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Driving the momentum of the GovTech ecosystem from the Development Bank of Latin America (CAF)

For our latest episode, we invited Enrique Zapata, one of our five GovTech Groundbreakers 2023, to share his experience working at the Development Bank of Latin America (CAF), where he has led numerous GovTech initiatives.

πŸ“Œ About Enrique Zapata 

Enrique serves as the Coordinator for Data Intelligence, GovTech, and Open Government at the Development Bank of Latin America and the Caribbean (CAF). He has spearheaded several groundbreaking initiatives, including the establishment of the first dedicated investment facility for GovTech startups in Latin America and the Caribbean.

Enrique has also taken the lead in creating The GovTech Index, which stands as the inaugural GovTech index in Iberoamerica. Throughout his career, he has actively contributed to significant projects, including the development of Mexico's National Open Data Policy, the creation of the National Digital Platform for the National Anticorruption System in Mexico, and the formulation of the Data Governance Model for Colombia's National Data Infrastructure.

In recognition of his outstanding contributions, Enrique was honored with an award as one of the "100 Future Leaders: The World's Most Influential Young People in Government | 2019" by Apolitical. 

πŸ“Œ How do you think the GovTech Index 2020 has contributed to the GovTech ecosystem in Ibero-America?

"It all began in 2019. That year, we formed and launched, for the first time, the digital transformation team at the Development Bank of Latin America (CAF). Based on an analysis of what was happening in the field, observing the activities of other banks, we concluded that understanding and supporting the GovTech ecosystem was crucial. Why? Because there's a significant gap in the capacity for using advanced and exponential technology within governments. Except for governments with very high budgets, such as the United States, or regions like Europe, China, Russia, and a few others, the reality is that most governments, especially at the national, state, and municipal levels, lack these advanced computing capabilities. They face budgetary pressures, struggle to retain skilled human resources who often prefer the private sector, and so on. We saw companies resembling startups in the GovTech ecosystem, specializing in advanced technology, as valuable players who, if connected appropriately with governments, could provide these capabilities for better operations, improved citizen services, and foster a more entrepreneurial government responsive to today's digital society."

"One of our initial efforts in this area was to understand the state of affairs in Latin America. At that time, in 2019, there wasn't much information available. Our first thought was that we needed an index—a snapshot of the region's status. Not for the sake of comparing countries, but to understand where we stand, both regionally and nationally. By knowing where we are, we could make recommendations on where we could progress."

"Thus, the idea of the GovTech Index 2020 was born. It was the world's first GovTech index created by any actor. What emerged was the GovTech Index 2020, published that same year, providing insights into how countries in the region, including Spain and Portugal, members of the CAF, were positioned. We realized that even the most advanced countries—European nations, Brazil, Chile, Mexico, Argentina, Colombia—had much room for improvement."

"We developed a methodology that breaks down GovTech into three main pillars: governments, startups, and, in between, procurement and data, facilitating the relationship between government and other stakeholders. Upon disaggregating these three pillars into seven dimensions, comprised of 28 indicators, with primary and secondary sources for each, we recognized that there was much to change and support in the region regarding these issues."

πŸ“Œ What was the impact of the GovTech Index 2020?

"Firstly, it allowed us to see the status of each country and identify best practices. These practices could be exported or replicated in other countries. Secondly, it enabled governments to understand the challenges they face. If you don't name something, put it in writing, or make it clear, it's difficult to comprehend. With clear country-level analyses, we, along with stakeholders in governments and startups, had a roadmap of where to navigate. Thirdly, having this insight allowed us to make specific interventions with countries and governments, both national and local, who sought support in certain dimensions. This ranged from initiating specific projects to advancing initiatives, including creating strategies or public policies and establishing public challenge initiatives or even investment funds."

"Following that, last year, we released the GovTech Index 2023 of Ibero-American Cities. The idea was to conduct a pilot project with 31 interested cities. They said, 'I want to participate in this project.' This was a significant effort because there isn't as much data and information available at the regional level. So, we had to collect this information firsthand and published the report last year with the same interest. Now, we're wrapping up the GovTech Index 2024, which will likely be released around April or May of this year."

πŸ“Œ Could you tell us about the first investment mechanism in GovTech companies created by CAF?

"We created two things. Firstly, we initiated a pilot project for an investment fund at CAF for equity investments or direct investments in startups. We began in 2019, but in 2020, with the pandemic, it became even more important to support digital ecosystems and, particularly, governments in their digital transformation efforts to offer new citizen services, allowing everyone to stay at home while minimizing disruptions to industries, procedures, and services by transitioning them to digital platforms. This also led us to support companies, startups, to do the same. In this spirit, we created the first GovTech investment fund in Latin America. We established a $2 million fund at CAF, through which we invested in six regional startups working in various areas related to government operations: 1) OS City in Mexico, focusing mainly on self-managed digital identity, 2) Cívica Digital in Mexico, specializing in digitalization of procedures and services, 3) Vicua in Colombia, Venezuela, and Peru, supporting the transformation of cities or smart cities, 4) Aprova in Brazil, also dedicated to digitalization of procedures and services and government digitalization, 5) Unblur in Spain, supporting disaster response teams, especially firefighters and those responding to natural disasters like floods, with various technologies including drones, Artificial Intelligence, and augmented reality vision, 6) Citibeats in Spain, providing intelligence from social networks on various matters of interest to governments."

"What we wanted to achieve was twofold. Firstly, to bridge an existing market gap where traditional venture capitalists perceived high risk in startups that engage with governments. This is because working with governments differs significantly from working with private entities: timelines, risks, and financial projections vary. We aimed to demonstrate that it's feasible, encourage other stakeholders to invest in these companies, and support them. I believe it turned out well. There are now several funds, both public, private, and hybrid, engaging in this, which is great news."

"The other aspect, which I believe will be the most important in the long run, was to assist governments in creating their own funds. These are public funds investing in private actors, which might sound contradictory, but we successfully accomplished this with the municipality of Córdoba in Argentina. We supported them in legal analysis to explore regulatory and legislative possibilities for creating such funds. We found various avenues and models they could pursue. We aided them in establishing an operational model, culminating in a fund called 'Córdoba Smart City Fund'. With this, the municipality, using 1% of its main municipal tax, the industry tax, invests in diverse startups. They're already on their fourth or fifth call for proposals. This has been well-received because we also devised a new way to attain returns that venture capitalists typically seek, which could include economic returns or convertible notes. In Córdoba, returns can also be in the form of social benefits. So, if you invest in a company, for instance, deploying sensors of any kind on lampposts, instead of merely conducting a trial, the money invested is returned to the municipality, which then uses it to install more sensors. Córdoba is an example that this approach is feasible. Other governments are keen on exploring how they can replicate this, and we're working to make this a more common reality in Latin America."

πŸ“Œ What were the lessons learned that we should consider when discussing the GovTech ecosystem and analyzing it critically concerning public data governance?

"It's important to note that GovTech is defined as a governance scheme between the public and private sectors to address public issues through new technologies. When something is defined, setting boundaries is crucial. So, GovTech is not open government, it's not digital government (I say digital government is what you want to do, and GovTech is how you want to do it), it's not open innovation, nor is it civic technology because it primarily involves the government as the main counterpart and decision-maker. It's crucial for the audience to understand what it is and what it isn't. I always emphasize this because, with the best intentions, if you understand something differently, you'll end up implementing something vastly different from what you intended. This has been seen in issues like open government, which ends up being something completely different from the spirit; open data ends up being something different from the spirit. It's essential to make this clear so that the same doesn't happen with GovTech."

"Within this governance scheme, there are sub-governance schemes. There can be different organizations/relationships within the government itself: between the coordinating entity and all internal governmental bodies that need to organize, between the government and various external actors and startups, between those overseeing contracts on both sides, and within the data aspect."

"The National Open Data Infrastructure of Colombia is probably the clearest example of well-thought-out data governance in a country. Firstly, we mapped out the key actors andæ priority datasets in Colombia. For example, actors included the Ministry of Technology overseeing open data, the National Planning Department (DNP), transparency authorities, and several other entities housing public records, which are high-transaction databases. These data are used by many systems to identify specific actors such as individuals, companies, vehicles, etc. What we did was establish an initial ecosystem of how these actors, who are responsible for generating and safeguarding this data, can first achieve interoperability among themselves to streamline system operations, automate various processes, and, based on that, build citizen services."

"The next step in these governance schemes is to understand how the private sector, and all other sectors of civil society, can access data that is not necessarily public. Part of any national data infrastructure must be open data, i.e., data that, by its nature, is public: it's neither confidential nor related to national security issues or privacy breaches. There are data that are confidential, perhaps private, but need to be used by various actors. The big question is how do you create governance systems that allow for this use while also not violating human rights? This has been seen globally through data trusts, which is the ideal mechanism for this. It's a data trust because it has the same legal structure as a trust: you have someone who holds something, an asset, i.e., the data, someone who uses that asset, the private sector, for example, or conversely, the public sector with private sector data, but you're legally bound to safeguard those data and only use them in certain ways that protect people's anonymity, for example, or the confidentiality of the data in question. This enables the creation of many new services, drastically reduces bureaucracy between public entities, and enables the use of transactional data, which is the lifeblood of a digital ecosystem and the digital world we live in. What was done in Colombia is an example that should be followed, deepened, and undoubtedly one of the best examples we have in Latin America."

πŸ“Œ Can you give us a preview of what's coming in the GovTech Index 2024 or highlight some trends for this year?

"There are changes. There's a new methodology, and we've improved it. It's not about ranking or comparing countries but about understanding what's happening and going beyond. On another note, regarding what's coming, we're working with several governments on implementing a methodology we call the 'GovTech Strategy Preparation Guide,' which we developed at CAF. It's an open methodology that anyone can try to assess their institution, government, or a specific sector of the public sector on certain issues and understand the next steps to keep moving forward. We've implemented it with Colombia, the Madrid City Council, Córdoba in Argentina, also with Monterrey in Mexico, and recently started working on it with another government that I can't mention because it's not public yet, but eventually it will be. The launches of these guides and documents will come soon, and most likely in May, at an event organized by the Madrid City Council, we'll have the opportunity to discuss with all the stakeholders involved to see what each has achieved, but above all, what commonalities there are and what we can learn from a kind of meta-analysis."

"We'll also continue with what I believe is most important, the funding aspect. Money is needed. One issue with GovTech startups, and startups in any sector but especially GovTech, is that they survive based on grants which have a very specific nature tied to a specific project. That's not what they need. They need money and investment to grow as a startup, meaning, expand their operations, grow their technology, develop new technologies, open up new areas (legal, sales, marketing). This is what transforms a business, which may be expert in technology but has five people, into eventually a small company, and eventually, a micro one."

"Precisely, we're working on a proposal for sovereign loans for countries that, from CAF, we can provide on a multi-year basis, to create much larger investment programs. We're talking about tens of millions of dollars over several years to fund precisely the ventures in all sectors or verticals of the digital economy. I believe that will be the most important."

"Finally, we'll also release some theoretical documents based on my doctoral thesis. It's the first theoretical basis of what GovTech is beyond what we can see documented based on experiences. Experience is one thing, theory is another, and what we want here is to have a theoretical foundation of public policy for GovTech in a way that continues to show that it's something different, that it's not something new, and that it continues to strengthen the dialogue we have."