The thorny issue of automation across Latin America
Human Resources

The thorny issue of automation across Latin America

Globally, companies and governments are racing to address the impact of automation as more and more sectors integrate automated processes. Jane Fraser, CEO of Citigroup’s Latin America business told attendees at Fortune‘s Most Powerful Women Summit in October that “we are going to move from people to things. We are expecting 500 billion objects to become connected to the internet and this automation is going to hollow out middle and working class jobs. Technology is replacing these jobs.” While fear mongering around job loss as a result of automation is widespread, it is still unclear how countries are responding to this evolving workforce environment. For Latin America, in particular, there are no safety nets for the effects of this shift, Fraser warned in her address.

Mark Kamlet, Professor of Economics and Public Policy at Carnegie Mellon University's Heinz College believes that Fraser is completely correct. “I believe those who do not think this is the case are 'automation deniers', and I anticipate that it will not only be workers in America who are affected,” he says.

David Poole, co-founder and CEO of Symphony Ventures, emphasises that the benefits of robotic process automation (RPA) are the same in Latin America as they are globally. “The incredibly powerful opportunity for enterprises to reduce costs, improve customer satisfaction and tighten controls is universal and is accessible to all companies, he says. Poole believes that adopting RPA early could give organisations in Latin America a competitive boost in global markets, but those that are slow to react will fall further behind their competitors in other nations that are pushing very hard into automation adoption.

“In order to prepare for this shift, LatAm countries should take the same steps that other countries are pursuing: focus on educational efforts to upskill their current labour force,” he says.

The appeal of automation is clear: automation can perform mundane, rules-based work, much faster and more efficiently than people assigned to such tasks. Poole says that administrative roles that can be performed by robotics will ultimately be eliminated, which will free employees up for more entrepreneurial, value-added roles within the organisation.

“Often, growing companies are not using RPA to reduce headcount, but to make their current workforce more efficient, so they can do more but with the same or smaller budget than before,” he says. Poole explains that while the fear of job loss is nothing new, the prospect of job creation as a result of automation is; new jobs and alternative roles will be established, but these alternatives are likely to emerge much slower in economies less able to adapt through changes in education and training.

Carlos Meléndez, COO and co-founder, Wovenware, says that while it is clear that IoT and automation will replace humans in many service industry jobs, it will impact LatAm countries later than in the US because there is still a considerable cost advantage in using service providers in regions. He cites the example of the Dominican Republic, since the lower wages of customer service reps (CSRs) there make it easier for them to compete against the current value equation offered through automation, such as chatbots and other cognitive solutions.

Meléndez does believe that change will come, however, and he predicts that countries, such as Colombia and Mexico, will be severely impacted by a loss of Business Process Outsourcing (BPO) contracts due to automation.

He says that BPO will be threatened the most by automation. “Jobs, such as call centre operations, customer services and other back-office functions, will be threatened by rules-based and cognitive automation as well as chatbots that begin to mimic the role of humans,” he says.

Because automation works best to alleviate employees of mundane, rules-based work, the most significantly impacted sectors are ones with very large back office operations, such as banks, insurance companies, healthcare, telecoms and utilities. Poole emphasises that, in addition, the large BPO players and business services providers will also attempt to develop their capabilities across multiple industries reducing headcount. “In many cases, these contracts are FTE based so this will also impact the revenue of those businesses,” he says.

Meléndez adds that to prepare for the inevitable shift toward automation, which will eventually occur as the cost of services increase due to competitive pressures, LatAm countries need to focus on STEM education, to make their workforces more skilled in technology disciplines.  Like Poole, Meléndez believes that although automation will replace repetitive jobs, it will also create jobs to manage and improve automation technology. He already sees initiatives to improve STEM education in Latin America.

Chile and Brazil are good examples of countries improving their STEM education and overall primary and secondary education. For example, Chile has initiated a program, called Start-Up Chile, which was created by the Chilean government and seeks to attract early-stage, high-potential entrepreneurs to bootstrap their startups using Chile as a platform to go global. Meléndez says: “By focusing on an educated workforce and encouraging growth in technology fields, these countries can take advantage of the automation revolution, instead of being victims of it.”

Poole notes that while the shift in automation is likely to impact all of Latin America eventually, the larger economies will benefit from this initial wave. “Brazil is likely to experience the most significant impact as it starts to emerge from its recession and GDP starts to grow. There is an opportunity for Brazilian companies to grow without expanding their headcount and at the same time improve their profitability,” he says.

Despite some movement towards the integration of automation in a variety of sectors, the level of penetration in LatAm is very low currently with only one or two of the major BPO players actively implementing RPA within their installed base of multinational clients, according to Poole.

“Despite the low penetration currently, LatAm may be better prepared to reap RPA’s benefits more quickly than other regions due to initiatives towards digital and mobile-based business systems within both large corporations and the government,” he says, adding that there is a huge amount of potential for automation in Latin America, as the technology works best with more structured and digitised inputs.

 

Also read:
Office 2021: Why robots won’t end drudgery or steal our jobs
Workplace automation: Is the UK worried?
Humanity will invent new jobs long before AI “steals” them all
Can the skills shortage square with automation fear?

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Bianca Wright

Bianca Wright is a UK-based freelance business and technology writer, who has written for publications in the UK, the US, Australia and South Africa. She holds an MPhil in science and technology journalism and a DPhil in Media Studies.

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