Accessing data crucial for operating businesses, establishing public policies, avoiding double taxation and the release of a new information system: these were just a few of the subjects discussed at the fourth Annual Convention of the Latin American Exports Association (ALES) in Buenos Aires, Argentina, held last week.
“Information about services is not at the same level as the production and exportation of services in our countries or in the world as a whole, despite the fact that it’s an economic activity that has gained impetus over the last few years,” stated Uruguay’s Vice President Danilo Astori at the forum.
Astori highlighted how public policies and the participation of private initiatives (in particular, small and medium size businesses that have made a name for themselves as exporters, as well as other entities actively participating in international commerce) give an idea as to the relevance of the exportation of services.
Astori explained how global services are currently divided into three groups: information technology, business process outsourcing (BPO) and knowledge process outsourcing (KPO). All three groups have expanded on a global scale thanks to outsourcing and offshoring: “They have segmented and established value chains that allow countries to place themselves within a particular segment.”
He also highlighted how the services sector has shown significant resistance to economic fluctuations. In particular, towards the end of the first decade of the new millennium the economic crisis negatively impacted on a great number of developed countries – throwing many of them off-balance economically. “What happened to services during the economic crisis? In 2009, global demand for goods fell by 23% and demand for services fell by 10%, while the demand for global services only fell by 5%. This is what we call crisis resistance,”Astori stated.
Opening Up to the Outside World
According to the Uruguayan Vice President, opening up to the outside world is fundamental when it comes to ensuring that Latin American countries develop their internal potential. And this opening up should not be seen purely from a global perspective; it should also take into account political and cultural components.“It also includes opening up to society; the position a country takes, allowing the community to access and participate in public data. Access to data is fundamental, along with data protection, when necessary,” Astori said. He also emphasized the need for Latin American governments to structure a digital agenda defining the action they intend to take in order to modernize their states.
One of the problems facing technology services exporters is that they have to pay taxes both in their country of origin and in the country to which they are exporting. This is known as double taxation. Because of this, Astori, along with other participants in the forum, recommended the creation of devices to help services avoid double taxation: “Open countries are counter-attacking by setting up investment promotion and protection treaties and double taxation avoidance treaties.”
Astori also explained that improving infrastructure, widening bandwidth, closing the digital divide, promoting the use of fiber optics and encouraging service exportation businesses to participate in the stock market, is vital: “Access to the stock market is essential to ensuring the availability of the resources needed to make sure their projects progress.”
The focus of this fourth convention was Latin America’s position within the Knowledge and Information Economy. It reported how 31 public and private institutions from 16 countries are working with ALES to attract investors to the region and promote it as an exporter of knowledge. According to Javier Pena, ALES’ General Secretary, “the aim is to position Latin America as the hub of global services on an international scale.”
ALES made the most of the convention and released the Information System for Services Commerce (SRIAM), an online tool available to service exporters, investors and trade promotion agencies, giving them access to information on how to do business in Latin America and the world as a whole. “This tool allows you to make informed decisions, based on accurate data and personalized ratings,” explained Pena. Backed by the Inter-American Development Bank (BID), the tool will provide information on laws, agreements, double taxation, indices and statistics, he added.
“Firstly, we generate a common nomenclature; in language that will be easily understood by the statistical specialists in Chile, Nicaragua and Argentina,” Pena said.One of the remarkable aspects of SRIAM is the way in which it measures service exportation. According to Pena, developing this capability was extremely challenging, as each individual country has a different way of doing it.
Identifying factors that investors take into account when they segment each of the sectors of interest(such as IT, BPO, Call Centers, Engineering and Architecture) is also important.“The products we have developed for the region are already being used in several countries. For example, in Chile, where they have used the nomenclature to measure service commerce in the engineering sector and have discovered that there are activities that had not previously been recognized by the formal sector,” Pena stated. He added that PromPeru has signed an agreement with the Peruvian Statistical Institute, promising to accurately measure global services commerce within the country.
Four Key Components
The most important release at the convention, SRIAM is made up of four main components.The first of these is the Laws and Agreements system, a geo-localizable system that identifies the country of origin of the investor or entrepreneur and provides information on relevant national and international laws. “It also provides transverse information from several sectors, for example when dealing with author rights, visas and taxes,” Pena explained.
The second component is the Double Taxation Agreement. As previously mentioned, businesses involved in the exportation of global services often have to pay double taxation. This component provides information on cases that are exempt from double taxation. “This can prove extremely useful to businesses when it comes to exporting their services,” Pena said.
On the other hand, the Index section provides information on factors that investors take into account when looking to invest. For example, if an investor from the United States is considering investing in sectors such as Engineering and Call Centers in countries such as Brazil, Colombia, Costa Rica or Mexico, he can use the index component to obtain a panorama of how these sectors stand within Latin America.
“It has taken over a year of extremely complicated work. It’s like a Russian doll – with layers of information. The system gathers hundreds of variables and groups them together in transverse elements such as the general structure of costs, competitiveness, business platform, human resources and quality of infrastructure – and there is information specific to each sector,”Pena explained.
Finally, there is the Statistical component. This component compiles data from central banks, allowing you to compare the different countries. For example, you are able to consult statistics on the exportation of services, participation of the services in the GDP and year by year statistics etc.
“Perseverance has guided our efforts right from the start,” Pena stated. “We have worked for four years in order to make this dream a reality: with help from 16 countries, 31 private Latin American institutions and support from the BID.” He concluded: “Now, the challenge is even more ambitious: making sure the Information System for Services Commerce stands the test of time, and that Latin America continues as a global services hub.”