Project Syndicate

By Benigno López and Eric Parrado

The barriers to economic progress in Latin America and the Caribbean (LAC) are as well-known as they are formidable. Inequality is high, tax evasion is rampant and education systems are inadequate. Poverty and extreme poverty are widespread, especially in the wake of the pandemic. And the public subsidies that could support the most vulnerable are poorly targeted, undermining their effectiveness.

Overcoming these barriers will require the construction of stable institutions and world-class infrastructure, a difficult feat that demands considerable time, investment and will. But there is one relatively smooth path to progress: the digitalisation of public services.

Today, nearly three-quarters of the LAC population use the internet. The region has embraced smartphones, with more than two-thirds of Latin Americans now connected to a mobile network. Access is uneven, with low-income and rural households lagging behind high-income and urban households, but governments have been working hard to close the gap, especially since the pandemic highlighted the Internet’s role as an essential service.

The private sector is already making the most of the digital revolution: the LAC region now boasts more than 25 digital companies valued at more than $1 billion. But even as the proliferation of internet and smartphone access transforms services like shopping and banking, government services continue to be delivered largely in person and on paper.

This is a major missed opportunity. By using digital technologies, governments can deliver a wide variety of public services, even services that are not currently provided in any form, widely, efficiently, and at a low cost. In fact, the possibilities are so vast that the first challenge is prioritising them. That is why the Inter-American Development Bank has released a report evaluating policy options in areas ranging from education and health to fiscal programmes and public administration.

Which programmes will provide the biggest bang for the taxpayer’s buck? One standout example is sending text messages to pre-diabetic people encouraging them to eat healthier foods and engage in more physical activity. Such messages cost little to create and disseminate. But they can have a big impact: similar programmes in China, India, and the United Kingdom led to a 5-30 per cent reduction in the onset of diabetes after two years. Similarly, videos about the economic benefits of education, delivered through school networks in Peru, reduced the dropout rate by 20 per cent over a two-year period, with overall economic benefits totaling an estimated $553 million.

Another intervention that withstands a rigorous cost-benefit analysis is electronic procurement, which improves the efficiency and transparency of transactions between government and suppliers of goods and services. Argentina’s e-procurement platform, COMPR.AR, reduced prices paid by 4.4 per cent, shortened procurement processes by 11 days, and increased the number of bidders by 0.3.

For any such programme to work, the central government must ensure that digital services are accessible, reliable and affordable, especially for lower-income groups. Moreover, relevant apps and other software must be easy to use, primarily on smartphones or cellphones and interventions must be implemented at scale, in order to maximise the return on investment. Inclusion, efficiency and cost-effectivenesas are the order of the day.

Central governments must also take the lead in implementing the needed digital infrastructure and institutional frameworks. If securing digital public services is too complicated, users are likely to be deterred. They should be able to use a single digital ID for all of their interactions with government, and tap all government-provided online services through a single access point.

For this to work, data must flow seamlessly among institutions and agencies at all levels of government. Such digital integration could kickstart the expansion of administrative capacity for municipal governments, which carry out much of the spending and service delivery in the LAC region.

At the same time, regulatory frameworks must be modernised, for example, to protect privacy and guard against cyberattacks. And governments must continuously monitor and evaluate the impact of their digital innovations and interventions, assessing not only the return on investment, but also how inclusive their programs turn out to be, and adjust their strategies accordingly. Fortunately, digital technologies make it easy to collect real-time data.

The case for governments in the LAC region to use digital interventions to increase the quality, value, and reach of public services could not be stronger. Thanks to the widespread adoption of cellphones and smartphones, governments need only develop easy-to-use applications and invest in low-cost interventions. Add to that continuous evaluation of programme impacts, and a strategy for digitalising public services becomes a powerful weapon in the fight against poverty and inequality.

Benigno López is vice president of Sectors and Knowledge of the Inter-American Development Bank. Eric Parrado is chief economist of the Inter-American Development Bank. Copyright: Project Syndicate, 2023.

www.project-syndicate.org