International Trade Outlook for Latin America and the Caribbean: Recovery in an uncertain context

94 Chapter II
Economic Commission for Latin America and the Caribbean (ECLAC)
6. Information technology has been a key driver
of the rise of trade in modern services
The growth of global modern services trade has been driven mainly by the spread of
information and communication technologies (ICTs). From the 1960s onwards, these
technologies contributed to the process of outsourcing of modern services in developed
countries. Firms increasingly passed the responsibility for non-core business processes
such as computer processing of payrolls and customer claims to third parties, which could
manage these processes more efficiently and economically, thanks to staff specialization
in those areas and economies of scale achieved by providing services to a number of
clients from large data centres.
In the beginning, companies almost invariably outsourced their processes to
providers in the same country, but later the outsourcing model expanded to include
service providers whose facilities were located in developing countries (offshore
outsourcing). This was facilitated by a wave of deployment of undersea fibre-optic
cables, which reached its peak between 1998 and 2002 during the “dot-com” boom
(Ruddy, 2013). In a parallel development, large corporations also increasingly established
specialized offshore shared services centres (SSCs) in developing countries to provide
services to their offices in other countries. Another contributor to this offshoring trend
was the liberalization of services trade through the WTO General Agreement on Trade
in Services (GATS) of 1995 and multiple regional and bilateral free trade agreements
signed afterwards.
Although earlier developments in ICTs played a key role in the growth of offshore
services provision and the resulting benefits for Latin American countries, some of
the latest ICT developments have the potential to diminish those benefits. The most
significant of these is automation —the use of machines that are capable of carrying
out tasks without direct human intervention. A particularly simple type of modern
automation that can be used by offshore service providers is robotic process automation
(RPA), which involves the creation of a software “robot” that automates the repetitive
tasks that a human worker performs when using multiple computer applications.
In contrast to basic
robotic process
automation, the
implementation of
AI-based automation
requires substantial
technical sophistication
on the part of the
individuals who carry out
the analysis upon which
the details of automation
will be based.
However, as the tasks to be automated become less standardized and repetitive,
more advanced technologies are required. These often involve the use of machine
learning and other artificial intelligence (AI) techniques to analyse large amounts of
information about tasks and their desired outcomes, with the AI software creating rules
based on the results of this analysis which can then be used to guide activities intended
to achieve those outcomes. In contrast to basic RPA, the implementation of AI-based
automation requires substantial technical sophistication on the part of the individuals
who carry out the analysis upon which the details of automation will be based.
The results of recent surveys have shown that cost reduction is the most important
reason for businesses to outsource services, and to move existing ones abroad (Deloitte,
2015). Offshore services providers are therefore under strong pressure to control their
costs, as shown by the importance that they place on locating their facilities in countries
with relatively low wages. Other options available to service providers for controlling
costs via employment strategies have direct implications for the types of services that