Artificial Intelligence (AI) has arrived in Latin America and is bringing with it a new business reality, which presents unprecedented opportunities alongside significant risks. Governments and corporations are investing billions of dollars to make the Latin American megacities - from São Paulo to Bogotá - smarter, more efficient, and safer. For Israeli innovation, this is a call to one of the world's largest playgrounds, but without a thorough legal-business understanding, they can quickly become a costly trap.
As a law firm that expertizes in Israeli high-tech for dozens of years it is clear to us that Israeli AI technologies in the fields of transportation, energy, and defense are an excellent solution to the tremendous Latin need. Combining Israeli innovation with Latin power has the potential to create the transactions of the century, but there are also many challenges. The first major challenge is the regulatory "data wall," similar to the regulatory regime in both Israel and Europe. AI systems are hungry for local data to learn and digest, but the continent's stringent privacy protection laws, such as Brazil's Lei Geral de Proteção de Dados (LGPD) - which is similar to the GDPR, including with regards to the material criminal fines it applies (but also the Personal Data Protection Law (Law No. 25.326) of 2000 in Argentina, The Mexican Federal Law on the Protection of Personal Data Held by Private Parties (LFPDPPPP) that was significantly updated in March, 2025, the amendment of the law in Peru from the same month called Supreme Decree No. 016-2024-JUS, etc.) creates a wall of privacy protection in these jurisdictions. This is not only an issue of compliance - it is a fundamental business barrier, which requires Israeli companies to receive legal advice on local law and act in compliance with it, which makes the legal aspect an integral part of the business plan.
The issue of data protection is only one of the challenges. Another challenge is the liability issue, the nightmare scenario of any management: for example, an Israeli AI system for traffic management causes a chain accident in Mexico City - is the liability on the shoulders of the developers in Israel, the local integration company or maybe the municipality that operated the system? Lack of a precise contractual definition for such a situation may lead to an exposure that can cause an image and financial crisis from which it will be difficult to recover.
Additionally, without a properly structured contractual system, the transaction could turn into a battleground for the most valuable asset: intellectual property. The AI system is not a static product - it is a technological "child" which will mature by studying the rich Latin data to which it will be exposed. The result is a new and immensely valuable knowledge. To the extent that the engagement agreements do not address this issue well, questions will arise as to whom it belongs? Does it belong to the Israeli company that brought the technological DNA, or to the local partner that provided the "growth environment"? Without a clear regulation of ownership of the derived knowledge, the Israeli company may discover that its intellectual property has been "contaminated" and it has lost ownership of the next generation of its technology.
In conclusion, in AI transactions in South America, the measure of success lies not only in the code, but also in the business-legal architecture that envelops it. Building it requires a strategic vision and the support of a law firm that not only understands technology and the Latin market, but also knows how to plan the complex bridge between code, culture and regulation. Israeli companies that are wise enough to build this bridge correctly will not only avoid risks but may build the deals of the century.