Artificial Intelligence could increase Latin America's GDP to 4.3% per year

December 1, 2018

(Microsoft Press Release) The world is undergoing a profound digital disruption in which Artificial Intelligence (AI) is leading the way. An increasing number of companies are beginning to incorporate such technology into their production processes, logistics or customer services, for a broader use of data or the integration of systems.

 

But are we moving forward as quickly as we could? What would the economic benefits for Latin America be if this technology were adopted at a faster rate? What challenges would arise in a scenario involving a more rapid adoption of technology?

 

These and other questions were addressed in the study entitled "Inteligencia Artificial y Crecimiento Económico: Oportunidades y Desafíos para América Latina” [“Artificial Intelligence and Economic Growth: Opportunities and Challenges for Latin America,”] by the Center for the Implementation of Public Policies for Growth and Equity (CIPPEC), commissioned by Microsoft Latin America.

 

The study looked at the 6 largest economies in the region in making growth projections. The report, presented today in the Microsoft “AI+Tour”, primary concluded that if the region were to adopt and expand IA more intensively than it adopted ITCs in the ‘90s, it could accelerate growth by more than one percentage point, to a GDP of about 4.3%.

 

The study also included less optimistic scenarios for the region: a “negative” scenario reflecting a slowdown with respect to the historical rate of technology adoption, which would lead to a deceleration of Latin American growth (2.1%). And a “neutral” or “status quo” scenario, which assumes that the regional economy will maintain the same rate of technology adoption as it had in the ‘90s; in which case the growth projection would remain at 3.2%.

 

 

 

Lessons from History

 

Experience from previous industrial revolutions suggests that those companies and countries that adopt new technologies more quickly are those that have the greatest opportunities for growth. This is the theory on which the CIPPEC report is based.

 

“The First Industrial Revolution, which introduced the steam engine, was led by the United Kingdom, which for almost five decades grew at twice the rate of the rest of Europe,” explained Martín Rapetti, the researcher in charge of the study, in his presentation.  “The epicenter of the Second Industrial Revolution was the United States, and involved the introduction of electricity which quickly spread through all productive sectors of that economy, once again reaching growth rates more than double that of Europe. And the Third Industrial Revolution gave us the “Asian Miracle” driven by the rapid absorption of information technologies (ICT), with a growth rate that was triple that of Latin America.

 

However, Rapetti says that in the Fourth Industrial Revolution, it is not all over yet: “There is an opportunity for growth opening up for many developing countries.”

 

 The changes are not automatic. According to the study, getting Latin America to a new level of technology adoption would require “industrial policy 4.0” and a significant effort to adapt the skills of the workers as they are displaced to new higher-quality and higher-productivity tasks. This is one of the most important points for the entire region.

 

Lastly, it would require companies to challenge the status quo to take advantage of new AI innovation, with its potential to open up new technology sectors. “Industrial revolutions have always begun with companies,” notes Rapetti.

 

 

 

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