Technology & Innovation

Investment in AI is booming in Latin America, but what will it mean for the region's economy?

August 15, 2022


Investment in AI is booming in Latin America, but what will it mean for the region's economy?

August 15, 2022

Walter Pasquarelli

Tech & Society at Economist Impact

Walter Pasquarelli is a Manager within the Tech & Society team, where he delivers research and engagement programmes that use evidence and data to drive change on critical tech policy issues. Prior to this Walter was the AI Policy Lead at an international consultancy where he advised governments and leading tech companies on AI benchmarking and strategy. As part of this he also worked as a consultant with the Open Data Institute on enabling data sharing across different sectors. Walter is an AI Policy Fellow at the Institute for Policy Research at the University of Bath. He holds a Master’s degree from the University of Cambridge and regularly guest lectures on tech policy and ethics at universities.

Artificial intelligence (AI) is widely expected to transform the world economy. Latin America has experienced an investment boom in AI, driven by an opportunity to disrupt traditional business models and challenge industry incumbents.

With support from Google, Economist Impact produced a new report that examines the future of AI in Latin America, with a specific focus on Argentina, Brazil, Chile, Colombia, and Mexico. It analyses AI uptake across four key industries including government services, healthcare, agriculture and finance. The report’s insights are founded on a programme of in-depth interviews alongside desk research.

Key findings include:

  • Implementing AI in government services across Latin America could help tackle systemic inefficiencies that have been slowing social and economic progress across the region. This is underscored by the emergence of national AI strategies and policies seeking to accelerate how governments adopt AI 

  • The market for the AI healthcare sector is expected to grow by up to 38% by 2027, benefiting patients in LATAM countries. The region has produced a number of leading healthtech players creating success stories across the continent

  • As one of the largest sectors in the region, agriculture has extraordinary potential for disruption through AI. However, while the number of “agtech” startups has grown by over 600% between 2005 and 2018, investments remain relatively low

  • The financial services sector receives 40% of all AI investments in LATAM

Among investors and policymakers, AI has become synonymous with progress and business opportunity. Global investment in AI startups, research and development has risen fast, climbing from $0.8bn in 2010 to $78bn in 2021. Specifically in Latin America, pre-pandemic projections forecasted AI to contribute up to 5.4% to the region’s gross domestic product (GDP) (see figure 1).



Interviewees we spoke to found that prior to 2020, there was a recognition for the potential of AI. Governments across the region were developing initial blueprints for stimulating uptake across industries. Argentina and Colombia even published fully fledged national strategies—following global AI leaders such as the UAE (2017) and the UK (2018). Yet investment shifted little from the continent’s northern neighbours to Latin America. 

Covid-19 changed everything. According to the Latin America Venture Capital Association, startups in the region attracted more than $4bn in funding in 2020, rising up to $15.3bn in 2021. What explains this investment boom? As the pandemic uncovered inefficiencies of traditional industries with low levels of digitisation and innovation, it also created an opportunity for disruption and remodelling of these spaces to meet people’s needs. Prior to 2020, the region was generally considered to be underinvested in technology with few competitors and little incentive to innovate. Interviewees explained that as covid-19 required people to shift economic and social activity online, it created an opportunity for AI startups to step in and reinvent entire sectors.

Our research clearly highlights that AI is now disrupting sectors across the continent. In banking, fintech startups used machine learning to provide easy digital banking applications for the previously unbanked. Between May and September 2020, 40 million people in Latin America opened a bank account for the first time. In the health sector, a startup called “prosperIA” is using predictive algorithms to detect and prevent eye illnesses, based on optical chromatography scans. In agriculture, startups are leveraging precision farming to harvest crop fields more sustainably. Government services are also implementing robotic process automation to make bureaucratic processes more efficient.

As our report shows, the outlook for the Latin American AI ecosystem is positive, but to keep up this momentum the region needs to overcome a series of challenges. Latin America is characterised by a gaping digital divide with only 45.5% of households having access to broadband internet. Similarly, as the region is rapidly accelerating AI uptake, guaranteeing the safety of these technologies as they are being scaled will remain crucial. Governments will play a key role in putting in place the right policy frameworks and guidelines for addressing these issues. Building and expanding existing AI strategies will signal to the AI ecosystem that their needs are being taken seriously and governments are committed to putting AI at the heart of the region’s future.   



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