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The pandemic impact on e-commerce and digital transformation

Gonzalo Navarro is the executive director of the Latin American Internet Association (ALAI by its Spanish acronym), an international non-profit organization that brings together important stakeholders and web platforms of the Internet industry. In this interview with LACTLD, he shares his view on the impact of the coronavirus pandemic on the region’s digital transformation process.

—What are the main effects of the COVID-19 crisis on e-commerce and the digital transformation processes that were taking place in Latin America?

—Before answering this question, we must keep in mind that it has only been three months since the pandemic has triggered restrictions on the movement of people and lockdowns in some countries in the region. Therefore, it is still very early to give a definitive answer.

At first glance, it can be seen that e-commerce has been growing effectively in the region. However, it is important to consider that this growth has not impacted on all areas nor has it been consistent in all Latin American countries. It is possible to identify certain items that have grown and have had an explosion in terms of sales. For example, medical supplies, food, hardware (computers, tablets, laptops) and delivery services, which have played a central role in preventing infection during the pandemic.

When we talk about digital economy or web platforms, we are talking about the real world transformed into a virtual reality. We should also note that e-commerce operates at an intermediary level. In other words, it acts as an intermediary for the real economy, which may or may not be developing. Therefore, not all sectors of e-commerce have been promoted in the same way.

Also, as I said, it has only been three months. We will have to wait and see if this growth has an impact in the long term.

—To understand the impact of COVID-19, it is important to look at the pre-pandemic scenario: What was the status of the region’s digital transformation processes at the end of 2019 and how has it changed in recent months?

—The COVID-19 crisis has exposed the three major deficiencies or gaps that we had been observing in general terms in the region. Firstly, we see a large connectivity gap. Before the pandemic we were already aware of different studies and indicators that revealed that practically 45% of the population in Latin America has no access to the Internet or has very limited connectivity. This gap has a direct impact on the second gap we identified in digital financial inclusion. There are countries, and I am talking about large countries in the region, where only 18% of the population has access to a credit card or some type of online payment method. Finally, we detect a digital skills gap in the Latin American region.

—So, what opportunities and challenges do the Latin American countries face in advancing the development of e-commerce and the digital transformation of their economies?

—Since the COVID-19 crisis, policy makers have noticed the importance of adopting public policies and regulatory frameworks aimed at promoting the use of web platforms and the expansion of the digital economy. The pandemic has shown us several gaps and has exposed some regulatory failures.

A number of questions related to the regulation of web platforms and e-commerce have emerged. I am thinking, for example, about rules, regulations, international standards (some of them related to privacy issues and the use of personal data), which were once promoted by the countries of the region and were left as if written in stone. When states face the implementation phase, one can see how theory contrasts with practical reality.

We can see how the countries lack the necessary tools to carry out certain actions because they do not have adequate personal data protection or privacy regulations, or because they must apply very obsolete regulations. At the same time, some of the actions that are occurring would theoretically be impeded by existing regulations.

As a result, these countries have crashed into a regulatory wall and have realized that their regulations are not only inconsistent with the needs imposed by the pandemic, but also are not appropriate for the development of the digital economy.

Other issues that should be reviewed are the skills and jobs of the future. Since the crisis was triggered by the pandemic, a large number of people (with Internet access and especially in those countries where lockdowns have been severe, such as Chile, Argentina, Colombia or Mexico) began to work remotely. It will be necessary to study later how productivity rates were modified from this sudden change, we will have to see whether these rates grew. 

The introduction of remote working also forced us to review some regulatory issues. Latin America had regulations that strictly prevented remote working or established important barriers to its implementation. Currently, in view of the need to continue working and due to the circumstances, the reality showed that some countries of the region had not taken the necessary regulatory measures for the adoption of remote working.

—Do you think the current digital transformation processes will allow the countries in the region to face the crisis and boost their economic and social recovery?

—Latin America still has an opportunity. It remains to be seen what are, ultimately, the most important lessons learned from this pandemic, what are the public policies that will really be crucial. Today, we are talking about lockdown, remote working, remote education, but in the coming six months we are going to be talking about economic recovery in some cases, or economic collapse in others. We will have to see how the digital tools serve to support the recovery and to avoid collapses.