strengthening Productivity, Improving Lives” that we have come to Colombia to present can be of great help. The report builds on the OECD “Going Digital” initiative, and aims to harness digital transformation to increase productivity and equality.


Let me highlight five of its key recommendations.


First
, it is key to further enhance access to broadband networks and reduce the digital divides that persist between LAC countries, and between various regions within each country. Much progress has already been made in this area: at the end of 2017, 62% of the region’s population was online, up from only 50% at the end of 2014. This is an impressive achievement, but much still needs to be done to ensure an inclusive digital transformation. Our work shows that competitive telecom markets with sound regulatory frameworks are crucial to improving productivity. For example, the effects of the 2013 telecom reforms in Mexico on prices and access have been impressive.


Second, for the benefits of new technologies to materialise, they need to spread throughout the economy, beyond large enterprises, digital start-ups and digital-intensive sectors. While it is true that an ever-increasing number of LAC companies now have a website, only a few use more sophisticated digital technologies to improve productivity. And given that large firms typically have much greater uptake of digital technologies than SMEs, it is vital to help the latter to get involved in, and benefit from, digital transformation.


Third, it is necessary to improve the skills and abilities of the population of Latin America and the Caribbean. Many people still lack basic computer skills, and this limits their opportunities. Workers with fewer skills often operate in low productivity and informal jobs, with lower earnings, longer hours, higher insecurity, poorer working conditions and limited access to training. For this reason, governments need to support the development of skills required by people to succeed in the digital economy, notably sound cognitive skills and ICT skills, as well as the ability to continue lifelong learning. This will be key to boosting productivity.


Fourth, fostering healthy business dynamism to enable the growth of digitally-intensive firms is key. This requires reforms in sectors that are being disrupted by the digital transformation; strong policies to facilitate the entry, growth and exit of firms; and innovation-friendly regulation to enable the growth of new businesses. It is also important to focus on competition policies, to ensure that digital transformation does not benefit only the largest companies.


Fifth, the countries in the region need to seize on the new opportunities linked to digital trade and e-commerce, by overcoming traditional trade barriers and adjusting trade policies to new challenges, for example related to data flows, e-payments and interoperability. This also requires strengthening regional integration within LAC.


Ladies and gentlemen,


Digital transformation offers a key opportunity to address the urgent challenge of increasing productivity in an inclusive manner. The OECD is ready to continue working with the countries of Latin America and the Caribbean to design, develop and deliver better digital policies for better lives. Thank you.

 

 

See also:

OECD work on Science and Technology

OECD work with Colombia

 

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