Govtech is here to stay
The entrepreneurial ecosystem in Latin America is experiencing an unprecedented flourishing. Great successes such as Rappi, NuBank or Kavak have contributed to an increasing flow of capital to invest in startups in the region and, with it, to boost innovation and solutions for underserved populations.
This entrepreneurship boom is also reaching governments and has the potential to improve them substantially. Thanks to the so-called govtech companies, technology-based startups that are born with the objective of social impact and a vocation to solve management problems in the public sector, many outdated and dysfunctional processes are disappearing. Although the presence of govtechs in the countries of the region is still limited, these startups are called upon to contribute to bridging the modernisation gaps of states.
After the COVID-19 pandemic, which accelerated digital transformation in all sectors and industries, governments in the region have assumed that the future of public administrations inevitably involves agility. And govtech solutions offer just that: from ensuring transparent public procurement practices, to reducing red tape, improving regulations and bureaucracy, to facilitating greater efficiency in public spending.
Today, the market for technology solutions for public administrations, which generates more than $400 billion a year worldwide, is still dominated by large technology companies. The question is how governments can take steps to open up this market to new companies and increase diversity and competition. In this sense, govtechs will also be key to avoiding major failures in state technology investments at a time when technology investment budgets are growing significantly.
"This type of innovative entrepreneurship is exactly what Latin American public administrations need. Govtechs are transforming the way governments design and execute their public policies through technology. They add value to the acceleration of the digitalisation of governments, allowing us to experiment with disruptive solutions to reset our governments in start-up mode for recovery, particularly in cities," says Carlos Santiso, Director of CAF's Directorate of Digital Innovation of the State.
The region has a number of technology-based start-ups that are already providing solutions to public administrations. Munidigital in Argentina, Brazil and Costa Rica with its platform for the efficient management of municipal incidents such as tree management; VisorUrbano and Civica in Mexico with their digital municipal cadastre solutions and automation of citizen services; OsCity, Appterix and Signature, also in Argentina, and their blockchain technology solutions for public management and digital notaries; Linte, in Brazil, and its software for the automation of legal routines and documents; or UNBLUR and Citibeats in Spain with solutions for emergency management and citizen participation.
All these companies have their raison d'être in data management, which contributes to improving the quality of public services and helps governments to predict citizens' needs and behaviours. In this sense, CAF's Govtech and Future Government Report contains 30 recommendations for governments and startups to improve the efficiency of administrative processes.
Efforts to boost the govtech ecosystem are multiplying in Latin America and the rest of the world. The first Global Govtech Alliance was recently launched, a space for policy dialogue and exchange of best practices, composed of government, national and local entities that seek to foster public entrepreneurship and boost their govtech ecosystems. Ten countries participated in its first meeting, including Colombia, Brazil, Argentina, Mexico, Lithuania, Luxembourg, Spain, Poland, the United Kingdom and Serbia. This network is initially chaired by the Government of Colombia and will be supported by CAF as the permanent secretariat.
Another of the efforts to promote govtech solutions is the creation of CAF's govtechlab, a space that fosters collaboration between governments, startups and MSMEs that use data, digital technologies and innovative methodologies to solve public problems and improve the transparency and efficiency of public management.
The platform integrates a series of govtech action initiatives around knowledge generation, technical advice and impact investments.
Latin America has a series of structural challenges that need to be addressed in order to have more agile, transparent and efficient governments. Among the most important are an outdated government machinery, high institutional informality and low service delivery capacity. All of these problems are in the crosshairs of govtech.
Robert Valls, Senior Communication Executive at CAF
Visions of Development is a section promoted by CAF - Development Bank of Latin America - that analyses the main development issues in the region. The articles it contains are published simultaneously in the main Latin American media.