How to revolutionize public services in Latin America

Through the use of digital technologies, governments can deliver a wide variety of public services, even services that are not currently provided at all, widely, efficiently, and at low cost. A new report highlights the most promising policy options in areas ranging from education and health to fiscal affairs and public administration.

WASHINGTON, DC – The barriers to economic progress in Latin America and the Caribbean (LAC) are well known and they are immense. Inequality is high, tax evasion is rife, and education systems are inadequate. Poverty and extreme poverty are rampant, especially after the pandemic. And public subsidies that could help the most vulnerable are poorly targeted, making them less effective.

To overcome these barriers it is necessary to build stable institutions and first-class infrastructure, a difficult feat that will require time, investment and will. But there is a relatively easy route to progress: the digitization of public services.

Today, almost three quarters of the Latin American population uses the Internet. Mobile phone use in the region is widespread, and more than two-thirds of Latin Americans are connected to a mobile network. There is inequality in access, since in the case of rural and low-income families it is less compared to urban and high-income families, but governments are making great efforts to eliminate this disparity, especially since the pandemic highlighted the fact that the Internet is an essential service.

The private sector is already taking full advantage of the digital revolution: the LAC region has more than 25 digital companies with a valuation of more than US$1 billion. But as the proliferation of the Internet and smartphones transform service provision in the banking and business sectors, public services continue to be largely delivered in person and on paper.

Thus, an important opportunity is lost. Digital technologies would allow governments to provide a wide variety of public services (including some that do not exist today) in a broad, efficient and economic way. In fact, there are so many possibilities that the first challenge is to prioritize them. That is why the Inter-American Development Bank has published a report evaluating options for policy formulation in areas ranging from education and health to fiscal programs and public administration.

Which programs offer the best cost-benefit ratio? One example that stands out is sending text messages to pre-diabetics to encourage them to eat better and be physically active. Creating and disseminating those messages costs little. But they can be very effective: similar programs in China, India and the United Kingdom managed to reduce the occurrence of diabetes by between 5 and 30% in two years. Meanwhile, a video dissemination program on the economic benefits of education (which was carried out in Peru through school networks) reduced the dropout rate by 20% in a period of two years; It is estimated that the total economic benefit of an intervention of this nature reaches 553 million dollars.

Another intervention that passes the test of a rigorous cost-benefit analysis is the digitization of public procurement processes, which improves the efficiency and transparency of transactions between the State and providers of goods and services. In Argentina, the COMPR.AR platform reduced the prices paid by 4.4%, shortened the contracting process by eleven days and generated an increase in the number of bidders equivalent to 0.3 more bidders per call for bids.

For programs of this kind to work, the central government has to ensure that digital services are accessible, reliable and affordable, especially for lower-income sectors. In addition, relevant applications and software components need to be easy to use (particularly on smartphones or mobile phones) and interventions need to be implemented on a scale that maximizes return on investment. The keywords here are inclusiveness, efficiency and good cost-benefit ratio.

Central governments also need to take the lead in putting in place the institutional frameworks and digital infrastructure that are needed to make the system work. If accessing a public digital service is too complicated, users will most likely avoid doing so. All interactions with the public sector should be possible with a single digital ID and through a single access point.

For this to work, institutions and agencies at all levels of government must be able to share information seamlessly. This digital integration can be the starting point for expanding the administrative capacity of municipal governments, which in the LAC region concentrate a large part of the spending and provision of services.

At the same time, regulatory frameworks need to be modernized; for example, to protect privacy and prevent cyberattacks. And governments must continually monitor and evaluate the effectiveness of their digital innovations and interventions (measuring not only the return on investment, but also the degree of inclusiveness achieved by their programs) and adjust their strategies accordingly. Fortunately, digital technologies facilitate the collection of data in real time.

There are very good reasons for governments in the LAC region to improve the quality, value, and reach of public services through the use of digital interventions. Thanks to the widespread adoption of mobile and smart phones, all they have to do is develop user-friendly apps and invest in low-cost interventions. If to this is added a continuous evaluation of the effectiveness of the programs, then a digitalization strategy of public services will become a powerful instrument in the fight against poverty and inequality.

The authors

Benigno López is Vice President of Sectors and Knowledge at the Inter-American Development Bank.

Eric Parrado is a Principal Economist at the Inter-American Development Bank.

Translation: Stephen Flamini

Copyright: Project Syndicate, 1995 – 2023

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