Looking back at 2023, a year in which trade in goods faced considerable headwinds in Latin America and the Caribbean, knowledge-based services stood out for their sustained growth. The high quality of this surge is borne out by practices that promote efficiency, sustainability, optimization, and productivity, all of which significantly help bolster people’s quality of life.
A valuable experience I had a few months ago in the Caribbean shows how this region -famous for its sublime landscapes- is in the midst of an astonishing and silent transformation.
This transformation hinges on knowledge-based services exports, which are just taking hold in an economy traditionally underpinned by the natural beauty of the region’s white sand beaches and crystalline waters. Now, sectors like software, data management, information technology consulting, and many other activities are stepping into the spotlight and driving growth and innovation.
On June 14 and 15, I attended the successful ninth Outsource2LAC summit in the tourist city of Montego Bay in Jamaica. This is Latin America and the Caribbean’s most important event for knowledge-based services exports, and I came away from it with a much richer perspective on the Caribbean.
At this event, organized by the Inter-American Development Bank (IDB) together with Jamaica’s Ministry of Industry, Investment and Commerce through the Jamaica Promotions Corporation (JAMPRO), I was able to witness the cultural diversity and, above all, entrepreneurial enthusiasm at play in the services provided digitally in this realm of idyllic islands.
There is still much work to be done. Still, the statistics on business development in the digital economy confirm everything that people told me at the Montego Bay Convention Center, a location with sweeping vistas of mountains rising above the turquoise bays of Jamaica’s northeastern coast.
The numbers point to a burgeoning sector, just as Anuskha Sonai, Mario Sparkes, Rajiv Hieralal, and siblings Megan and Okon Alleyne had described to me in a boisterous networking session.
These individuals exemplify what knowledge-based service entrepreneurs are doing in the Bahamas, Barbados, Guyana, Jamaica, Suriname, and Trinidad and Tobago—the Caribbean countries that have the IDB.
The World Trade Organization (WTO) measures certain exports of digitally delivered services—also known as global services exports or knowledge-based services exports—to track trends in the sector. Its indicators show that this sector is growing fast in Caribbean countries with IDB programs
In 2022, these countries exported a combined $1.468 billion in knowledge-based services, led by Jamaica ($498 million), Trinidad and Tobago ($304 million), and Guyana ($270 million).
In the subregion consisting only of the six countries listed above, knowledge-based services still carry less weight in absolute terms than in Central America ($11.560 billion) and South America ($39.818 billion), according to the same statistical source.
But compared to the reality of just a few years ago, the region has made a significant leap, driven by the performance of a few standouts. I think back to the first Outsource2LAC, held in 2011 in Montevideo, Uruguay. At the time, knowledge-based services exports from the six Caribbean nations totaled $1.059 billion. In other words, sales of these global services for export have risen 38.6% in 11 years.
Overall, services have enjoyed a positive dynamic this year, especially considering the shrinking foreign sales of goods in 2023. Both trends were charted by the Trade and Integration Monitor 2023, compiled by the IDB’s Integration and Trade Sector and its Institute for the Integration of Latin America and the Caribbean (INTAL).
The pandemic: a turning point
Anuskha Sonia is from Suriname, a country perched on the northeastern tip of South America but with striking cultural and geographical similarities to Caribbean nations. Perhaps because of this affinity, she provides an exciting perspective on knowledge-based services, as did all her Caribbean colleagues with whom I spoke at the Outsource2LAC event in Jamaica.
The 43-year-old electrical engineer works in information technology and holds an MBA. She noticed accelerated growth of knowledge-based services after the COVID-19 pandemic, at least in the markets of Suriname, Guyana, and Trinidad and Tobago.
She is the head of the dual company Creative Tech Hub Caribbean, headquartered in Suriname and provides digital services to businesses. These services include website design and development, digital marketing strategies, and a wide variety of training courses with internationally recognized certifications in using the latest technology and other topics.
Based on her insider insight into the Caribbean’s digital economy, she sees two major obstacles to greater internationalization of Caribbean markets: human capital formation and access to financing.
But tech firms have not become mired in these difficulties. Instead, they have launched training programs at the companies themselves, outside of the traditional tertiary sector. According to Sonia, this move marks a paradigm shift.
Creative Tech Hub Caribbean provides training services at a much lower price than formal education does. However, it faces the challenge of scaling up in a way that keeps investments at reasonable levels. Essentially, this challenge consists of expanding the activity without significantly increasing resources and costs.
Okon Alleyne experienced these limitations firsthand in 2015 when he and his siblings founded Aeon Innovative Solutions Inc., which primarily focuses on implementing medical records software for the healthcare industry in Trinidad and Tobago.
Alleyne, a biomedical engineer who at 35 is CEO of the company, recalls considerable difficulties with recruiting local talent when the company was first launched. Also, when he finally found suitable personnel, the associated costs were prohibitive, which in the tech ecosystem can deal a significant blow to a company’s competitiveness, especially if they are looking to expand beyond their countries borders.
Cross-Caribbean connections
According to Sonia, a crucial obstacle to knowledge-based services in the region is the lack of access to financing, although financing alone does not guarantee successful scalability.
She believes that now is the time to deepen connections within the Caribbean, focusing on gains from scale and creating better conditions before pivoting toward markets in the rest of the world. So, in the short term, she argues for “focusing on the Caribbean region.” As an enthusiastic entrepreneur with clients in the Netherlands and the United States, she speaks from ample experience.
Aeon Innovative Solutions Inc., the Alleyne siblings’ company in Trinidad and Tobago, seems to be taking the same tack. For example, they plan to expand to Jamaica by providing medical software to local companies there.
Structural advantages
Mario Sparkes, a 37-year-old physicist and electrical engineer, shed further light on the outlook for an emerging sector that has an increasing number of experiences to build on.
Sparkes, who also has a Master’s degree in cybersecurity, the field in which his company Purple Team Solutions operates, believes that his country—Jamaica—has specific structural advantages that make it easier to sell knowledge-based services to the United States or Canada. These advantages are English as a common language and a shared time zone, as well as lower costs than competitor markets like India and the Philippines, at least in his niche.
But this IT security expert does not take these advantages for granted, warning that fierce global competition means a country’s edge is never absolute.
His tech company, therefore, aims to expand to other countries in the region—Guatemala specifically—by teaming up with local companies, a path similar to the one the Alleyne siblings are taking to get a foothold in Jamaica.
Sparkes acknowledged the Caribbean region’s efforts to develop technological sectors and sees his country of Jamaica as a prime example of this trend. But he also believes a lot of work is yet to be done.
What does he see as the chief difficulty? A lingering overemphasis on training on job skills that are easy to replace with automation tools or procedures. He believes that more effort needs to be put into expanding services that add value, which would help raise the standard of living for people and the Caribbean.
Rajiv Hieralal, a 35-year-old electrical engineer from Suriname, puts it more bluntly: knowledge-based services can be an excellent tool for fighting poverty. He believes that businesspeople have a responsibility in that regard.
From the vantage of his company Apptastic, which provides apps for cell phones, he has seen the sector’s growth reflected in his operations’ shift towards software. After offering graphic design services only, he recently went all in on the business of apps for Android, one of the most popular operating systems in the world.
The entrepreneur’s face beams with the pride and confidence brought by working on an export project in no less than the technological mecca of Silicon Valley, California, with support from a multilateral bank.
Hieralal explained that the technological factor had played a decisive role in the solid numerical growth and constant evolution of knowledge-based services. For that reason, he paints a picture of a sector undergoing both quantitative and qualitative changes, one step ahead of the companies operating in the traditional economy.
The young man from Suriname was excited about interacting with other colleagues at the ninth Outsource2LAC, and foreign companies that attended the event as outsourcers. He is optimistic that knowledge-based services will offer the basic conditions needed to develop the skills and competencies for expanding to other markets and, more generally, that the companies will move forward in harmony with the world around them.
“There are opportunities, but it isn’t easy,” he admits.
After these conversations, it was clear that the Caribbean’s tech companies have a world of opportunities before them, especially with initiatives like Outsource2LAC, which allows entrepreneurs the opportunity to export their services and gain experience. I was left convinced that the time is ripe for this region to act and has an opportunity to stand out on a global stage and earn a place in a highly competitive sector.
The ever-more-connected nature of the world is a fair wind, filling the sails of the Caribbean ship of knowledge-based services.
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