Existing scholarship on Latin America’s digital economy has primarily focused on the delivery of 5G, e-commerce, fintech, and more recently, AI-based technologies. But media, researchers, and policymakers have devoted less attention to the so-called Internet of Things (IoT), or solutions based on machine-to-machine communication, and their relation to other information technology developments (e.g., hardware, software, services). The following provides background information on IoT for Latin American policymakers and researchers, highlighting trends in its evolution, and considering the extent to which IoT can be an engine of sustainable growth for the region in the coming years.
What is IoT?
IoT relies on interconnectivity between network devices, such as smart watches or connected vehicles, and the transfer of real-time information between these devices or “things,” to offer new, dynamic solutions. As part of the process, data can also also be used to improve a device’s intelligence and capabilities. As noted in the authors’ recent Santander X-ESADE report on the topic, IoT is also evolving to establish links between the digital and physical worlds, to predict and automate certain business processes, and enable a smart society. Beyond the direct economic and societal benefits, the interconnection of basic city infrastructures (roads, traffic lights, bridges) with cars, buses, and even personal wearables—augmented with massive amounts of data—can be used to improve Latin America and Caribbean (LAC) communities and enable data-driven public policymaking, including on issues such as traffic management and resource allocation.
An Overview of the Existing IoT Market
The global IoT market is currently valued at US$300-700 billion, and is growing steadily. It is expected to double in size by 2030, becoming a US$1-3 trillion market. Furthermore, the Statista consulting firm estimates that industrial IoT [or machine-to-machine (M2M) technologies], or the use of smart machines and real-time analysis to optimize industrial capacity, could add up to US$12.5 trillion of economic value to the global economy by 2030. Additionally, the number of IoT related devices is expected to increase by almost 16 billion over a ten-year period, with a 150 percent increase between 2020 and 2023. The application of IoT technology is far less prominent in Latin America and the Caribbean (LAC) than in other parts of the world, but the number of IoT connections in Latin America is nevertheless expected to reach 1.3 billion by 2025 (versus around 800 million today).
At present, the global IoT market is dominated by China, the United States, South Korea, Australia, and Germany, when measured by IoT-related patents, but some LAC companies have also made notable progress in this market. For instance, Chile’s Vigalab, has employed a Mine Watch System, also operating in Mexico and Peru, that applies monitoring technology for equipment in underground mines, leveraging a network of IoT sensor technologies. In Colombia, Genial.IO is a startup dedicated to improving the operational efficiency of companies in the industrial sector. It uses IoT, data, and analytics to enable real-time information capture, automate decision-making, and boost productivity by up to 25 percent (Disclaimer: Co-author Victor Munoz is the founder and a shareholder of Genial.IO).
IoT Applications in LAC
Beyond the progress achieved by certain LAC-based companies, IoT technologies have the potential to further transform daily life across the region. Decision-makers can leverage the opportunities enabled by IoT to address key policy challenges, such as improving urban planning and developing smart cities, strengthening healthcare systems, or improving industrial productivity via automation.
Latin America is one of the most urbanized regions in the world, with more than 80 percent of Latin American citizens living in urban cities. There are numerous opportunities for IoT solutions to be applied in support of city sustainability, connectivity, public safety, and delivery of citizen services. IoT technologies can help to enhance urban mobility, business productivity, and transportation, as well as improve energy and environmental management across the region to make cities more livable, environmentally sustainable, and efficient. IoT devices can also importantly be utilized to reduce traffic congestion and pollution, or to advance “circular economy” principles by improving energy efficiency and waste management with sensors that measure real-time weights, temperatures, and flows of people and vehicles. In many high-income economies, IoT-based solutions— e.g., geolocation of gas station prices and collective monitoring of transportation times in Valencia; real-time parking information in San Francisco; electric bicycles in London; and smart waste collection in Seoul—are markedly improving city efficiency.
The Covid-19 pandemic highlighted numerous vulnerabilities in the LAC region’s social protection systems, including insufficient medical outreach and patient monitoring. IoT devices have and can continue to address these issues by facilitating remote patient monitoring. In Brazil, the Clinical Telemonitoring Center successfully used digital health services to assist in the monitoring of Covid-19 transmission. Data generated from IoT devices can also reduce costs and errors, enhance patient experience, minimize hospital admissions and re-admissions, improve drug and equipment management, and facilitate faster disease diagnoses. Amid the pandemic, high-tech devices, real-time data analytics, and remote access to health experts enabled and sustained healthcare services, particularly for non-communicable chronic diseases and certain mental health conditions. Amid the pandemic, Colombia conducted 55 million tele-consultations within a span of 16 months. In Latin America, where significant distances separate communities, IoT solutions will continue to be impactful. Remote medical consultations hold promise for improving healthcare access for populations residing far from urban centers.
Moreover, World Economic Forum researchers found that 84 percent of IoT deployments are currently supporting or have the potential to support the UN Sustainable Development Goals (SDGs). There is tremendous opportunity for IoT devices and the data they collect to be utilized in the renewable energy sector or in support of environmental stewardship initiatives. Additionally, smart agriculture represents an enormous opportunity for Latin America through the potential use of sensors and smart devices to optimize farming and water management.
Looking Ahead
The expansion of IoT technology is not without its challenges for LAC policymakers. Although IoT can be integrated into 4G, 3G, and GPRS technology environments, which are common across much of the LAC region, many logistical roadblocks persist, including a lack of sufficient digital infrastructure (e.g., evolutionary technologies like 5G), human capital shortages, concerns surrounding data privacy and security, cost, and scalability challenges. Importantly, at least 230 million people across the region still do not have access to mobile internet, which is partially driven by problems of affordability. Moreover, IoT is inherently capital-intensive and requires relatively high initial investment in infrastructure and devices. This poses a challenge for many countries in the region.
Concerns about cybersecurity, data privacy, and sufficient regulation of this emerging industry, and the communications networks supporting it, are being actively discussed internationally and within industry-led standards bodies. LAC policymakers have looked to the European Union as a model on data-related policymaking, striving to strike a balance between private innovation, citizen privacy and security, and environmental sustainability. Finding the right approaches to these challenges will be critical to ensuring maximum economic and social benefit for LAC and other users.
For LAC companies operating in this industry, supply chain limitations are an additional frustration. According to interviewed investors, one challenges is that nearly all electronics manufacturing must be done in China, due to its comparative advantage in this space.
Despite these challenges, the potential of IoT technology and its associated benefits—sustainability, enhanced healthcare services, increased investment and socioeconomic benefits, and improved business and technological productivity—would appear to outweigh the possible risks. Progress over the next several years will nevertheless be key if LAC policymakers intend to utilize IoT-based solutions in support of urban, social, and other solutions. Much will depend on whether the region can overcome a persistent digital divide, and then adopt policies to enable and monitor technologies with broad social benefit.
Fortunately, as international companies compete for space in the LAC tech sector, opportunities may very well arise for policymakers seeking to attract additional investment to grow their own countries’ IoT industries and related sectors. Latin America’s vast territory and population and high levels of urbanization provide an opportunity for market expansion and innovation—of the sort previously seen in the telecommunications industry.
Ángel Melguizo is a non-resident senior fellow with the Asia and Latin America Program at the Inter-American Dialogue and a senior economist consultant based in Colombia and Spain, specializing in public policies, economic growth and digital regulation. Victor Muñoz is an affiliate of the Berkman Klein Center for Internet and Society at Harvard University and a member of the advisory board of EWA Capital, TAESA, and the New Urban Mobility Alliance (NUMO).
