10 Most Innovative Economies in Central and South America
In this article, we will look into the 10 most innovative economies in Central and South America. If you want to skip our detailed analysis, you can go directly to the 5 Most Innovative Economies in Central and South America.
The Tech Sector in Latin America
The economic growth in Latin America presents a contrasting picture, providing both hurdles and opportunities for innovation. According to a report by McKinsey and Company, Latin America faces many challenges to truly excel as an innovative region. Equitable access to technology and lack of skill development are some of the factors hindering innovation and technological advancements in the region. In 2010, Latin America showed significant progress, as the number of internet users in the region doubled. However, the region still lags behind others. The lack of digital adoption in the region is evident by the gap in fixed and mobile broadband subscriptions, compared to developed economies. Additionally, there are many gaps and disparities across Central and South American countries, in terms of use and access. For instance, internet use in Uruguay is close to the OECD average. On the other hand, the usage is nearly 50% lower in El Salvador compared to the OECD average. Moreover, in Peru, nearly 75% of top quintile earners use the internet regularly, compared to the bottom quintile.
Latin America has been a latecomer and slow adopter of technologies. This can be observed in areas such as mechanized farming. The region exhibited a lower adoption rate compared to other regions. Similarly, when the adoption of mobile money swelled in Africa, it remained significantly lower in Latin America. However, a surge in technology adoption was observed during the pandemic, exemplified by initiatives such as Brazil's Pix digital payment system. Over 50% of the total population in Brazil adopted the system in less than a year. This represents the region's potential to quickly adopt technology.
The technology adoption in Latin America has been strengthened by the surge of innovative companies. Over 80% of start-up unicorns in Latin America are focused on fintech and e-commerce. Nonetheless, the concerns remain the same. The research and development investment in the region is 0.6% of its GDP, which is 25% less than the OECD average and China. Latin America only represents 2% of the global patent applications, with less than 20% filed by Latin Americans. The region also lags in terms of adopting advanced technologies such as AI. The report cites an estimate that suggests the impact of AI on Latin America, stating that its impact will be 3-5 times lower in Latin America, compared to North America and China. The region must invest in research and development and technology integration to emerge as an innovative region.
Despite these challenges, Latin America is exhibiting resilience and trying to adopt new technologies. For instance, according to an article by Bloomberg, published on January 5, Argentina is set to update its old patenting rules which hinders the farmers from accessing modern technology, allowing it to compete with agricultural leaders such as Brazil and the US. This will help major seed companies such as Syngenta, Corteva, Inc. (NYSE:CTVA), and Bayer AG (OTC:BAYRY), who would be able to charge royalties. This reform can result in higher yields and also boost Argentina's competitiveness in the global market.
Business in Latin America
Some of the top companies contributing to the technological advancements in the Americas include Nu Holdings Ltd. (NYSE:NU), Petróleo Brasileiro S.A. - Petrobras (NYSE:PBR), and Vale S.A. (NYSE:VALE).
Nu Holdings Ltd. (NYSE:NU) is a leading fintech company in Latin America. As of February 2, the company has a market cap of $44.55 billion. On January 24, the company announced that it had introduced new features to provide users with more control over their financial decisions. The new feature allows customers to add funds to accounts using their credit card limits. The users can access the new update in the Nu Holdings Ltd.'s (NYSE:NU) bank app by selecting "Charge it all to the credit card," and then selecting "Add funds to account."
Talking about the new updates, Livia Chanes, CEO of Nubank in Brazil, said:
“This product also promotes flexibility, as it offers another option for those who do not have access to loans. The goal is to provide more security to our customers when their account balance is low and in establishments that do not accept credit card payments. It is an additional alternative and expanding financial possibilities. Since the funds added to the account come from the credit card limit, the feature helps provide another form of liquidity for the customer."
Petróleo Brasileiro S.A. - Petrobras (NYSE:PBR) is a Brazilian petroleum company. The company leads the petroleum market in the region with a market cap of $110.31 billion, as of February 2. On December 29, 2023, the company announced that it had signed a contract with UNIGEL to produce fertilizers at the Sergipe and Bahia plants. This agreement is a result of the company's strategic planning for fertilizer production.
On December 15, 2023, Petróleo Brasileiro S.A. - Petrobras (NYSE:PBR) Petrobras announced that it had signed a new natural gas contract with Companhia Distribuidora de Gás do Rio de Janeiro (CEG) and CEG RIO S.A. (CEG RIO). The new contract aims to provide natural gas to the companies to regulate supply of natural gas. The contract will expire after December 2034. The estimated value for the entire period is R$51.6 billion.
Vale S.A. (NYSE:VALE) is a top metals and mining company, headquartered in Brazil. The company boasts a market cap of $57.14 billion, as of February 2. On November 12, 2023, the company announced that it had opened the first-ever iron ore briquette plant in the world. The new facility will revolutionize the steel industry by providing a GHG emissions reduction of up to 10%. Vale S.A. (NYSE:VALE) intends to produce 6 million tonnes of briquettes yearly. The company has caught the attention of over 30 companies worldwide. This innovation by the company will play a significant role in decarbonizing the steel industry.
With this context, let's have a look at the 10 most innovative economies in Central and South America.
10 Most Innovative Economies in Central and South America
Methodology
We have ranked the most innovative economies in Central and South America by utilizing metrics including R&D Expenditure, High Technology Exports in US$, and Digital Adoption Index (DAI). These metrics serve as a concrete framework to rank the most innovative countries in the region, providing us with detailed insights about their technological and research advancements.
To compile our list, we first sorted the countries on the basis of their R&D expenditure. We then sourced their DAI and high-technology exports. We allotted ranks to the countries on our list based on each metric. Finally, we assigned weights as 40% to R&D Expenditure, 40% to High Technology Exports, and 20% to DAI to our metrics. Our list ranks the countries in descending order of the weighted average calculated across our metrics.
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10 Most Innovative Economies in Central and South America
10. Paraguay
R&D Expenditure as a Percentage of GDP (2020): 0.16
High Technology Exports (2021): $103 million
Digital Adoption Index (2016): 0.542
Insider Monkey Score: 9.4
Paraguay is ranked among the most innovative economies in Central and South America. In 2021, the country reported high-technology exports of $103 million. The country spent 0.16% of its GDP on research and development in 2020.
9. Guatemala
R&D Expenditure as a Percentage of GDP (2021): 0.05
High Technology Exports (2021): $332 million
Digital Adoption Index (2016): o.524
Insider Monkey Score: 9.2
Guatemala is one of the most innovative countries in Central and South America. In 2016, the country reported a DAI of 0.524. The country reported an R&D expenditure of 0.05% in 2021. The high technology exports in the country were reported to be $332 million in 2021.
8. El Salvador
R&D Expenditure as a Percentage of GDP (2020): 0.16
High Technology Exports (2021): $358 million
Digital Adoption Index (2016): 0.503
Insider Monkey Score: 7.8
El Salvador is ranked among the most innovative economies in Central and South America. The country reported high-technology exports of $358 million in 2021. The country spent 0.16% of its GDP on research and development in 2020.
7. Peru
R&D Expenditure as a Percentage of GDP (2020): 0.17
High Technology Exports (2020): $173 million
Digital Adoption Index (2016): 0.553
Insider Monkey Score: 7.6
Peru ranks 7th on our list. In 2021, the country spent 0.17% of its GDP on research and development. The country reported high technology exports of $173 million in 2020. In 2016, the country reported a DAI of 0.553.
6. Uruguay
R&D Expenditure as a Percentage of GDP (2020): 0.44
High Technology Exports (2020): $113 million
Digital Adoption Index (2016): 0.758
Insider Monkey Score: 5
Uruguay is ranked 6th among the most innovative economies in Central and South America. The country reported high technology exports of $113 million in 2020. The country spent 0.44% of its GDP on research and development in 2020. In 2015, the country reported a Digital Adoption Index of 0.758.
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Disclosure: None. 10 Most Innovative Economies in Central and South America is originally published on Insider Monkey.