The Latin American Innovation Gap No One Talks About
by Federico N. Fernández
The innovation scene in Latin America shows two faces that couldn’t be more different from each other.
I think the following three examples help us to explain what I see:
Just a year ago, a group of Chilean Senators proposed a bill called “decent digital employment.” It was intended to establish a rather traditional labor relationship between delivery platforms such as Glovo, Uber Eats or Rappi and their collaborators. This project would have basically destroyed the business model of these apps, which do not hire employees but simply help connect delivery people with restaurants and customers.
By Christmas 2019, Uber was being ejected from Colombia through the use of a legal technicality. Based on a rule dating from 1996, the Colombian Superintendency of Industry and Commerce decided to block the Uber app. In other words, using a regulation prior to the very existence of the iPhone, an innovative company was expelled from Colombia by the authorities.
In Argentina, the new Fernández/Kirchner administration has been carrying out a very aggressive campaignagainst the Fintech sector, in particular towards the unicorn company Mercado Libre. In this context, the founder of the company, Marcos Galperín, decided to move to Uruguay.
However, all these coarse attempts at over-regulation or prohibition aren’t the end of the story.
Innovation Is More Important Than Ever
As we all know, delivery platforms like Glovo, Rappi and Uber Eats have been an incredible help to all citizens during these difficult weeks of confinement and quarantine. In particular, for older people – who are among the most vulnerable groups facing Covid-19 – services such as “contactless delivery” have been an invaluable help.
Consequently, if these delivery services were highly valued before the pandemic, most people are likely to adore them after it.
In spite of legal harassment, Uber in early 2020 was able to return to Colombia. Not only that, in the context of the pandemic, it also offers new services like Uber Flash, focused on package delivery.
In Argentina, on the other hand, the importance of fintech innovations was sadly demonstrated with the collapse of the banking system unable to handle the payment of retirees and pensioners. Crowded lines of old people posed a serious threat to the health of the most vulnerable. And on top of that, they also highlighted the importance of fintech solutions for making payments.
In turn, despite the unfair demonization, the company Mercado Libre recently reached a valuation of 37 billion US dollars. This represents 10 percent of the Argentine Gross Domestic Product.
Furthermore, it exposes the dramatic divergence of trends in both cases. In effect, Argentina’s Central Bank itself predicts a fall in gross product of 7 percent by 2020.
LatAm: Analogical or 3.0?
I think these three examples are enough to illustrate the point I want to make: there is a very sharp divide between the political class and civil society regarding innovation. While the latter embraces innovation and wishes to become a Society 3.0, the former is still analogical and sees innovation under a cloak of suspicion.
Therefore, it is not surprising that in Argentina, for example, 70 percent of the population believes that it is a good idea to have organizations which promote the benefits of innovation.
What’s more, according to an opinion poll carried out in Argentina, Brazil, Chile, Colombia and Mexico, 87 percent of Latin Americans believe that encouraging innovation is crucial for economic growth.
Likewise, 84 percent of those surveyed expressed that they regularly use innovative products and services.
For all this, the Latin American network Somos Innovación has begun a coordinated effort throughout the region, that is from Mexico to Argentina and Chile, to give voice and visibility to these majorities who embrace innovation, consider it a fundamental tool to improve their lives, and don’t want to see it strangled by regulations.
We want to see Latin America become a fertile ground for innovation, creativity, entrepreneurship and innovative solutions. The future is calling.
Federico N. Fernández is a Senior Fellow at the Austrian Economics Center, the Executive Director of Somos Innovación, and President of the Fundación Internacional Bases.
The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.
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