GovTech is Here to Stay

The entrepreneurial ecosystem in Latin America is flourishing in an unprecedented way. Great successes such as Rappi, NuBank and Kavak have led to an ever growing flow of capital being invested in startups in the region, with enhanced innovation and solutions for underserved populations.

This entrepreneurship boom is also reaching governments, with a potential to improve them substantially. Thanks to so-called GovTech companies—technology-based startups that were founded with social impact in mind and the vocation to solve management problems in the public sector—, many outdated and dysfunctional processes being phased out. Although the presence of GovTech in countries of the region is still limited, these startups are called to help bridge modernization gaps in the states.

After the COVID-19 pandemic, which accelerated digital transformation in all sectors and industries, governments in the region have acknowledged that the future of public administration must inevitably become more agile. And GovTech solutions offer just that: from ensuring transparent practices in public procurement, to reducing red tape, regulatory and bureaucratic improvements and facilitating greater efficiency in public spending.

Public administration technology solutions is currently a 400-billion-dollar-a-year global market, which is still dominated by large technology companies. The question is how governments can take steps to open up that market to startups and improve diversity and competition. In this regard, GovTech companies will also be key to avoiding major failures in state technology investments at a time when budgets for this purpose are growing significantly.

“This kind of innovative entrepreneurship is exactly what Latin American public administrations need. GovTech is transforming the way governments design and implement public policies using technology. They add value to government digitalization acceleration, allowing us to experiment with disruptive solutions to reset our governments in start-up mode for recovery, particularly in cities,” said Carlos Santiso, director of CAF’s Directorate for Digital Innovation of the State.  

The region has a number of technology-based startups that are already providing solutions to public administrations. Munidigital in Argentina, Brazil and Costa Rica, with its efficient incident management platform at the municipal level, such as arborization management; VisorUrbano and Civica in Mexico, with its digital municipal cadastre and solutions for automation of public services; OsCity, Appterix and Signature, also in Argentina, with its blockchain technology solutions for public management and digital notary services; Linte, in Brazil, with its procedure and legal document automation software; or UNBLUR y Citibeats in Spain with emergency management and citizen participation solutions.

These companies are first and foremost data management ventures, which contribute to improving the quality of public services and helping governments predict citizens’ needs and behaviors. In this regard, CAF’s GovTech and the 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 exchanging good practices, composed of governmental, national and local agencies, seeking to promote public enterprises and boost their GovTech ecosystems. Its first meeting was attended by 10 countries, including Colombia, Brazil, Argentina, Mexico, Lithuania, Luxembourg, Spain, Poland, the United Kingdom, and Serbia. This network is initially being chaired by the Government of Colombia and will have the support of CAF as a permanent secretariat.

Another effort to enhance 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 is integrated around a series of GovTech actions, knowledge generation, technical advice and impact investment initiatives.

Latin America has a number of structural challenges that it needs to solve in order to have more agile, transparent, and efficient governments. Among the most important are outdated government machinery, high institutional informality and low service delivery capacity. All these problems are in the crosshairs of GovTech.