There is no time to waste. The key technology for the fourth industrial revolution has reached its maturity and is ready to evolve and optimize Latin American trade. Accelerating the adoption of Blockchain is a decisive response to recovery from the crisis in a world that will demand more security and confidence after the pandemic, according to the Inter-American Development Bank (IDB).
Thus, the IDB released the analysis called "Blockchain and international trade” in December 2020 as a corollary to a disruptive year. It coincides with the implementation of new tools increasingly adopted by the private sector and scheduled by government policies that promote a greater impact of digital platforms on production techniques.
The study raises one Guide to applying Blockchain at different stages that a company goes through when trading abroad and indicates how this technology will allow for greater efficiency and productivity in customs operations, logistics, trade financing and cross-border payments.
"Blockchain technology is already transforming trade in Latin America“The publication states, then analyzes how and explains selected cases.
Customs
Customs in Latin America have adopted this tool. According to the report, “Peru, Mexico and Costa Rica They made particularly significant progress with the application of Blockchain to the customs system through a pilot project called CADENA, carried out with the IDB and Microsoft, which uses this technology to improve the security and efficiency of their customs mutual recognition agreements (MRA) and their authorized economic operator (AEO) programs.” It should be noted that CADENA was designed as a pilot project primarily to allow all participants to learn how Blockchain works and consider its implementation.
Also, the U.S. Customs and Border Protection Service U.S. (CBP) formed a team in 2017 to investigate the agency’s potential use of blockchain. The group has already identified 14 specific uses, ranging from tracking licenses and permits to certificates of origin.
The publication also mentions that the evolution of Blockchain in customs will allow them to secure and facilitate commercial transactions and defeat fraud, optimizing exchange, in a context in which the improvements achieved will generate significant economic benefits.
Logistics
The level of efficiency in logistics in Latin America is very low. That is why new technology can generate a highly significant change in this scenario, according to the IDB.
For this purpose, a pilot test is being developed in Mexico. "The Port of Veracruz is working with the General Administration of Customs of Mexico to adopt Blockchain and smart contracts to transmit information and automate processes involving port community participants (such as terminal operators, rail carriers, logistics providers, tax authorities and the port authority),” the analysis explains.
There is also a very promising project: the Blockchain-based platform of Maersk, developed with IBM. As reported, “The joint blockchain venture by shipping company Maersk and IBM was launched in June 2016 and targeted areas such as pineapple shipments from Colombia al Rotterdam port. Since then, the network has connected Maersk’s carriers, ports, customs, banks and other participants in global value chains to track cargo and replace redundant and time-consuming paperwork.”
Overall, port automation can transform trade in the region, according to the study. Ports around the world are becoming smarter by leveraging fourth industrial revolution technology to optimize their operations.
Payments
Pilot tests show that this new technological system can help speed up and reduce cross-border payment fees faced by exporters, importers and SMEs involved in international trade. For this reason, Latin American companies have developed alternative methods to avoid paying very high fees for these transactions, the IDB indicates.
The report exemplifies, among some cases, with the test of Bradesco, Santander :“Tokyo-based MUFG and Sao Paulo-based Bradesco have agreed to collaboratively create a cross-border payment service based on Ripple’s distributed ledger technology.” It adds that “Santander in Brazil has launched a service called OnePay FX to make cross-border business-to-business (B2B) payments using Blockchain.”
The value proposition of this technological system is therefore to lower costs and settle payments more quickly in commerce, including for operations in Latin America.
Financing
Blockchain can streamline international trade financing. Several banks are now trying to solve the problem of high costs incurred in processing a letter of credit.
According to the report, “Blockchain technology has already been tested in Latin America and the Caribbean: in 2017, the company Show off, based in Barcelona, bought more than 25 tons of frozen tuna from Pinsa Frozen, originally from Mazatlán, Mexico, with the help of a 35-day letter of credit. Use cases suggest that blockchain reduces the time it takes to issue a letter of credit to approve a transaction from seven to ten days to just four hours.”
Pilot testing of the use of Blockchain technology holds unparalleled promise in Latin America, the analysis highlights. These findings show that this system can help speed up Customs operations and shipments, as well as secure commercial transactions, combat fraud and money laundering, and reduce the costs caused by intermediaries.
“Blockchain is bringing Latin America closer to the holy grail of global trade: the integration and automation of financial, logistical and information value chains that support commercial transactions,” the document notes.
Recommendations
This technology is relatively new, so the IDB recommends accelerating its adoption by Latin American governments and expanding its benefits through the following: specific measures:
- Enable use cases and experimentación related to Blockchain through laboratories and test environments.
- Thinking about systems and standards interoperability of Blockchain.
- Measuring adoption and simulator of Blockchain in the region's trade and of SMEs in particular.
“The situation is pressing. There is an urgent need to accelerate the incorporation of this type of innovation that will allow for more and better goods and services from Latin America and the Caribbean in world markets, offering quality, health and safety. in the new normal that awaits us the day after the pandemic,” the document concludes.
Aduana News is the first Argentine customs newspaper to launch its digital version. With 20 years of experience, its publications and initiatives aim to provide the most relevant knowledge on customs issues in order to contribute to safe trade in the region.
