How Artificial Intelligence Can Boost Productivity in Latin America

By: Bas B. Bakker, Sophia Chen & Dmitry Vasilyev (International Monetary Fund Blog)

In this blog post for the International Monetary Fund, authors Bas B. Bakker, Sophia Chen, and Dmitry Vasilyev examine the impact of artificial intelligence on labor markets in Latin America and the Caribbean.

For decades, the region has been characterized by a high level of labor market informality, with a significant portion of the workforce operating outside the formal economy. This leaves many workers without essential benefits and protections.

Informal businesses tend to be small, have limited access to legal and financial systems, and face difficulties in securing investment. Additionally, their smaller scale and lack of specialized talent often prevent them from adopting new technologies, including AI.

As illustrated in the Chart of the Week, less than half of jobs in the region are likely to be significantly affected by AI—a lower proportion than in advanced economies such as the United Kingdom and the United States. This is largely due to the prevalence of informal employment, which, according to International Labour Organization data, accounts for more than half of all jobs in the region. In some countries, such as Bolivia, Peru, and Honduras, the share of informal employment exceeds two-thirds.

While this lower exposure to AI may shield the region from immediate disruptions, it also means that countries risk missing out on the productivity gains and economic growth that AI can drive, as highlighted in a recent working paper. Among jobs that are exposed to AI, roughly half—such as those in healthcare—stand to benefit from increased efficiency without substantial job losses. Others, such as call center roles, face a higher risk of displacement.

Expanding formal employment will be key to maximizing AI’s economic potential. Greater formalization would enable more workers to access AI-driven opportunities and allow businesses to leverage technology for growth and innovation…

CONTINUE READING…