SME Policy Index: Latin America and the Caribbean 2024

10. Dimension 8: Digitalisation

Abstract

The digital transformation of SMEs presents substantial opportunities for growth and efficiency. By embracing digitalisation, SMEs can elevate their operations, automate processes, and enhance customer engagement, leading to heightened productivity and competitiveness (OECD, 2021[1]).

While digital strategies are commonplace in the region, the focus on SMEs varies. LAC countries demonstrate substantial policies dedicated to enhancing broadband connectivity for SMEs, showcasing a strong commitment to digital development. Several countries have made noteworthy progress in developing policies targeting broadband connectivity, underscoring their dedication to digital advancement. Furthermore, there is a region-wide commitment to fostering digital skills for SMEs, emphasising inclusivity, collaboration, continuous learning, and the integration of digital skills into broader national strategies for digital transformation.

This chapter assesses the state of selected framework conditions for the digital transformation in LAC countries.

Assessment Framework

The digital transformation of SMEs offers substantial opportunities for growth and efficiency. Through digitalisation, SMEs can enhance operations, automate processes, and improve customer engagement, resulting in heightened productivity and competitiveness. Leveraging technologies like cloud computing, data analytics, and IoT devices allows SMEs to optimise supply chains, reduce costs, and compete effectively with larger enterprises, fostering innovation and improved performance (OECD, 2021[1]). The digitalisation gap between large and small firms contributes significantly to the substantial productivity disparity observed between SMEs and large corporations, a discrepancy that is notably pronounced in Latin American and Caribbean (LAC) countries (OECD/CAF, 2019[2]). The importance of SME digitalisation has become more prominent among policymakers, particularly in the aftermath of the COVID-19 pandemic. This is evident in the decision to include Digitalisation as a dimension in the SME Policy Index (SME PI), showcasing its influence.

This new dimension assesses the state of selected framework conditions for the digital transformation in LAC countries based on the SME PI methodology of the Eastern Partner countries (OECD/EBRD, 2023[3]), looking at i) the overall policy framework (the national digital strategy or equivalent), ii) broadband connectivity and iii) digital skills.

As a result, the assessment framework is composed of the following elements (see Figure 8.1):

• National digital strategy focuses on the existence of a dedicated policy document aimed at expediting digital transformation. This assessment encompasses planned measures, including those tailored for SMEs, as well as considerations for budgeting, defined targets, and monitoring practices. Additionally, it explores the co-ordination mechanisms established among public and private entities/actors for both the design and implementation of the digital transformation policy.

• Broadband connectivity assesses endeavours aimed at expanding access to high-speed Internet for individuals and firms, incorporating dedicated policies. The analysis includes an examination of government investments in infrastructure, incentives targeting households, businesses, and broadband providers, and provisions related to 5G technology. Additionally, emphasis is placed on the effectiveness of data collection and an assessment of digital divides to gauge the overall success of broadband connectivity initiatives.

• Digital skills evaluate policies aimed at fostering digital literacy for citizens of all ages. This examination encompasses the analysis of policy documents, the engagement and co-ordination of relevant stakeholders, and initiatives to integrate digital competence into school curricula. It further investigates the provision of lifelong learning opportunities for the development of digital skills. Special attention is given to the effectiveness of data collection on digital skills levels, monitoring and evaluation practices.

Figure 10.1. Assessment framework - Digitalisation

Analysis

In the Digitalisation policy dimension, the average score among the nine Latin American countries (LA9) is 4.16. Digital strategies are common in the region, although the level of focus on SMEs varies between countries. The analytical framework used to support the digital transformation of SMEs takes into consideration both the enhancing conditions for a digital economy and implementing precise policy instruments to aid SME digitalisation.

Regarding framework conditions, these entail the prerequisites for a successful digital transformation, including broadband connectivity, physical infrastructure, and digital literacy among citizens. Ensuring accessible, affordable, and reliable internet connection is crucial for fostering broader participation in the digital economy and preventing disparities between urban and rural areas, as well as between SMEs and larger enterprises. Digital literacy is equally vital, necessitating the acquisition of digital skills at all life stages through well-designed school curricula and continuous learning opportunities for adult skills development. In addition to these fundamental enablers, SMEs require targeted policy measures to incentivise their digitalisation journey, such as specific business support services, digital financial services, and assistance in harnessing the potential of e-commerce.

Figure 10.2. Weighted scores for Dimension 8: Digitalisation

Note: Scores are on a scale of 1 to 5, with 5 being the highest.

Sub-dimension 1: National Digital Strategy

In numerous countries across the LAC region, the shaping of digital policy is guided by an overarching national digital strategy or digitalisation plan. These plans serve as comprehensive frameworks that integrate the efforts of pertinent entities. Additionally, countries are establishing inter-ministerial councils and committees tasked with overseeing the creation and execution of digitalisation strategies. These bodies play a pivotal role in co-ordinating policies aimed at fostering digitalisation for SMEs. Furthermore, they engage in consultations with diverse stakeholders, both public and private, to gather insights that shape the development of future policies. Occasionally, this overarching strategy incorporates a specific focus on SMEs through an SME Digitalisation Strategy.

Table 10.1. Sub-dimension 8.1 scores: National Digital Strategy

	Argentina	Brazil	Paraguay	Uruguay	Chile	Colombia	Mexico	Peru	Ecuador	LA9	Mercosur	PA
Total score	4.13	4.33	4.80	4.80	4.80	4.80	4.53	4.60	4.33	4.57	4.52	4.68

Note: Scores are on a scale of 1 to 5, with 5 being the highest.

Digitalisation strategies are widespread in the region, but the targeted focus on SMEs is limited

All LA9 countries have implemented a national digitalisation strategy, a crucial element within an effective institutional framework. Across the region, there is a divergence in prioritised areas, such as the Fourth Industrial Revolution in Colombia or digital inclusion in Uruguay. Nevertheless, certain countries' digitalisation strategies lack crucial details essential for effective implementation, including measurable targets, action plans, responsible entities, budgets, and timelines. Strategies also differ in their emphasis on supporting SME digitalisation, highlighting the necessity for a dedicated strategy to enhance competitiveness. Notably, the National Digitalisation Strategies in Chile, Colombia, Paraguay, and Uruguay stand out with scores of 4.80, surpassing the regional average. These comprehensive strategies place significant emphasis on supporting small businesses, streamlining government services, and promoting digital literacy.

Most countries have digitalisation actions, but effective co-ordination mechanisms are crucial for successful implementation

All countries in the region received high implementation scores. This is attributed to many countries providing support services for digitalisation to businesses through dedicated agencies, although there is still a requirement for effective co-ordination mechanisms. Collaboration across ministries is crucial for the successful digital transformation. For instance, Mexico’s NDS, led by the Co-ordination of the National Digital Strategy, or Paraguay’s NDS, guided by the Co-ordination and Interoperability Committee.

There are gaps in the monitoring and evaluation of digitalisation policy at the strategic level for SMEs

Many LA9 countries track the advancement of their digitalisation strategies in relation to their objectives. Nevertheless, notable deficiencies exist in overseeing and assessing digitalisation policies at the strategic level, particularly for SMEs. For instance, a majority of countries lack national indicators to assess the comprehensive effectiveness of SME digitalisation policies. This deficiency renders monitoring and evaluation the least robust among the three elements comprising the sub-dimension of the National Digitalisation Strategy in all LAC countries. Reinforcing processes for monitoring and evaluation is imperative for the triumph of these strategies.

Sub-dimension 2: Broadband connectivity

Access to high-speed broadband and dependable internet connectivity is essential for successful digitalisation. The speed of the connection influences the range of digital technologies that SMEs can employ, requiring faster connections for more advanced technologies. Disparities in internet usage will consequently affect SMEs connecting online and utilising digital tools, thereby influencing the appeal of regional areas.

LAC countries have significant policies to improve broadband connectivity for SMEs. Several countries have made significant strides in developing policies targeting broadband connectivity, showcasing commitment to digital development. Ambitious national plans, such as Argentina's Connectivity Plan and Brazil's National Broadband Plan, demonstrate a collective effort towards universal internet access.

Table 10.2. Sub-dimension 8.2 scores: Broadband connectivity

	Argentina	Brazil	Paraguay	Uruguay	Chile	Colombia	Mexico	Peru	Ecuador	LA9	Mercosur	PA
Total score	4.11	5.00	3.72	4.00	4.33	3.94	4.11	3.44	3.17	3.98	4.21	3.96

Note: Scores are on a scale of 1 to 5, with 5 being the highest.

Across the LAC region, there is a notable progress in broadband connectivity which reflects a positive trajectory towards digital inclusion

Countries such as Argentina, Brazil, Chile, and Mexico all achieved impressive scores in the broadband connection sub-dimension. Broadband initiatives are not solely about technological advancement; they are deeply rooted in fostering social inclusion and economic development. Governments are recognising the importance of ensuring connectivity reaches even the most remote and underserved areas. Initiatives, such as those in Colombia, and Paraguay, demonstrate a commitment to bridging the digital divide by targeting remote and socially disadvantaged areas for improved connectivity. Despite this, in many countries there is a need for SME-centric broadband policies to address the unique needs and challenges of SMEs in the digitalisation process.

Collaboration with stakeholders, including network operators and consumers, underscores a cooperative effort to assess and meet the connectivity requirements of diverse populations within the region

Regular consultations with stakeholders, including network operators, consumers, and regulatory authorities, underline a collaborative approach to understanding and meeting connectivity requirements. Public-private partnerships play a crucial role in establishing and enhancing digital infrastructure, ensuring that both sectors collaborate for the benefit of citizens and businesses. Collaborating with international organisations such as in Brazil, facilitates the exchange of knowledge and adoption of best practices. This international perspective contributes to the adoption of efficient models for digital connectivity.

Sub-dimension 8.3: Digital Skills

Digital skills are critical for SMEs to effectively adopt and utilise digital technologies. However, many SMEs may lack the necessary digital skills among their workforce, which can hinder their ability to fully embrace digitalisation. Implementing targeted policy measures, such as subsidised training programmes, workshops, and online resources, can play a pivotal role in digitally upskilling SMEs and ensuring they have the expertise needed for successful integration of digital tools into their operations.

There is a region-wide commitment to fostering digital skills for SMEs, with an emphasis on inclusivity, collaboration, continuous learning, and the integration of digital skills into broader national strategies for digital transformation.

Table 10.3. Sub-dimension 8.3 scores : Digital Skills

	Argentina	Brazil	Paraguay	Uruguay	Chile	Colombia	Mexico	Peru	Ecuador	LA9	Mercosur	PA
Total score	3.03	4.00	3.36	4.32	4.73	3.13	4.21	4.27	4.23	3.92	3.68	4.09

Note: Scores are on a scale of 1 to 5, with 5 being the highest.

Across the LAC region, countries are adopting diverse educational initiatives to enhance digital skills for SMEs.

Across the LAC region, countries are adopting diverse educational initiatives to enhance digital skills for SMEs. These initiatives range from integrating technology into school curricula to adult education programmes and community workshops. A noticeable trend is the emphasis on inclusivity, with a focus on reaching diverse demographic groups. Efforts are made to ensure that digital skills training programmes are accessible to individuals of all ages and backgrounds. A shift towards a continuous learning culture is evident, with initiatives like virtual open courses, MOOCs, and lifelong learning programmes. These efforts promote a culture of continuous upskilling, particularly among civil servants and the general populace.

Across LAC countries, there is a substantial variation in the implementation of digital skills initiatives, ranging from early integration in education to a notable emphasis on specialised programmes designed for girls and women.

While countries like Chile, Brazil, Uruguay, and Mexico excelled in implementing digital skills for SMEs, there is room for improvement in others. Several countries, including Chile and Ecuador, are prioritising the early integration of digital skills into formal education. This trend aims to equip students with essential digital competencies from primary education through higher education. The region is witnessing a growing trend in implementing specialised programmes to encourage the involvement of girls and women in digital skills development. Initiatives often focus on STEM fields to address gender disparities.

Despite progress, there are considerable gaps in monitoring and evaluating digital skills policies

Despite progress, there are considerable gaps in monitoring and evaluating digitalisation policies, especially at the strategic level for SMEs. All LAC countries underperformed in this area. For example, governments, such as Brazil, are implementing comprehensive digital skills programmes but there is a need for improvement in monitoring and assessing the impact of these policies. A common challenge is the lack of national indicators to monitor the overall performance of SME digital skills policies, indicating a potential area for improvement in assessing the impact of digital initiatives on businesses.

Digitalisation for the development of women-owned or led SMEs

Policies promoting digital skills for women entrepreneurs are a common practice in LA9

Argentina offers free "WhatsApp Fridays" workshops aimed at enhancing the proficiency of women entrepreneurs in utilising WhatsApp Business, a messaging platform tailored for small businesses. Paraguay's REEMUJERPY project mandates participation in digital tools training and the submission of related deliverables for access to seed capital. Moreover, Telecentres established in Paraguay's 4 Women's Regional Centres provide digital literacy training.

Initiatives to encourage women's pursuit of STEM education are widespread in the region.

As mentioned in Sub-dimension 8.3: Digital Skills, the region is witnessing a growing trend in implementing specialised programmes to encourage the involvement of girls and women in digital skills development. Argentina serves as a pilot country in UNESCO's SAGA project aimed at narrowing the gender gap in science, technology, engineering, and mathematics fields. Brazil's "Mulher e Ciência" programme, launched in 2005, is aimed at the same goal. Additionally, the Mexican Government's "Ponte en Modo STEM" initiative offers a free national awareness strategy to co-ordinate actions among various institutional and social actors, fostering the participation of more adolescent and young women in STEM-related careers.

The way forward

As outlined in Table 8.4 below, in the LAC region, policy recommendations for the digitalisation of SMEs include enhancing national digital strategies with specific details for effective implementation, fostering SME-centric broadband policies to address unique challenges, and advocating for comprehensive monitoring and evaluation processes for digital skills policies. The region shows progress in broadband connectivity, with countries like Argentina, Brazil, Chile, and Mexico leading the way. Emphasis on inclusive educational initiatives and a continuous learning culture for digital skills development highlights the commitment to bridging the digital divide and ensuring widespread participation in the digital economy. For example, digital hubs have proved successful in other regions such as Europe at providing access to digital infrastructure for SMEs. These hubs offer SMEs access to essential digital infrastructure, including fast broadband, advanced technologies, and software, enabling them to enhance their operations and competitiveness. Moreover, digital innovation hubs play a pivotal role in skills development by offering training programmes, workshops, and resources to empower SMEs with the necessary digital capabilities.

Table 10.4. Policy recommendations for digitalisation dimension

Policy area	Challenges and opportunities	Policy recommendations
National Digital Strategy	Limited targeted focus on SMEs in digitalisation strategies, lacking essential details for effective implementation.	Encourage countries to enrich their digitalisation strategies with measurable targets, action plans, responsible entities, budgets, and timelines, ensuring comprehensive and effective implementation. Advocate for the development of dedicated SME Digitalisation Strategies within overarching national digital plans to specifically address the unique needs of small businesses.
Broadband Connectivity	Disparities in internet usage affecting SMEs, need for SME-centric broadband policies. Impressive broadband connectivity progress in countries like Argentina, Brazil, Chile, and Mexico illustrate potential for social and economic inclusion through digital inclusion in rural areas.	Encourage countries to develop policies specifically tailored to address the unique needs and challenges of SMEs in the digitalisation process, ensuring inclusive broadband access, e.g. digital innovation hub. Promote public-private partnerships to establish and enhance digital infrastructure, fostering collaboration for the benefit of citizens and businesses. Enhance data transparency and standardisation of indicators to facilitate more accurate and comparable assessments of digitalisation progress across the region.
Digital Skills	Gaps in monitoring and evaluation digital skills policies.	Increase the provision of digital training for SMEs workforces, ensuring inclusivity and accessibility of digital skills training programmes for individuals of all ages and backgrounds. Promote a continuous learning culture with initiatives like virtual open courses and lifelong learning programmes, fostering a culture of continuous upskilling among the general populace. Support countries in enhancing their monitoring and evaluation processes for digital skills policies, with a focus on measuring the impact at the strategic level for SMEs.

References

[1] OECD (2021), The Digital Transformation of SMEs, OECD Studies on SMEs and Entrepreneurship, OECD Publishing, Paris, https://doi.org/10.1787/bdb9256a-en.

[2] OECD/CAF (2019), Latin America and the Caribbean 2019: Policies for Competitive SMEs in the Pacific Alliance and Participating South American countries, SME Policy Index, OECD Publishing, Paris, https://doi.org/10.1787/d9e1e5f0-en.

[3] OECD/EBRD (2023), SME Policy Index: Eastern Partner Countries 2024: Building Resilience in Challenging Times, OECD Publishing, https://doi.org/10.1787/3197420e-en.