One of the traditional indicators for measuring a country's level of development is the quality of its infrastructure. The rationale is clear: having good roads and strategic routes, for example, will offer greater opportunities to trade and export all kinds of products. But also, without adequate electricity grids, it will be impossible to provide stable electricity services to citizens, let alone in remote areas.
This logic highlights the infrastructure gaps that currently exist in Latin America in relation to more advanced economies. It is estimated that, in order to close these gaps, the region will need to invest between 200 and 250 billion annually, which is seven times more than what it currently invests, and which would allow for the construction of roads, ports and airports to promote trade within the region and open up its markets to international trade.
These investments can find in digitisation a new strategic ally to accelerate their impact on socio-economic development. Indeed, the digitisation of infrastructures can be a shortcut to avoid further backwardness, and to accelerate economic recovery after the pandemic.
"Latin America needs to integrate the latest technological developments, such as 5G, big data or interconnection of devices for the Internet of Things, into existing infrastructures and those yet to be built. However, to date, the region has not substantially developed any of these aspects," says Walter Cont, chief executive of CAF's Vice-Presidency of Knowledge.
Among the main impediments to new technologies not being massively integrated in the region, according to a recent CAF report, are the adaptation of regulations to new technological formats and uses. In other words, regulatory schemes still need to be updated to incorporate new technologies.
New technologies establish new roles for existing players in the market or pose a redistribution of activities. For example, Cont argues, in electric power, the benefits of the smart grid could be better exploited with a separation between distribution and trading operations.
In addition to the lack of efficient regulation, there are risks associated with new technologies, such as information security, transparency of Artificial Intelligence systems or data management. In this regard, a key task for states will be to ensure that regulators pay due attention to the security of individual information, cybersecurity and biosecurity issues, as well as the resilience of electricity and transport systems, among others.
The benefits of digitising infrastructures impact both the scope and quality of services. Some concrete opportunities can be found in the electricity and urban transport sectors. In the first case, progress has been made, for example, with the expansion of the electric vehicle fleet or with the development of batteries that allow electricity storage. As advanced metering systems are implemented, grid components are automated and smart devices are incorporated, the traditional electricity grid is being transformed into a smart grid.
In urban transport, digital developments have taken place within a sustainable mobility framework. These include technologies that encourage the use of public transport or walking, greater use of individual or shared transport services, journey optimisation and micro-mobility. Georeferencing and general public transport feeder specification systems also contribute to mass transport planning by local authorities.
These developments bring multiple benefits. For example, in the electricity sector, it improves system reliability, security, savings and efficiency, and has potential for grid asset management, system integration with renewable energy sources, and real-time communication between consumers and businesses. But progress in the region remains very incipient and heterogeneous.
Infrastructure not only has the potential to contribute to economic growth, business competitiveness or the integration of national and regional space, but can also help social inclusion and environmental protection, thus improving the quality of life of present and future generations.
Robert Valls, Senior Communications Executive at CAF.
Visiones del Desarrollo is a section promoted by CAF -development bank of Latin America- that analyses the main development issues in the region. The articles it contains are published simultaneously in the main Latin American media.