Tapping the Vast Opportunity of Smart Cities in LATAM

In LATAM, governments are the biggest contractor of projects. Between 2013 and 2016, public investment represented around 4% of the region’s total GDP or roughly US$213 billion, according to the World Bank. Nearly 40% of all public investment in the region is a public-private partnership. Building up of urban infrastructure attracted most of these investments. Unfortunately, these projects are often inefficient due to weak planning. As a result, governments are turning to technology with the hope of making their investments work by making projects more efficient.

A few days ago, I had the opportunity to participate in the 2nd edition of the SmartCity Expo in Buenos Aires, Argentina. It was one of the biggest smart city events in Latin America.  Companies were promoting their services to the cities, while the cities were showcasing how they have evolved. It was a platform for the meeting of the public sector and the private sector. The key themes that emerged out of the event were – digital transformation, security, mobility, education, sustainable future, inclusiveness, and shared economy.

In the last three to four years, a bulk of the public investment in technology has been for digitalizing all processes. National and capital cities’ governments, especially, have spent a good deal of resources to improve their e-readiness. In Brazil, for example, Congress has approved a US$87 billion budget for 2019 to continue with its digital transformation goal.

E-Government index measures the government use of electronic communications devices such as computers and the Internet to provide public services. Exhibit 1 shows the list of ten most e-ready countries in LATAM.


Exhibit 1: LATAM Top Ten E-Government Development Index (EGDI)

Source: UN E-Government Knowledgebase.

However, even within the top ten countries, cities other than national capitals are far from being e-ready.  For example, Colombia has more than 1,200 municipalities, Argentina has 2,300, Brazil has 5,500, and only the top 5% of the cities in these countries have an online appointment system.  Many small cities, located wealthy parts of countries, are looking to improve their e-readiness. Nonetheless, even cities that started digitizing their data many years ago need intelligence to sort the data. They also could benefit from the use of blockchain technology to crossover data.

Another focus area at the SmartCity Expo was improving city security.  Big cities, such as Buenos Aires, Rio de Janeiro, and Sao Paulo, struggle in this regard. As security is an issue that city dwellers most demand, most governments have been installing cameras all over the cities. For example, Buenos Aires, had 8,500 security cameras by the end of May 2018, while Rio de Janeiro had 4,200 in 2017.  The cameras in Rio de Janeiro have been collecting information since 2003 and generate a few terabytes of data every month. Therefore, authorities in Rio de Janeiro are looking for new cloud services to manage and store this data. The city of Rio also needs AI to identify what is normal and what is an anomaly. In the case of Argentina, the coast guard generates 12,000 records each quarter. This year, it contracted Big Data Analytics services to process the data.

Mobility is another area where all major capital cities in LATAM had invested heavily to transform the physical infrastructure. However, there is still a need for major technology investment. For example, the city of Buenos Aires has 6 million people that commute within the city daily. However, it doesn’t have a platform or any information that would convey all the bus or train schedule.  To correct this situation, Buenos Aires is planning to launch an app that would inform commuters about the timings of public transport. Although, in the beginning, the coverage of the app will be limited. At present only six cities in LATAM have this service. With almost 60% smartphone penetration, soon all the other cities will have to provide such a service.

These are just a few samples of why there is such a hype about smart cities in LATAM. On average, each of these contracts is worth US$1.5 million.  As for opportunities, it is clear that “technology is global”. However, technology needs to be supported by a robust business model. And for this the biggest problem for any company are the LATAM governments in most countries, the contract process is often not transparent, always extremely bureaucratic, and many times tainted with corruption. These are the challenges which need resolution if the smart city opportunity in LATAM is to truly flourish.