A systemic approach to digital policies for productive development

Technological innovations, especially advances in AI and robotics, have the potential to reduce required labour, which carries the risk of driving up inequality. Technological progress linked to information and communications technology (ICT) seems to be biased towards labour involving non-routine cognitive tasks, to the detriment of workers with less schooling who perform routine tasks (Autor, Levy and Murnane, 2003). Even in Latin American countries, demand has grown over the past two decades for workers in occupations that require intensive use of cognitive skills. Such positions offer higher pay than jobs that are intensive in manual tasks. The result is polarization of the labour market, considerably fuelling informality and inequity (Apella and Zunino, 2022).

The main challenge in this new environment comes from some countries potentially obtaining substantial gains and others having a lot to lose through worse terms of trade and weaker demand for unskilled labour, and even possibly less demand for natural resources as a result of production savings from using new technologies. Developing countries must therefore set out industrialization strategies that go beyond manufacturing to encompass other sectors, such as agriculture and knowledge-based services. In parallel, countries should engage in reforms of the global governance system that include a global tax regime for the digital age, competition policies that extend beyond national borders, adjustments to intellectual property frameworks and data regulation (Korinek, Schindler and Stiglitz, 2021).

In this context, the countries of Latin America and the Caribbean have significant opportunities but also face complex challenges. The future is digital, and the longer it takes for countries to increase not only access to the new digital economy, but also intelligent and widespread leveraging of its potential, the longer it will take for them benefit from its enormous advantages, including the possibility of escaping the development traps that affect the region: high levels of social inequality, low productivity, institutional weakness and environmental vulnerability (Salazar-Xirinachs, 2021). Faced with this challenging and complex panorama, and in order to remain competitive and avoid deepening structural inequalities, the countries of the region should accelerate their digital transformation with three main goals: (i) achieving universal access to digital technologies, promoting development of improved skills to increase adoption; (ii) fostering innovation and digital transformation of the productive sector; and (iii) promoting public-private cooperation and regional digital cooperation.