IDB study says Artificial Intelligence can boost Caribbean economies
A study by the Inter-American Development Bank (IDB) says artificial intelligence can facilitate trade negotiations and add one additional percentage point of growth to Latin American and the Caribbean economies.
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 four per cent from current three per cent projections.
Overall, economic growth of countries that embrace artificial intelligence is expected to be 25 per cent 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 labour 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.”
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 per cent greater predictive capacity than traditional econometric models.
In finance and capital markets, algorithms can be 95 per cent more effective in predicting investor risk profile. The report said that 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 per cent by using smart networks that can better match supply with demand; and in health, diagnosing illnesses with image recognition has a 96 per cent accuracy rate, it added.
The report also said personalizing education plans with the help of artificial intelligence reduces remediation costs by 40 per cent and increases exam passing rates by 15 per cent.
Artificial intelligence also brings important political and ethical challenges.
“The risk of job losses due to automatization varies between 10 per cent and 65 per cent 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,” the report said.
“To better manage the transition for displaced workers, governments must put in place policies and strategic plans that are designed for artificial intelligence,” added Beliz. “And an artificial intelligence ‘rebellion’ can sound a bit far-fetched, 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.”