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Artificial intelligence to boost Latin American and Caribbean economies: IDB study

Study also urges governments to anticipate consequences of artificial intelligence in labor markets

BUENOS AIRES – Artificial intelligence can facilitate trade negotiations and add one additional percentage point of growth to Latin American and the Caribbean economies, according to a study by the Inter-American Development Bank (IDB).

The study – put together by the IDB’s Institute for the Integration of Latin America and the Caribbean (INTAL) – predicts artificial intelligence could boost regional GDP in the mid-term to 4 percent from current 3 percent projections.

Brazil, for instance, could grow 4.1 percent a year instead of 3.2 percent. Colombia’s economy could hit 4.5 percent growth instead of 3.7 percent. Overall, economic growth of countries that embrace artificial intelligence is expected to be 25 percent higher, on average, than those that do not, the report finds.

Almost half of this increase comes from improvements in productivity, as workers spend more time on tasks that add more value, according to Algorithmlandia: Artificial Intelligence for Predictive and Inclusive form of Integration in Latin America. The report, which contains inputs from 40 experts in artificial intelligence, also warns that artificial intelligence will bring difficult ethical considerations and labor market challenges.  

“Artificial intelligence is much more than a new technological fad,” said Gustavo Beliz, the director of INTAL. “It is a unique hybrid of work and capital. It is an entirely new productive force, capable of teaching itself. These new technologies need to be inserted into our productive processes and in our exports. Failure to do so means falling behind more developed economies.”

Better trade negotiations

The report predicts the emergence of a “new trade techno-diplomacy,” where complex trade negotiations are simplified, and supply chains become more productive. Artificial intelligence can bring this about by analyzing vast amounts of data relating to trade flows, tariffs, rules of origin, and sanitary regulations, among others. Artificial intelligence can help find consensus areas in tough multilateral trade negotiations. With the help of anticipatory analytical tools, artificial intelligence can also construct sophisticated predictive regional trade scenarios. Artificial intelligence models have a 300 percent greater predictive capacity than traditional econometric models.

In finance and capital markets, algorithms can be 95% more effective in predicting investor risk profile. Artificial intelligence can help the region narrow physical infrastructure connectivity gaps. By using sensors and the internet of things, artificial intelligence can assign port container slots in real time to optimize inventory management. Electricity consumption can be lowered by up to 10 percent by using smart networks that can better match supply with demand.

In health, diagnosing illnesses with image recognition has a 96 percent accuracy rate.

Personalizing education plans with the help of artificial intelligence reduces remediation costs by 40 percent and increases exam passing rates by 15 percent.

Labor market consequences

Artificial intelligence also brings important political and ethical challenges. The risk of job losses due to automatization varies between 10 percent and 65 percent of the work force. Algorithmlandia offers a new way of measuring that risk, by factoring in education levels, the economy’s productive structures, and the ratio of robots per industrial worker, among others.

 Between 36 percent and 43 percent of jobs could be lost due to artificial intelligence in Latin America – putting the region in the middle of the more optimistic and more pessimistic forecasts. Countries with lower GDP per capita and greater inequality are at a greater risk of suffering jobs losses, the report says.

“To better manage the transition for displaced workers, governments must put in place policies and strategic plans that are designed for artificial intelligence,” says INTAL’s Gustavo Beliz. “And an artificial intelligence ‘rebellion’ can sound a bit farfetched, but we need to anticipate the ethical risks around the data management, production and analysis. Artificial intelligence can bring us prosperity, but we need to ensure we do it in a way that secure and inclusive.”

About the IDB

The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region.

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