There are numerous public policies in Latin American countries that are funding the deployment of digital infrastructure, especially in less developed areas. Most of these plans are funded with industry revenues. Exceptions include the Telecommunications Development Fund in Chile and the Fund for Social Telecommunications Coverage in Mexico, which are funded from the public budget. This reflects the fact that the macroeconomic environment in Latin America does not favor substantial increases in investment funded by the public sector.
Concessional financing from international organizations and funds from multilateral development banks, such as the Inter-American Development Bank (IDB) and the Andean Development Corporation Development Bank of Latin America (CAF), can be mobilized in areas where domestic public resources are insufficient, and the private sector is unable to provide adequate financing.
One sector where these funds could focus their investment is rural areas. There is still a significant gap in rural areas with respect to the contribution of digital investment to sustainable development. The deployment of fixed, mobile, and broadband networks in these areas is a necessary condition for digital infrastructure.
Another way to promote investment is by removing policies that distort investment decisions, such as excessive regulation and inefficient taxation. Presently, the telecom market is regulated in almost all countries in the region. This means the regulator has a role, by action or by omission, in the development of the sector.
As underscored by Frontier Economics (2017), competition analysis, as currently carried out, raises several problems given the dynamic nature of the sector. To overcome these short comings, regulators in Latin America should consider competition as determined by the existence of rivalry. Rivalry creates incentives for companies to reduce costs, lower prices, and invest in the development of new services.
Taxes can also distort consumption and investment. While taxes can have an economic rationale in terms of increasing welfare, the results of this study show that treasury departments must take additional care in the application of tax policy to the digital industry given the significant positive externalities that result from sustainable development.
Penetration of digital services in Latin American households is still low compared to the OECD average. Several actions could be undertaken to incentivize the adoption of digital technologies:
. applying policies to reduce the cost of purchasing telecom services.
. increasing the availability of local content.
. and undertaking digital literacy campaigns.
… could be some examples.
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