Digital Transformation in Latin America – the market for European companies

Hicron's Expert View: A closer look at the digital state
Konrad Mazur
Konrad Mazur
Business Transformation Expert
October 14
18 min
Table of Contents

[This article was updated on May 11, 2023]


The development of information technologies and the capacity to analyze large data volumes are the advances that enabled the fourth industrial revolution, in which information is the key business asset and States must ensure its security and proper use.

The importance of information is directly related to the technological capacity to possess and process real-time data on various types of devices, which, in conjunction with today’s large and very low-cost storage capacities, have fostered the emergence of technologies capable of “learning” and improving their results. In the words of Klaus Schwab, executive director of the World Economic Forum (WEF) “The fourth industrial revolution is not defined by any particular set of emerging technologies, but rather by a transition to entirely new systems that are being built on the infrastructure of the [previous] digital revolution”.

As in the previous industrial revolutions, the main beneficiaries are most likely to be those who were able to innovate and adapt to the new scenario with the existing tools in the early stages of the process. In this way, they differentiated themselves from the rest of the market, although the benefits of the advances obtained eventually reached everyone over time.

Digital transformation refers to the implementation of changes in existing processes, to make them more efficient by improving decision-making based on the large volumes of relevant data that the newly available technologies make it feasible to manage. In other words, the cultural and organizational change that technology enables is more important than the technology itself.

In this context, COVID-19 is making it even more necessary to monitor these trends, owing to the restrictions imposed by countries the world over to prevent its spread. This has had major repercussions on all processes and chains worldwide (World Bank, 2020). Given the urgent requirements and needs associated with overcoming the crisis and maintaining existing processes, a series of basic guidelines appeared for the new processes that have been defined. These include maximizing the execution of automated processes, remote execution capacity for processes that cannot be automated, and the existence of contingency plans coordinated with third parties; and giving processes a resilience capacity that enables them to continue providing services albeit on a reduced scale (Salvador, 2023).

While the COVID-19 pandemic has impacted changes in processes, it has also been the major and genuine catalyst of digital transformation and the adoption of innovative technologies and processes that were in a pre-adoption trial phase in the pre-pandemic period, or where the courage to make the change was simply lacking.

In this connection, the measures implemented during the first phase of the pandemic have shown that many of the technologies deployed in response to the contingency are mature enough to drive the definitive changes required by the newly formed scenario.

One of the positive results that this pandemic could leave in its wake is the major push that has been given to paperless trade and contactless technologies, thus promoting a paradigm shift in the way different industries work – changes that would be neither possible nor advisable to reverse once the pandemic is over.

Thus, purchase decision variables such as short and reliable delivery times, total cargo traceability, integrated door-to-door services and costs, will henceforth be a minimum requirement for any international logistics operation. It is also highly likely that requirements related to improving processes and enhancing their resilience capacity will prove permanent.

For this reason, it is essential that the different actors in the regional industries equip themselves to satisfy this new level of service quality which will certainly require process redesign — digitization of some processes and automation of others— in order to improve industries’ decision-making and afford greater visibility and traceability to logistics chains. Moving towards a paperless form of trade logistics will not only reduce the risk of contagion, but also eliminate inefficiencies, reduce costs and transit times, and enhance the transparency and traceability of processes. One must remember that the pandemic was only a catalyst for these and other processes that were sooner or later to occur in the near future.


Governments and the private sector need to shield their digital infrastructure from cyber-attacks if they want to continue in the race for digitally competitive economies. This was a major finding in the 2022 edition of the IMD World Digital Competitiveness Ranking, published today by IMD’s World Competitiveness Center (WCC).

All things being equal, economies that want to develop a solid roadmap for digitalization should invest equal amounts in talent, training and education, scientific concentration and R&D.

The yearly ranking – one of four produced in 2022 by the WCC – has seen Denmark take the lead for the first time since the ranking began six years ago. The Scandinavian country ousted the USA, who had to settle for second place – also for the first time since 2017.

“This ranking describes the importance of national factors in explaining the digital transformation of companies and the adoption of digital practices by citizens. Digital nations result from a combination of digital talent, digital regulation, data governance, digital attitudes and the availability of capital,” says Arturo Bris, Director of the WCC.

A total of 63 global economies were studied in terms of their ability to adopt and explore new digital technologies. This year 54 criteria were measured – a mixture of external hard data and the IMD Executive Opinion Survey – and arranged into three major groups: future readiness, knowledge and technology.

Tackling cybersecurity will encourage the uptake of e-participation resources

Correlations in the data prove that the safety of digital systems and the transparency of digital actors, especially in terms of data usage, are essential if technology is to be diffused among society; a key example is e-governance.

“Government cybersecurity capacity,” and “privacy protection by law” are two new criteria in the WCC’s data set. Both were supplied by the Digital Society Project.

The WCC said it wanted to include them because “globalization, advancements in the digital technologies field and the global pandemic have, together, made economies more interconnected and have shifted even more parts of our business and personal interactions onto the internet, vastly increasing cyber-attacks. Cybersecurity capabilities, both at the company and governmental level, have become of paramount importance.”

Denmark’s triumph is in large part due to its outstanding performance in future readiness: defined by the WCC as “the level of country preparedness to exploit digital transformation”. It performs strongly in business agility (1/63) and in IT integration (1/63), also reaching fifth in its adaptive attitudes.

Denmark remains among the world’s leading economies in digital talent and training and education. And yet, executives’ perceptions about whether or not immigration laws constrain the competitiveness of the country’s private sector were worse than last year.

Elsewhere in the top ten, Sweden remains in third place, and Singapore gains one position, taking fourth. Switzerland moves up to fifth (from sixth).

“Switzerland is on its way to becoming a fully developed digital nation, with satisfactory digital infrastructure and regulation, data governance and digital attitudes. A key success factor for the future though will be the introduction of a digital identity program in the country. The top nations in the ranking, such as Denmark and Singapore, are already marking the way in this sense,” said Bris.

The USA (second) sees drops across the board, with the largest being in the technology factor. Despite the fact it maintained a relatively strong position, there is much room for improvement in terms of the know-how needed to discover, understand and build new technologies (the “knowledge” factor), the ranking found.


Latin American countries are not the leaders of digital transformation, while the best places in the ranking among Latin American and Caribbean countries are held by Chile (123 position) and Colombia (143 position).

To strengthen economic ties and work with the LAC region to achieve sustainable development goals, including digital transformation, at the end of 2022, the EU undertook to reinvigorate relations with the countries of Latin America and the Caribbean (LAC). The benefits of this cooperation lie on both sides: gaining new markets for its digital services (EU countries) and improving the digital transformation state (LAC countries). The success of these aims depends on productive cooperation in combating the COVID-19 pandemic and tackling its socioeconomic effects.

Challenges include differences in approach to the Venezuela crisis and the need for the EU to compete for influence in LAC with China, in particular. However, digital transformation and startup development are one of the driving forces of business relations between the EU and Latin American countries.

The importance of digitization in designing and implementing people-centered public policies and as a path to sustainable development in Latin America and the Caribbean was highlighted today by participants at the opening of the Eighth Ministerial Conference on the Information Society in Latin America and the Caribbean, which is taking place in Montevideo, Uruguay, until Friday, 18 November.

The Conference organized by the Economic Commission for Latin America and the Caribbean (ECLAC) in conjunction with the Government of the Eastern Republic of Uruguay, through the Agency for Electronic Government and Information Society (Agesic), aims to define a set of policy priorities at the regional level to promote digital transformation with a vision of sustainable development, within the framework of the Digital Agenda for Latin America and the Caribbean (eLAC 2024).

The inauguration was attended by Rodrigo Ferrés, Deputy Secretary of the Presidency of the Eastern Republic of Uruguay; José Manuel Salazar-Xirinachs, Executive Secretary of ECLAC; Pablo Ruiz Hiebra, Resident Coordinator of the United Nations in Uruguay, and Hebert Paguas, Executive Director of Agesic.

The Assistant Secretary Rodrigo Ferrés welcomed those present on behalf of the Uruguayan Government, highlighted the role of the State in the design of public policies that have taken into account the needs of the people and underlined the cross-cutting nature of digital technologies and digitization. “The issues that we will discuss at the meeting, especially digitalization, which is advancing more and more and better, are very well thought-out and necessary instruments, but they must be used in the best possible way, taking into account public purposes, the general interest and people’s rights,” he said.

Hebert Paguas of Agesic presented the country’s progress in the different ambits of digitalization and indicated that these experiences will be a contribution to the Digital Agenda for Latin America and the Caribbean eLAC2024, which is being discussed in Montevideo. “We want more agile services for our country and the region, with people at the center,” Paguas stressed, highlighting the need to advance in digital citizenship and digital transformation.

“Talking about the future means talking about information, science, change in work, the fourth industrial revolution. From UN Uruguay we will work with the Government and all sectors of society on the bets that the country must make to make the definitive leap towards development,” said Pablo Ruiz Hiebra, Resident Coordinator of the United Nations in Uruguay.

In a complex global and regional context, in which multiple crises converge, “digitalization is one of the priority areas for the transformation of the development model in Latin America and the Caribbean”, said José Manuel Salazar-Xirinachs, Executive Secretary of ECLAC, who pointed out that “in order to move towards a true process of digital inclusion, a set of actions and policies is required to facilitate the use and adoption of digital technologies in all segments of the population, businesses and government institutions”.

Between 2014 and 2023, the region will experience the lowest growth of the last seven decades (0.8%), lower than that recorded in the so-called lost decade of the 1980s due to the debt crisis, warned ECLAC’s top representative. “We must work both on reducing inequality and on wealth creation, which involves productive development policies and digital transformation policies in a very important way,” said José Manuel Salazar-Xirinachs, calling for the positive effects of digital technologies to be boosted and for the challenges of inequality, privacy, security, competition and data protection to be addressed.

“The Digital Agenda for Latin America and the Caribbean, eLAC, which is 17 years old today, has generated enormous capacities for dialogue and cooperation and its agreements were crucial to consolidate a common vision on the mechanisms needed to enhance the impact of digital technologies on development,” he said.

After the opening session, the ECLAC Executive Secretary presented the document A digital path for sustainable development in Latin America and the Caribbean, which will be discussed by representatives of government, the private sector, the technical community and civil society participating in the regional meeting.

The senior official explained that the COVID-19 pandemic accelerated digitisation in the region and highlighted that the State has been a major driver of digital transformation; however, persistent connectivity gaps condition social inclusion.

In 2021, the average household fixed broadband penetration in Latin America and the Caribbean reached almost 62%, which places the region well below other regions such as North America and Europe, which have penetration levels close to 100% and 90%, respectively.

The differences are also significant in the case of mobile broadband, which has a penetration of 78% of the population in the region, and 105% and close to 150% in the cases of Europe and North America, respectively.

José Manuel Salazar-Xirinachs specified that 1/4 of urban households and 2/3 of rural households have yet to be connected. Unconnected households in the lowest income quintile, he said, are three times more than those in the highest income quintile in the region.

Currently, in the region, half of the young people aged 13-25, 1/3 of children aged 5-12, and 1/4 of adults over 66 are “not connected”.

Industrialized countries put digitalization at the heart of productive development policies, said José Manuel Salazar-Xirinachs, who mentioned five ambits of action that ECLAC will be proposing for sustainable and inclusive digitalization in the region:

  1. generating enabling conditions (which involves expanding service coverage, ensuring effective universal coverage, speeding up the deployment of advanced mobile networks such as 5G and developing digital skills);
  2. developing digital solutions;
  3. driving digital transformation (favoring, for example, entrepreneurship and innovation and fostering the digitization of companies);
  4. establishing digital governance;
  5. strengthening regional cooperation and integration (promoting, among other things, a regional digital market).

The Ministerial Conference panels will address topics such as investment, infrastructure, and connectivity; governance and regulation and regional digital market; innovation, entrepreneurship, and digital transformation; digitization for greater inclusion; competencies and skills for transforming societies; cybersecurity and critical assets; digital trade and SMEs; green transition in a digital world; smart cities; digital government and citizen participation; and cooperation and strategic alliances for new digitization, to name a few.


Since the first wave of digital transformation a few years ago, companies in Chile and Venezuela, and other Latin American countries have adapted to new technologies and trends. Today, though, they’re facing a second wave: now it’s not enough to simply use digital technologies – they must evolve and transform peoples’ experiences. This also means evaluating and modifying their business models.

Despite understanding this need, companies and their leaders often opt for smaller, incremental changes that deliver lower value than assumed. When they learn that digital transformation should include social, cultural and behavioral facets, they feel surprised.

Based on Hicron’s desk research, Latin American countries are having some problems taking one step closer to digital transformation. There are several reasons for this situation:

The high failure rate in digital transformation due to cultural habits

Digital transformations often fail in Latin America. Mostly due to resistance from employees. In fact, only 4% of companies in Venezuela, Argentina and Chile view their transformations as “very successful.”

Citizens in Latin American countries can’t see the benefits of remote work and digitalization because of cultural habits. In the same way, remote work is slowly starting to be displaced by stationary work, especially for those who are vaccinated. Many people could not stay at home because they need to go outside to make their way for life.

The benefits we have come to know from remote work for employees and executives in Latin America are perceived differently, hence companies are calling in employees to the office whose work might be completely remote. This is also reflected in the numbers. The percentage of people who were able to do their work remotely is a minority in the region, reaching 27% in Mexico – one of the highest – and in Colombia it was close to 25%.

Companies have short-sighted vision

Companies are focusing mainly on revenue, not on the holistic view of digital transformation including market, users, competitors and business research. Desk research shows that Latin American companies are more likely to cite revenue growth as the primary motivator of transformation.

Telecommunications investment in the region has been falling in per capita terms since 2010.

Latin America invested USD 43 per inhabitant in 2020, down from USD 46 in 2019. 45% of Latin Americans do not have access to the Internet, more than 285 million people. Around 45 million live in areas without coverage, networks, communications services and other basic infrastructure.

There are also problems with the quality of connectivity. It is difficult to work remotely or connect to a virtual classroom if you do not have the equipment or a stable connection. Also, the Internet of Things requires advanced digital infrastructures that can be deployed massively. This is something currently difficult to imagine in regions like Latin America.

The average number of projects is the lowest in the world due to lack of specialists

For example, the average number of projects undertaken in Chile was 6.08. Compare that to the global average of 7.89 and the U.S. average of 9.21. One reason may be a lack of resources, especially highly skilled digital professionals.

The pandemic did not accelerate the digital transformation as in the other regions

Latin America lost around 47 million jobs, not only due to the pandemic outbreak but also due to the acceleration in the adoption of software and automated tasks.

„Latin America invests four times less in digital infrastructure than OECD countries”

That all results in the biggest recession in 120 years. According to the report of the United Nations Economic Commission for Latin America and the Caribbean (founded in Chile in 1948), the coronavirus pandemic caused a decline of GDP by 6,8 percent in the region. In general, the incomes declined by 89,4 percent in the whole region.

In Caribbean countries, there were lower decreases – approx. 25 percent. The recession results in decreasing investment in all regions except for 5 countries: Bahamas, Barbados, Ecuador, Paraguay and Mexico.


Fortunately, the Latin American startup market is one of the most promising in the world. Especially among developing countries and in terms of innovation and entrepreneurship. Startups have evolved into an ever-growing technology ecosystem, and 2022 sees them on the rise. Despite being an emerging market with its own difficulties, in the second quarter of 2021, Latin American startups raised investments of 7.2 USD billion.

The data comes from a new report issued by the Brazilian intelligence platform Sling Hub. According to the report, the recovery in May was driven by the proptech and fintech sectors, which together took 725 USD million of the funds invested in the region. Fintech has been for long the biggest sector of investment, but e-commerce has made a strong comeback.

In addition to vertical marketplaces in sectors like pet food and groceries, the region has also seen a wave of brand aggregators raising big rounds. Fintech lost its position as a leader in the raised volume, something that had not happened since September 2021.

Heading the list of fintech, this time is a Colombian proptech, Habi, which raised $200 million led by Homebrew and SoftBank Latin America Fund. With this, the startup founded by Brynne McNulty Rojas and Sebastian Noguera also became the first Latin American unicorn proptech based out of Brazil, joining Brazilians Loft and QuintoAndar.


The growth of the startup market in Latin America has been made possible by many factors. On the one hand, Latin America is a big market (approx. 650 million people), which makes the region a huge place for e-commerce development. However, high rates of cell phone usage and hours spent on the Internet have made consumers increasingly demanding. This forces companies to constantly transform, which creates a space for business opportunities in the region.

Areas with great potential for doing business include sectors such as ICT, tourism, mobility, energy, healthcare and agriculture.


Other factors are related to the activities of the public sector. Concerning government support, some countries have tried to make life easier for startups. Countries such as Colombia, Chile and Argentina are enacting new laws to stimulate the creation of startups.

In Peru, there is the initiative “Startup Peru”, which offers programs for innovative ventures that contribute to the country’s development. The Central Bank of Brazil launched PIX, an instant payment system that favors the speed and efficiency of these businesses. The Colombian government has also made it easier for fintech startups to begin operating without complying with all the bureaucratic requirements that a financial services license would imply.

Moreover, agreements between countries have contributed positively to the solid and rapid growth of the startup ecosystem. This may be demonstrated by the Pacific Alliance that unites Mexico, Chile, Colombia and Peru in an initiative that has a big impact on the region’s development. Through different actions, the Alliance seeks to boost the entrepreneurial ecosystem of these countries. It launched specific programs to support start-ups that play a fundamental role in the further creation and commercial rise of other companies.


Digital transformation is supposed to revolutionize traditional industries and is likely to substantially change the social and business patterns we know. Latin America is facing a trend that will determine its economic future in the medium term and will be decisive in integrating into global value chains. But, to complete this integration, Latin American companies need to combat many challenges.

Despite high-level government support for new tech and fintech companies, it seems that it is not sufficiently linked to infrastructure development. The reality indicates that countries with better digital infrastructures will make the most of digital transformation and startup development. Both for the development of related industries and for economic performance and social gains.

An initial diagnosis of the state of digital infrastructures in Latin America indicates that significant progress has been made over the past three decades, but that the digital ecosystem remains unprepared e.g.: to meet the demands of the IoT.

In fact, a recent study by CAF indicates that Latin America invests four times less in digital infrastructure than OECD countries, and this partially explains why its digital economies are lagging.

CAF (Development bank of Latin America) studies show that better regional interconnection infrastructure would reduce the cost of international transit by 38%, which would involve a reduction of up to 8.3% in current broadband rates.

That’s why the institution is starting a Digital Interconnection Hub in Panama that would give the region the opportunity to improve the end-user experience, improve connectivity, reduce costs and have a regional offering that meets the needs of Latin America, Central America and Mexico.

Additionally, CAF is funding the construction of the first underwater cable between Latin America and Asia Pacific, the first digital gateway in the Pacific. This project has also received interest from Argentina, Brazil, Venezuela and Ecuador.

The revolution must be performed also from the corporate perspective. Latin American companies, to become global competitors, must do holistic value shifts that create lasting results. People – not profits, not technology – should be at the very heart of digital transformation and startup development.

Organizations generally don’t create an environment conducive to business transformation where all people (employees, stakeholders and customers) are heading in the same direction. Good UX and Business Strategy create exactly such an environment.

European companies can fuel the growth of companies in Latin America by sharing their experience and expertise. Good practices have been tested and refined. The high competence of European companies can give Latin American countries the opportunity for faster and more stable development.

The winners will be the organizations that engage stakeholders, employees and customers in the very early stages of the product and service development process. With the tested practices, they can solve the right problem from a transformation perspective.

Konrad Mazur
Konrad Mazur
Business Transformation Expert
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