World Dialogue on Regulation

In the paper “Digital opportunities, equity and poverty in Latin America: What can we learn of the empirical evidence?”, by Simone Cecchini, the author affirms that poverty and inequality represent two enormous challenges for the countries of Latin America. In times in which new information communication technologies (ICTs) are changing deeply the societies of developed countries, it is very important to analyse if the opportunities that these technologies provide can be used in the fight against poverty in Latin America, and also what their impact on inequality might be.

In Latin America there are many examples of projects and programs that take advantage of the potential of the information communication technologies (ICT) to reduce poverty, trying to improve the access of people of low resources to markets, financial services, services of the local governments, training and health. These experiences confirm that poor people do not use fully new technologies opportunities as it was an automatic process.

It must be emphasized the paragraph “Telecommunications: competence and regulatory mechanisms” (Chapter IV – Public Policies) where the author says that encouragement of competition in telecommunications sector, as well as a good regulatory framework, can considerably reduce costs of communication. These factors also improve the access of the weakest economic sectors to ICTs.

One of the most interesting aspects of regulation of telecommunications is related to technological innovation rate in this sector, undoubtedly one of the highest. In such a fast changing scene, the risk of technological obsolescence is very high. Therefore, in some cases enterprises are inhibited to begin certain projects because they are not sure to have enough conditions and time to afford such demanding investments. In other cases, they try to recover their investments obtaining special conditions of favorable operation, as for example exclusiveness guarantees for long term periods.

Nevertheless, high prices are still a problem, because of residence telephone connection costs and, especially, because of internet connection charges, which are still quite high mainly in the poorest countries. Also, because of high cost of entrance in these markets, the market by itself has not been capable of providing adequate level of connectivity to the farest or poorest rural areas. The large telecommunications companies prefer to be focused in urban markets highly populated and they are reluctant to enter smallest rural markets, therefore these they are less profitable and mean losses for the businesses.

Consequently, the identification of limitations of market powers to carry out the extension of the infrastructure of telecommunications is a key to improve the connectivity in poor and rural areas. The gaps that have not been surpassed by private sector can be afforded by public actions; some tools are already being utilized with success in the countries of Latin America. The author does a special mention about the small operators of telecommunications, “microtelcos”, that have managed to extend ICT services to zones which are not interesting for large private companies.

This document shows empirical evidence for the conceptual hypothesis which says that in the countries of Latin America there is a great heterogeneousness in the adoption of the ICT. The process of diffusion of new ICT trends to repeat the typical duality of Latin American economies. The internal “digital gap” of the countries is thus determined by user qualities such as income, educational level, geographical location, gender, age and ethnic group. In the business sector, it is important the size of the companies and if they are in the formal or not formal activities.

Consequently, to take advantage of digital opportunities depends therefore not only of the presence of a low cost infrastructure guaranteed by governments, but also of public policies that keep in mind the problems that poor people have to afford. The author indicates some of these public policies: the information supply and prominent services for low income people and massive actions to make known and to train in ICT's, actions which must take care about the role of the intermediaries, as well as the participation of the local communities in ICT projects and programs.

Governments also should be more focused in building control and evaluation systems of information society through the National Institutes of Statistics (NIS), as a way to have good and reliable information for a good diagnostic about digital gap in the countries of Latin America.

About the author: Simone Cecchini is an economist at the Social Statistics Unit of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), based in Santiago, Chile. Before joining the UN, Mr. Cecchini worked for four years as a research analyst in the World Bank’s Poverty Reduction Department. There, Mr. Cecchini managed the PovertyNet website, the Bank’s gateway to poverty information, and contributed to writing reports on global poverty trends, progress towards the Millennium Development Goals, and empowerment.

This document has been published by the Series Prospective and Statistical Studies in the framework of the activities regulate of the Division of Statistics and Economic Projections of the of the United Nations' Economic Commission for Latin America and the Caribbean (ECLAC). The date of this publication is December 2005.