Towards a “digital new deal” for Latin America: Regional unity for a stronger recovery

This study is part of the series "Shaping the Future of Multilateralism - Inclusive Pathways to a Just and Crisis-Resilient Global Order" by the Heinrich-Böll-Stiftung's European Union and Washington, DC offices.

Download the study 'Shaping the Future of Multilateralism - Towards a “digital new deal” for Latin America: Regional unity for a stronger recovery' by Renata Avila

In the first half of 2021, Latin America and the Caribbean continued to suffer from the global pandemic declared more than a year earlier. Governments again imposed lockdowns, and hospitals were stretched beyond the breaking point, turning away patients or rationing care for those admitted. Many schools and universities were still teaching remotely, and telework was ubiquitous for those fortunate enough to still have work. Governments were bracing for a slow recovery, with bleak prospects of the kind of economic growth that would be needed to reduce a poverty rate that had climbed to levels not seen in three decades.

Country and sector leaders at the same time have been dealing with convergent crises that are further exacerbated by the pandemic. A social crisis stems from general mistrust in governments across the region that often are tainted by corruption, abuse of power, and actions that erode individual and collective rights. An economic crisis has millions sliding into poverty or even further into extreme poverty. And all of this is unfolding amid the climate crisis already affecting the region, especially the most vulnerable and fragile countries.

One possible overarching solution to all of these dire scenarios has the potential to deliver better social and governmental institutions, cleaner industry, and better job opportunities: digital transformation.

Technology has been portrayed as a savior during the Covid-19 pandemic. Public and private sectors across the region have claimed accelerated signs of progress in digitalization as they develop innovative solutions to address the pandemic. These successes make it almost certain there will be a multi-sectoral push to invest in continuing such digitalization.

Such a process carries risks for the region, especially if driven purely by profit motives, with little regard for the people and communities affected. But judicious action that leverages the region’s creativity and the potential of young innovators who were hands-on in supporting governments during the pandemic can turn a potentially disadvantageous situation into an opportunity for local communities, homegrown companies, and the region’s people as a whole.

A positive agenda matching the needs of the region will require unified, regional mechanisms to nurture policies and projects that target key areas and groups. It will necessitate building of institutional infrastructure for a shared digital future through collaboration, cooperation, and refined strategies. The goal should be to emerge from the pandemic with a clear vision for a more integrated digital public infrastructure.

Ultimately, in order to be sustainable in terms of the ability of the region’s people and institutions to follow through on the promise of a new digitalized era, any such plans must be developed in the most inclusive, consultative process possible. Only then can the results truly produce a constructive, productive digital transformation that serves all the people of Latin America and the Caribbean.

Emerging from the pandemic: regional digital sovereignty or privatization 2.0?

Technology writer and thinker Evgeny Morozov describes most tech-related interventions developed for the Covid-19 crisis across the globe as “digital plasters,” i.e. temporary solutions, which are completely dependent on a handful of private firms. “The feast of solutionism unleashed by Covid-19 reveals the extreme dependence of the existing democracies on the undemocratic exercise of private power by technology platforms.” With only a marginal market share of the global tech economy, Latin America and the Caribbean (LAC) are at an even further disadvantage. Also, unlike the European Union, the region lacks an integrated digital market and most of the countries don’t have national digital-sovereignty strategies, adequate data regulation, or an integrated political vision for tech. As Morozov continues, “Our first order of business should be to chart a postsolutionist path – one that gives the public sovereignty over digital platforms.”

Without a clear strategy, governments are more likely to adopt yet another technological “solution” or invest in yet another app based on novelty rather than on integration and interoperability. And in the case of Covid-19, it was urgency, built upon an established dependence on technology from China and the United States that has most often driven decision-making. Apps and tools were rapidly deployed, not without glitches and disruptions, leaving many people behind who theoretically were to be served, especially in a region with vast populations unable to connect – and afford the costs of remaining connected. That is especially the case in particularly poor parts of LAC such as Central America.

So, the public sector often acquires solutions spontaneously, announces them loudly, and deploys them without adequate consideration for human rights or consumer protections. That was what happened when Guatemala deployed a contact-tracing app during the Covid-19 emergency. It collected users’ exact locations even when the app was closed and retained a shocking 10 years of data in a country that lacks adequate human rights safeguards on any terms and that is one of the many in LAC without a privacy and data protection law.

The effect of technology on society is inescapable. Today, almost every governmental activity in the region is mediated by interactions with technologies and services controlled by increasingly concentrated conglomerates. And the main providers of software and hardware, the United States and China, are engaged in a market confrontation that escalated in 2020 and placed LAC countries in the vulnerable position of divided loyalties and dependencies, further restricting their choices of technology to bridge urgent digital divides. While competition between two tech superpowers might seem on the surface to be advantageous for offering choice to consumers, the United States is undercutting prospects of market competition with an aggressive strategy to coerce other countries, including in Latin American, to join it in banning Chinese technologies, such as 5G, on the grounds of what the U.S. State Department under then-President Donald Trump called the “long-term threat to data privacy, security, human rights and principled collaboration posed to the free world from authoritarian malign actors.” The novel approach was called the Clean Network Initiative, and it essentially consisted of signing on dozens of countries and tech-service providers to ban, on grounds of cybersecurity, technology that didn’t meet specific parameters that certain Chinese tech would not meet. As of publication of this paper, it was uncertain whether the Biden administration would continue such endeavours.

While Europe strives to compete and find a niche in the global digital transformation, Latin America and the Caribbean lags, without significant presence in software or hardware markets or a lead in any tech-related industry. There is some potential in Mexico, as the start-up epicentre and in initiatives like Mercado Libre, the successful e-commerce retailer based in Latin America. It operates in 16 countries and has 3,200 employees, but the industry is still heavily dependent on Silicon Valley dynamics and its basic infrastructure such as their cloud services. In the past two years, different European countries have advanced their digital sovereignty concepts. “Digital sovereignty is—especially in Europe—now often used as a shorthand for an ordered, value-driven, regulated and therefore reasonable and secure digital sphere. It is presumed to resolve the multifaceted problems of individual rights and freedoms, collective and infrastructural security, political and legal enforceability and fair economic competition.”

These digital sovereignty strategies also drive all institutions, funding, and research mechanisms in those countries or blocs towards achieving that vision. That mitigates the risk that they would become heavily reliant on foreign technologies, and strengthens their competitive and comparative advantages through a digital single market. Regulation is a key element of digital sovereignty, as illustrated, for example, by the European Commission’s pending Digital Services Act. As the EC outlines it, “The new rules are proportionate, foster innovation, growth and competitiveness, and facilitate the scaling up of smaller platforms, SMEs and start-ups. The responsibilities of users, platforms, and public authorities are rebalanced according to European values, placing citizens at the centre.” Strategic litigation also plays a role in keeping the area competitive and innovation flourishing, including the antitrust and consumer-protection proceedings taking place now against Big Tech in Europe.

In contrast, LAC governments are behind in developing a collective strategy to gain leverage over the tech sector. The situation is even more desperate in the public sector, as all countries are entirely dependent on a concentrated foreign private sector to digitalize key government functions and even entire social sectors, such as education. This leads to a silent, unaccountable, and rapid privatization of governmental functions such as online learning, remote health care provision, channels to connect with citizens, and even gathering of agricultural data. Across the region, the institutional digital transformation is not strengthening the public sector digital infrastructure and skills inside the institutions, but rather quietly replacing core public functions with privately controlled digital platforms. Tech giants are providing government services, sometimes as donations or at a low cost, effectively taking over entire sectors. For example, Intel computers donated to schools become the prevalent educational technology.

However, the seemingly generous donation also comes with a price: the data of the people using it. With exclusive and private access to key datasets, the tech giants then have a competitive advantage over the local companies. Since the countries in the region fail to consider data a public asset and simply let it fall into the hands of their service providers, they limit their ability to use public data to address the most pressing local issues. Datasets on pollution and inequality, energy consumption, or mobility are crucial to develop policies for more environmental protection and green innovation.

In the pandemic, for example, the digital infrastructure to deal with the crisis was provided mostly by U.S.-based companies, often subsidized with public funds. Projects ranged from Microsoft providing a digital-services platform in partnership with the Inter-American Development Bank (IADB) to Google tracking user mobility and reporting the results to governments to understand behavior patterns, and Facebook opening information channels via WhatsApp for the Secretariat of Central American Integration to educate people about Covid-19.

A worrying trend in the region is the public sector’s rapid digitalization of socialprotection systems, despite a generalized lack of policies, processes, and technologies to protect the vulnerable. These developments create somewhat of a contradiction, considering the aim is to get more of the vulnerable population digitally connected for their benefit. But instead of robust systems facilitating digital inclusion of the many so they can participate effectively in systems that directly affect them, the public sector often relies on technologies designed for other societies, and acquires them through non-transparent, non-participatory processes. One example is the Chilean Ministry of Social Development’s creation of a Childhood Early Alert System to prevent violations of children’s rights by identifying and prioritizing children and teenagers who show risk factors. But the system failed the communities it was intending to assist, because it was designed to fit the needs of a predecessor effort in New Zealand and did not take into account local needs. Both the model and the datasets used to run the system produced numerous false positives.

Another trend across Latin America and the Caribbean is to promote the use of artificial intelligence (AI) to deploy large-scale technology interventions to make government agile and rapidly reduce gaps or improve the delivery of benefits in targeted social programs. But the initiatives are not necessarily rooted in the region. Only a few of those projects are led by local companies and communities. On top of that, the models are often opaque and proprietary. The datasets are poor. Seven countries in the region now at least have AI strategies and policies under discussion or at an early implementation stage: Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, and Peru. But national and regional regulation of AI is still nascent when compared with more robust regulatory frameworks elsewhere, clouding the projects with policy uncertainty.

Public-private partnerships to reduce the digital gap

As the region emerges from the pandemic, both governments and the private sector likely will spend enormous sums to create robust digital infrastructure to support the recovery and LAC’s future. However, the region’s countries run the risk of consolidating their digital dependence on Big Tech, and instead of creating opportunities, delegating their digital future to powerful quasi-monopolies, as the world did during the pandemic.

The region’s governments have given little to no indication of any plans to direct digital infrastructure investment to local companies and public institutions, and competitive procurement processes will probably lead to the Silicon Valley winners taking it all, as local companies cannot compete with the power they concentrate. As loans and investments to alleviate the pandemic originate from China, the International Monetary Fund (IMF), the IADB, the Central American Bank for Economic Integration, and similar entities, the accompanying spending rules should consider the potential effects on the region’s digital future and its lagging capacity to develop local industries providing vital digital infrastructure.

This can only be achieved with procurement guidelines that are designed especially to target small technology companies and locally designed platforms, services, and products, and that require government procurement to grow. Some of these already exist – educational technology is growing in the region, for example. This kind of approach might take longer, and emerging industries might need additional investment and support, but it is a rapid way to develop a market, especially when technology giants such as Google jump in to help with funding for small businesses in trouble.

Policy development needs to focus on the fundamentals

Latin America lacks a uniform approach to regulating key digital areas and enabling a unified digital market. The region is active in cybersecurity, taking fragmented approaches to privacy and data protection, and working on some nationally led efforts for AI. But there are no results at a regional level. Legislation also is fragmented; even trade agreements such as the U.S.-Mexico-Canada Agreement (USMCA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), both of which might create a uniform basis for domestic regulation and standards, contain many variations from one pact to another.

One area where a coordinated regional policy at the intersection of technology and social rights could improve public-sector response is in health. At the simplest level of digital collaboration, data exchange, LAC does not even have a shared agenda and a regulatory framework for mandatory data sharing. In the future, this will be one of the key aspects of regional digital transformation to strengthen health-information systems and interoperability for evidence-based decision-making.

A robust, post-crisis policy to achieve an effective digital transformation will require regional reforms on competition law, taxation, data ownership, consumer protection laws, and labor laws. And even those elements should be preceded by a process to update the current Intellectual Property Rights systems, which is unprepared to deal with upcoming challenges such as AI.

Even before the pandemic, no country in the region had even started to develop a longterm vision for the areas outlined above. A few – Mexico, Chile, Colombia, and Brazil, for example – seem focused on the latest hot thematic trends, such as AI, even though the region is neither a significant competitor nor a leading market in that field. Furthermore, as the pandemic made evident, their populations struggle with basic connectivity and other deep economic disadvantages that leave them utterly unable to seize on the new wave of technologies for social and economic development.

The region has the institutional infrastructure to develop a digital single market. It is the political will that is lacking. The Organization of American States (OAS), for example, once produced somewhat useful model laws, but more recently has largely neglected its role in legal harmonization.

Lack of leadership opens way for digital colonialism

Digital trade, conditioned loans for digital infrastructure, and aid agreements have become the modern vehicle of digital colonialism. I define digital colonialism as the deployment of imperial power over a vast number of people via rules, designs, languages, cultures, and belief systems that serve the interests of dominant powers. In the past, empires expanded their power by controlling critical assets, from trade routes to precious metals. Today, it is not States but technology empires that dominate the world by controlling critical digital infrastructure, data, and the ownership of computational power. By collecting the personal data of citizens on a scale unprecedented in human history, for instance, companies can serve as conduits of misinformation and disinformation campaigns that can alter the flow of global geopolitics and even change the outcome of elections.

In recent years, global trade discussions have increasingly touched on digital issues, such as cross-border data transfers, online privacy, cybersecurity, spam regulation, and net neutrality. At the same time, Big Tech companies have accelerated their collaboration and provision of services to governments, essentially replacing the State in providing critical (digital) infrastructure. It has been an easy process for Big Tech, as the region is one of the least competitive in digital innovation (OECD, 2019) and relies on Asia, North America, and Europe to lead on technological modernization. Funds for research and development or serious public and private investment in infrastructure are insignificant compared with areas of the globe that lead the sector. Efforts towards digitalization are focused on increasing productivity, often for the benefit of foreign owners, rather than focusing on serving the people and on improving the health of the planet.

As noted earlier, political leaders in the region show little ambition to build a coherent, cohesive strategy towards a single digital market. They don’t negotiate digital-trade issues as a block or try to unify digital-rights frameworks across Latin America and the Caribbean. What diplomacy exists in the field is fragmented, heavily influenced by corporate lobbies, and lacking in opportunity for citizen participation and scrutiny.

Some LAC countries have rushed unilaterally to enter major trade agreements with non- LAC players, pacts that include significant digital-regulation terms. If that becomes the model for the region, it will perpetuate fragmentation and will risk excluding smaller economies that, by virtue of their limited capacity, are not equipped to fulfil the terms of such pacts among major players. Two examples are the Digital Economy Partnership Agreement (DEPA) among Chile, New Zealand, and Singapore, which was virtually signed in June 2020, in the middle of the pandemic, and the USMCA, which effectively replaced the North American Free Trade Agreement (NAFTA) in July 2020.

DEPA is a new type of trade agreement that aims to create a framework for the digital economy and is composed of different modules that can be flexibly expanded as the partnership evolves. The accord prohibits requirements to maintain data locally, and it is weak regarding data protection.

The USMCA is the most significant digital trade agreement in recent times and undoubtedly will shape the region, and not necessarily for the good. It sets the bar for rights protections particularly low. According to Brookings Institution’s Joshua P. Meltzer, the USMCA “expands upon the digital trade commitments” in the CPTPP, expressly excluding government procurement from its scope, relaxing digital customs or taxes, and fully liberating cross-border data transfers and the transfer of personal data. The USMCA also forecloses the possibility of member States requiring data localization, except in the case of financial services and only as a last resort. It also limits the possibility of requirements on the transfer of or access to source code. And it establishes a system of consensus-based standards on cybersecurity, with an overly flexible and ambiguous reference to best practices, an approach that appears to be an effort to push signatories to adopt harsh measures against Chinese technology.

Converging crises, converging solutions

For a fair and just digital transformation, LAC countries must identify and exploit their digital potential beyond the current market logic, and structure transformations to make the results compatible and complementary with their commitments under the Paris Agreement and the U.N. Sustainable Development Goals. Only then can LAC countries and their citizens be informed participants in regional and multilateral treaties that will shape their digital future.

The digital and green transformations should go hand in hand in the region to develop the missing positive agenda and a vision for reducing the multiple inequalities across Latin America and the Caribbean. As the Organization for Economic Cooperation and Development (OECD, 2020, OECD Policy Responses to Coronavirus) stated, the pandemic could become an opportunity to lay the foundations of a new social contract, moving towards stronger social protections, a well-defined production strategy, low-carbon development, and financial sustainability.

Leaders of Latin America and the Caribbean must do much more to ensure that funds put towards the pandemic recovery that are intended to bridge digital gaps and transform industries and State institutions for the digital era do not lock the region’s technological future to terms and conditions dictated by China, the EU, the United States, or powerful tech lobbies. The recovery period should be inclusive and flexible to design new, agile institutions for a green, inclusive digital future that also works for middle- and low-income countries. It is a unique opportunity to include society as a whole in all stages of the process.

Integrating a green and inclusive vision of the future in the region’s digital transformation can create the diplomatic advantage for the next wave of aid, trade, and cooperation agreements. Some of the possibilities will imply concessions and data-sharing mechanisms in key areas where the private sector generates the data countries need to shape their climate policies. Similarly, collective dynamics in the region could shape a new approach to data sovereignty, where peasants and indigenous populations generate and benefit from the data and biodata commons, exploring new models of data ownership and management.

The region has a number of groupings of various sizes and configurations that theoretically are aimed at regional integration, but none have shown an interest in or ability to spearhead such a pandemic-spurred digital transformation. The Central American Integration System (SICA) contains no mention of anything related to digital issues. The OAS has not delivered a unified digital vision. Other mechanisms, such as the Bolivarian alliance ALBA, the Union of South American Nations (UNASUR), and the Community of Latin American and Caribbean States (CELAC) have been largely irrelevant during the coronavirus crisis, and are too weak and fragmented to serve as a forum for consensus for the recovery.

For coordinated funding, the entities that will play a critical role are the IMF, the IADB, the Latin American Development Bank, the Economic Commission for Latin America and the Caribbean, the World Bank, the Central American Development Bank, and the New Development Bank established by the BRICS, as well as the U.S. Agency for International Development and Canada’s International Development Research Center. While all the listed entities usually require metrics of efficiency and effectiveness that privilege technologies and solutions shaped in the Global North, LAC countries should press for dialogue to explore other possibilities.

Other policy institutions that will play a role in shaping the pandemic-recovery plan are the OECD, UNESCO, UNICEF, the International Labour Organization (ILO) and the Pan American Health Organization (PAHO). During the crisis, PAHO played a major role in supporting countries in prevention, detection, and response to the pandemic. It might be a trusted entity to lead efforts towards updates and upgrades of the regional health infrastructure, including its digital dimension.

The last set of stakeholders to consider are the cities. In Latin America, cities can be the leaders of change in those countries where the central government is blocking any progress for digital and environmental policies. The Coalition of Cities for Digital Rights, for instance, is an adequate vehicle to advance a progressive data and digital rights agenda.

Citizens need to organize in a united front to ensure that the decisions and investments for economic recovery serve the public interest and the future. For that, coalitions broader than the usual NGOs need to be formed, to define a viable digital future.

Young people, who have mobilized for social and racial justice and inclusion and have demanded an end to the austerity state, are better placed to form a regional coalition to guarantee that investment in digital technologies serves their communities and opens opportunities for their future. It is important to develop an understanding of the systemic importance of digital policies, projects and priorities after the pandemic, their lasting effects, and their crucial importance for the future of the region. Real progress can only be achieved through regional integration and consensus, and by operating as a block and finding allies in Africa and least developed Asian nations to leverage multilateral fora.

For the road ahead, the region has two strategic stops during 2021 where its leaders could propose a different model in a coordinated matter and signal unified regional leadership – that is, if they could overcome their ideological differences:

• The U.N. General Assembly in New York in September. LAC nations could signal renewed and united leadership despite political differences, and a firm desire to innovate from the South, by announcing a vision for a sustainable digital future and a digital single market for the region. Presenting a clear, united vision before such a global assembly could win the broad support needed to secure funds from international mechanisms that could make that vision a reality.
• The 12th World Trade Organization Ministerial Conference in December, online and in Geneva, Switzerland. The unified LAC mission there should be to join with African nations to challenge the current consensus, win a postponement of the imminent negotiations on e-commerce and digital trade, and demand a continuation of the Doha Round before any other issue is introduced. Only with a WTO guarantee that it will seriously consider the needs and demands of developing countries, especially after the pandemic, can a fair deal be reached. Only by transforming trade rules into a more sustainable and adequate regulatory system fitting the needs of all countries can a better future be possible.

Conclusions and recommendations to the LAC region

With Latin America going through a series of political shifts and social crises, triggered by or worsened by the pandemic, there is no clear venue or institution able to lead a positive digital agenda, as countries are barely avoiding democratic, economic, or institutional collapse. While the region needs a broader coalition to seize a unique opportunity in history to achieve a digital transformation that places people and the planet at its core, and develops the needed critical infrastructure, data power, and skills to better serve their citizens and the planet, there is not a single country championing the issues.

While the region needs effort to invest in infrastructure and innovate in policies to achieve a sustainable, inclusive digital transformation of the public and social sectors, there is neither access to funds nor plans to do so. That will only be possible if that broader coalition includes social movements, unions, education advocates, public health organizations, farmers and peasants’ communities, indigenous nations, consumer associations, academia, young entrepreneurs, and regional institutions. But all of them currently are resisting and defending basic social inclusion agendas, rather than imagining a digital future, even on a country basis.

The risk I see now is one of abdication of the future, with the public, private, and social sectors delegating their digitalization to the giants in Silicon Valley and letting them dictate the rules, design the systems, and remove the power of a digital transformation from the hands of representative governments, social movements, and local companies. The price of current inaction will include the region’s traditional knowledge systems and cultural dynamics being subsumed, as outsiders impose their own values via the digital systems of the future.

Instead, the region should take back ownership of and responsibility for technology as a critical social infrastructure that needs to be shaped by and for local communities. Fostering decentralized digital social innovation, while restricting an architecture of oppression, should be the future the region begins to build as it eyes the end of the pandemic. The response of citizens to the pandemic – volunteering creative solutions and fighting for their fundamental rights – has demonstrated that democratizing technologies and enshrining rights in law is the way forward. Rooted in the local, in the decentralized, and in the logic of the digital commons: those are the characteristics of sustainable future architectures in the region.

Governments, municipalities, civil society, academia, and the private sector must begin now to take proactive steps to direct the destiny and conditions of recovery funds related to digitalization, such as procurement rules and targeted funds favoring local companies and ensuring that critical infrastructure is state-owned to avoid exploitation by the private sector. Such steps could increase exponentially the growth of local and regional companies, and avoid the dangerous concentration of technological power in the hands of Big Tech.

The departure point could be a region-wide plan for an inclusive, sustainable small-tech industry, including innovation funds for digitalization that prioritize indigenous nations and indigenous tech industry. The ILO 169 Convention should be activated to conduct proper consultations for indigenous communities both on digitalization plans and the overall post- Covid-19 recovery.

Latin America could lead a refreshed, locally designed digital policy, setting a vision for a regional data commons; auditable algorithms; sustainable, auditable hardware; and free software, while in the process protecting social sectors and workers from platform privatization. The region’s digital transformation also could not happen without parallel coordination for education, health, the future of work, and skills retraining for the future, beyond basic access to devices and broadband. At the same time, regulatory systems must be updated to protect economic, social, labour, and cultural rights in the digital era.

While this sounds ambitious, it is possible, and pandemic recovery mechanisms offer a once-in-a-lifetime chance to unlock the possibilities of building the much desired third way for the digital revolution. To have an impact and to truly develop not only a digital single market but a robust and diverse digital social-innovation platform, the most urgent needs to begin such a journey are leadership, diplomatic renewal, and unity across the region.

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