Supply Chain and Transport

The key to boosting economic recovery in Latin America

White freight truck on a concrete road in Ticapampa District, Peru: Digital transformation in transport is key to unlocking economic recovery in Latin America.

Digital transformation in transport is key to unlocking economic recovery in Latin America. Image: Unsplash/Ernesto Leon

Maria Agustina Calatayud
Supply Chain Management & Logistics Transport Sr. Specialist, Inter-American Development Bank
Jiten Vyakarnam
Communities Curator, World Economic Forum LLC
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  • Latin American and the Caribbean (LAC) countries’ experience of widening inequalities as a consequence of climate change, the pandemic and other shocks, could be mitigated by focusing on digital transformation in transport.
  • The transport sector has been instrumental in bringing citizens in the LAC region essential basic and medical supplies and its advancement could lead to progress through markets, hobs, healthcare and education.
  • Tools for digital transformation in transport could be leveraged to achieve further efficiency, quality and income, while reducing harmful emissions from the sector.

Countries in Latin America and the Caribbean (LAC) are facing the most serious socio-economic crisis since World War II, experiencing widening inequality and development gaps due to the COVID-19 pandemic.

Transportation has been key to supplying basic necessities, medical equipment and vaccines through the crisis, making it a potential pillar for post-pandemic recovery as it can provide access to markets, jobs, healthcare and education.

There are still some major obstacles to realizing the potential of the sector. Increasing levels of urban congestion and pollutant emissions, a public transport financial crisis, high logistics costs and risks related to climate or pandemic shock all risk stifling recovery.

Through digital transformation, however, including through the Internet of Things, artificial intelligence, 5G, automation and electrification, the transport sector can:

  • See unprecedented efficiency gains from greater visibility and streamlined and multi-stakeholder processes.
  • Improve overall quality of services, with better predictability, reliability and focus on users’ needs.
  • Reduce harmful emissions through gains in operational efficiency and energy transformation.
  • Diversify its income sources through new services generation, with a projected value of $2 trillion worth of societal benefits.
Digital transformation has the potential to create greater value for society than industry.
Digital transformation has the potential to create greater value for society than industry Image: World Economic Forum, Accenture Analysis

Regional progress

The Inter-American Development Bank, the World Economic Forum, Microsoft and Intel are launching a report entitled "Driving the Digital Transformation of Transportation in Latin America and the Carribean." It will present the first analysis from surveys, interviews and feedback from more than 220 organizations, 96 high-level private and public sector representatives and four working groups within the air, logistics and urban mobility sub-sectors.

Some of its key findings include:

  • Two out of three organizations claim to have a digital transformation strategy. However, half consider themselves lagging or lagging far behind their international peers.
  • The airline industry is leading the transformation in LAC, followed by large logistics companies (especially shipping companies and global freight forwarders) and mobility (technology giants and mass transit system operators).
  • Smaller companies and those less involved in global value chains show a lower degree of progress. This is particularly evident in road freight and urban passenger transport small-to-medium enterprises (SMEs).
  • Public agencies report a significant lag behind the private sector. Nearly 40% do not have a digital transformation strategy, while this figure is 27% for the private sector.
  • Two out of three respondents point to the COVID-19 pandemic as an accelerant for digital transformation, followed by cultural change (51%), senior management leadership (50%) and sector-level changes (45%).
  • The main barriers to digital transformation are resistance to change, lack of senior management prioritization, cost of technology and lack of financial resources and human talent.
Current state of digital transformations worldwide.
Current state of digital transformations worldwide. Image: Consulting.us

Moving forward

Countries from other regions with the highest rate of digital transformation show that it is important to have adequate public policies. These should focus on five key areas:

1. Make digital transformation a priority in sector planning.

In their planning instruments, the leading countries place digital transformation among primary objectives in the sector as a vector for greater efficiency, sustainability and social inclusion. There are digital transformation plans at the subsector level and for the development of digital technologies. A large number of agencies from the public and private sectors, academia and civil society participate in the preparation of these plans. Roadmaps are included to advance implementation.

2. Balance progress with risk mitigation.

They have regulatory and policy instruments that, while stimulating digital transformation in transportation, allow for the mitigation of risks. This includes cybersecurity strategies, data protection and prospective studies, public consultations and regulatory sandboxes.

3. Use a variety of instruments.

Tax and financial incentives are used to facilitate the adoption of new technologies. These have been used to create technology centres for technology testing and knowledge dissemination and training programmes to develop workforce skills required for new technologies.

4. Foster public sector digital transformation in transport.

Progress has been seen in the reengineering and digitization of procedures, promotion of digital culture, data-based decision making and technological management of infrastructure assets and transportation services. To this end, internal digital transformation strategies and specialized teams with budgeted resources are deployed to carry out projects, incorporate technology-related profiles and with considered training for personnel in general.

5. Create alliances.

Countries with good digital transformation records use different mechanisms to form alliances with other public agencies, the private sector and academia, such as:

  • High-level committees.
  • Inter-institutional committees.
  • Ad-hoc groups to work on technical issues.
  • Strengthening of local and sub-sector authorities.
  • Memorandums of understanding and consultative groups with the private sector.
  • Co-financing centres and programmes with leading companies to extend the transformation to the less advanced.

Climate-related and socio-economic threats could continue to undermine LAC’s development. However, if governments leverage the tools for the digital transformation in transport, this can be a catalyst for sustainable and inclusive recovery, underpinned by the novel technologies that characterize the Fourth Industrial Revolution.

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Supply Chain and TransportEconomic Progress
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