Caio Franco on the Future of Latin America’s Tech Sector and Political Dynamics in the Region
Wed Mar 16 2022

Headline

Latin America faces many challenges, but it is also rife with opportunities; the tech sector is just one area where challenges are being addressed in innovative ways to create greater social and economic value in the region. 


About the Interview 

In September, PRISM’s George Coe and Johan Gott sat down to speak with Caio Franco, the director of legal, policy and communication at Buser, a Brazilian intercity bus startup that raised $138 million in investment last year. We were thrilled to speak with Caio, as we wanted to discuss Latin America’s complicated and unfinished trajectory to economic prosperity and to better understand how Latin America’s tech sector is different from others in the world and is adapting to challenges unique to the region. 

A lawyer by training and a professional with a strong background in public policy and analyzing public discourse in Brazil, and Latin America more broadly, Caio brings unique insights into our conversation by presenting us with an excellent discussion on the intersection of Latin American politics and its tech sector. The broad conversation that PRISM held with Caio touched upon the challenges that Latin America faces, the unique opportunities for technology in Latin America, his concerns about how political discourse has changed in recent years, and the potential for the region to leverage competition between China and the United States in its favor.

 

Our Takeaways

  • The Brazilian and Latin American tech sectors are not growing as fast as those in the US or China, but throughout the region, the sector is growing faster than ever before. And while tech platforms in Latin America are unlikely to be exported to the rest of the world, valuable platforms will be created that develop unique solutions to the specific challenges the region faces. One such area is in ESG, where countries like Brazil that have immense natural resources and experience managing them could use technology to create new industries and investment products centered around sustainability.
  • Latin America’s turbulent history with democracy presents a unique way of looking at the risks facing Western democracies but also presents some reasons for optimism. While in Latin America there is a much wider sentiment that democracy is fragile than in longer-lived democracies, there is also significant evidence that key institutions are often capable of remaining in-tact despite efforts to undermine them, which offers one reason for optimism.
  • Technological developments have the potential to exacerbate existing inequalities because those who are disadvantaged now, as access to life-changing technologies are not readily accessible to those who are already marginalized but are to those who are advantaged. There needs to be intentionality to address this growing gulf in access and who benefits from technological development. 


The Interview 

Read the full conversation below. The transcript has been edited for clarity and style.


PRISM: Let’s start with a bit of an introduction. How would you introduce yourselves in terms of what you do and what you are working on at the moment?

Caio Fanco: I'm a lawyer by training, so that is the lens that informs how I look at things, but for a while now I’ve been focused on issues related to public policy and communications, particularly related to the tech sector. But what I’m really interested in is public discourse and debate, and what I am trying to do from the most macro level is to understand trends and think about where we are going on that front so that we can plan ahead.


PRISM: Super interesting. I guess my second question is from a high level of thinking about your current position, what impact has COVID-19 had on your role or and more generally Brazil’s tech scene?

CF: COVID affected every industry pretty heavily, right? And not just here, but across the world. Mobility,the industry that I am working in at the moment, was very heavily hit. My company grounded its entire fleet for three or four months, and demand in the industry still hasn't fully recovered. So COVID has been hugely important there. But the upside for tech here – and I don't want to speak for every tech company, but I do think it applies to most of them – is that COVID accelerated many trends that were already occurring. Remote work was one, but even changes in consumption habits, which were already shifting from offline to moving more online. So, funnily enough, I think it's been a good couple of years for tech, even if you go into sectors like mine that have been heavily impacted by COVID. 

If you take things from a market share standpoint between native tech companies and the more traditional offline incumbents, the tech companies have fared pretty well. Like even in the mobility sector, things are better than for consumer electronics and other types of commerce. I think crises highlight a few things that tech companies are good at: cost management, customer satisfaction, and being adaptable.

From a public policy perspective, I think that COVID has also changed the game in several ways, and again it has accelerated existing trends. For a while, the pandemic was out of control and way too many people had lost their lives, and this obviously had a tremendous impact on the policy agenda, right? So objectively, it was very hard to get anything done that wasn't related to the pandemic. You couldn’t push any regulation or any public discussion that was not related to it, which is completely understandable. But I think this was somewhat temporary, and I think the lasting impact of the pandemic will be that underlying trends in public policy will accelerate. 

Public policy is a very face-to-face profession, and that got hard in the pandemic. In response, we have seen a bit of a change in how public policy professionals conduct themselves. Now they leverage other things. They aren’t just going to lunch with people, right? Instead we sort of saw a rapid rise of people who were able to sort of use other strategies, like leveraging data, to be more effective. These changes were already happening before the pandemic, but they have taken off as a result of it.


PRISM: Just just diving into the first part of what you said a bit more. You mentioned that, even in mobility, tech companies have taken market share from traditional companies; I presume you mean that they are taking market share from traditional transportation companies. If this is a trend being pushed ahead by COVID-19, how do you see that evolving as the pandemic starts to – hopefully – subside? Do you think the transition is sort of inexorable and will continue at the same pace? Or will it slow down? Or could tech companies return to where they were before the pandemic? 

CF: The answer to that, I think, will change from industry to industry and country to country. But in general, that's the billion dollar question, right? Everyone's trying to figure out whether the trends that have been accelerated, will keep accelerating, will hold, or if we'll have to take a bit of a step back after COVID. I think it's really hard to predict the nitty-gritty of how many percentage points things will go up or down. But, I think it is safe to assume that the sort of jump that we saw and the order of magnitude of change will sort of stay the same or pick up. What we may see is some people going back to offline consumption, things getting back to normal, companies that are now completely remote going to some sort of hybrid form of work, et cetera. But I don't think we're going back to the same status quo that there was before the pandemic. I think COVID has shown us that things can be different for a large part of the world and many industries. And in the industries and the parts of the world where there is enough infrastructure and where culture permits things to happen more online than offline, I'd be very surprised if everything just shifted back to the previous status quo. Of course, in everything from remote work to consumption habits, things will become a hybrid between what we had before and what we have now. But I think that this is a slope that we've climbed and we’re not going back. So, I think the trends have serious staying power.


PRISM: I think that's a really interesting way of thinking about potential differences here. Zooming out, but staying in the tech sector, how do you think of what is about right now in the tech sector from a Brazilian or Latin American perspective? Is the Latin American tech scene growing more quickly than American or Chinese ones?

CF: In short, no, Latin America’s tech scene is not growing faster than the others. But if we rephrase your question, what I can say is that we’re growing faster than we were before. So we are gaining speed and gaining on China, even though the US and China are still miles and miles ahead. The first thing that we need to understand about Latin America – and this is my take – is that Latin America is this promising place for development and business and human thriving in general, but that, historically, things have started to pick up but have never really taken off. If anything, COVID kind of hindered our ability to develop in some ways, just in terms of how hard our public health systems were hit, how many people we lost, and how many small, medium, and large economic crises have occurred within the huge global pandemic crisis; many Latin American countries have suffered a lot these last two years. 

What I think is specific about the tech scene is that maybe because of the general sort of lack of prospect for many of the more traditional industries, there is a lot of attention being paid to Latin American tech and its potential to help us out of where we are even though we haven't been able to sort of catch up to the pace of China or the US. We have been doing much better than we were doing two or three years before the pandemic.

If you take venture capital investment in Latin America, we've been consistently – in the last two or three years – beating our own records. These numbers are still small compared to other parts of the world, but they look good. So, I would rephrase your question and answer: No, we haven't caught up to everyone else, but we are doing better and better. That’s a start, right? 


PRISM: Definitely. So, from what you’re saying and from almost a competition standpoint, on the global stage, is most of Latin American tech's growth domestically focused? Are there any areas where there's potential for the region to produce more globally oriented companies? And if so, what are those? In my eyes, mobility does not seem like the place where that naturally fits, but maybe there are other areas like fintech and others?

CF: I think there are a couple of ways to approach this question.. There are a few things that we will excel at at the local scale but aren’t export goods for the rest of the world, right? I'll give you an example. If you take fintech – and I don't want to say that Brazilian and Latin American fintechs that want to expand overseas will do badly – but a lot of what makes them possible and successful is regional: regulation, culture, consumption patterns, et cetera. Technology will solve some things in finance, but it won't solve everything because it's just so highly regulated and there are other challenges. 

It also doesn't mean that we are not at the forefront of that innovation. Fintech is a sector in which Brazil is surprisingly ahead of almost everyone in the world. I mean, you see startups in the US raising a lot of money to provide services like same day cash transfers, right? In the US, you will wire someone money and usually it'll take a day or two to be received. Brazil has had same day cash transfers for 15 years. Even before fintechs emerged, we had Pix, which allows people to instantly pay any amount at any time to anyone. So we are quite advanced on some things, but it doesn't necessarily mean we're going to get to export them, right? 

If I try to be a little more daring in answering your question, I do think Brazil and other countries in Latin America can excel at some things – not just tech but also things that combine tech and something offline. One major trend, obviously worldwide, is ESG. I think there is some space for Brazil, the rest of  Latin America, and other countries leading the way mainly on environmental practices to establish businesses in this area. Like, now people are discussing things like the tokenization of carbon credits or trying to talk about agritech. And you have people talking about making NFTs to conserve forests and selling NFTs as a kind of global carbon credit. There are certainly some areas where we have the materials to work with that no one else has. Maybe if we invest enough and have good tech behind it, we can have some bigger impact in the world. 

For the most part, however, I think we have to keep our feet on the ground and know that for now we are at a place in terms of tech where we're mostly doing things that other more innovative countries have already done but adapting those things to our realities. It's a huge market, and there's a lot of money to be made. But it's sort of tough for me to see Latin America, with the exception of some areas, leading the world in any respect with technology, because it's not just about having good people, right? We have good brains, we have good people, we have good ideas, and we have excellent developers. It's just that we don't have enough of the infrastructure. Our politics are in a very complicated moment, even though this is true in many places. Public investment here is much, much lower than – not only it should be – but where it was 10 years ago. So the general trend is not positive. In my opinion, we are still managing to do some very interesting things. Hopefully, tech will be a way to sort of help us out.


PRISM: I'm curious about what you said about ESG and the environmental angle. The Amazon is a huge land area that has enormous potential for carbon capture. Are you thinking about tech being used to turn parts of it into assets? Or, or what did you have in mind there? And how will tech support it? 

CF: Tech can support it in a number of ways. First, just in terms of hardware; there are always things that we need to make, build, and invent to allow us to do things better. So to give you an example, Brazil is somewhat famous for relying mostly on hydroelectric facilities. Our universities work a lot with developing technologies. So, there's this sort of heavy industry aspect of how efficient we can be and the fact that we invest in it because we are going to use it. But there's also software, which is something I know much more about than hardware and heavy industry. I think there are a bunch of ways that software can help us not only manage resources but also invent clever ways to market it and turn ideas into products. If someone figures out a way of – as some people are talking about – doing more effective things with the tokenization of carbon credits and things like that, you can create a market that is really open, easy to access, and trustworthy, so that you can really market those to anyone in the world, instead of just a few companies and governments. That's a huge thing, and this is just one thing that I've been reading about recently and that is in my head. 

There's all these different ways that tech can help. But getting back to your earlier point, the reason why I mentioned ESG, especially as a field, is precisely because it's not just tech, right? It's something that you have to build on. A country like Brazil has the potential to do great things. I'm not a specialist on this. But it does appear that conservation-as-a-service is going to be a big trend. And with the general global shift to ESG, the more serious it gets, the more I think countries will be rewarded by how well they're managing their own resources. And if you have a lot more resources in general and more natural resources than anyone else and on top of that you do a good job of managing them or you have tech companies that help you leverage those resources and to gain efficiencies in the area of conservation, that could definitely be very rewarding, not only in terms of the good that you do to the world but also very financially rewarding. So I think there's certainly a lot of things we can do in that direction, I've been reading a bit about it. I'm not a specialist on it in any sense of the word, but I think that's definitely a trend.


PRISM: Because you mentioned a bit before about how politics are complicated at the moment and can sometimes get in the way. How do you see that challenge interfering or enabling some of these positive trends or creating negative outcomes going forward?

CF: It's sort of tough to talk positively about politics right now. The short-term electoral and political outlook is rather tough to predict. And I won't venture a guess what will happen, but again, it's tough to be positive. So bear with me. What seems clear is that politics in a broader sense are at such a challenging point because of the confluence of elements that are working in tandem and are on a sort of feedback loop. It would highlight three things. First of all, growing polarization, and not only growing polarization in the sense that you have more and more people on opposite corners and less in the middle, but that these opposite corners are also increasingly more distant. So you have people concerned about gender neutral pronouns and people concerned with the earth being round or flat on the other. It's increasingly difficult to make people speak the same sort of language because people are in very distant worlds in terms of what preoccupies them, what drives them, and what they think is important. We have left a time where politics is more or less about ethics and moral discussion and ended up with discussions that are very hard to connect. The second is the deterioration of the quality of public debate and social conversation. Anyone who figures out a way to leverage software and make money by teaching people to be better at critical thinking, philosophy, and debating-style rhetoric will do wonders for the world. I mean, just the level of discussion that we see in the public sphere has deteriorated compared to 15 years ago in Latin America. It was much more high level, much more informed. It was much more data driven. This is weird, right? We have so much more access now to information and data. The deterioration of the quality of public debate is related to polarization. And the third one, I would say, is the proliferation of fake news and related phenomena. Again, this is highly related to the two other trends. All of these are in a terrible feedback loop with each other. Sorry for the very grim turn that this answer took, but I'm concerned about all that. 

I think there are some ways out. Just the availability of data and tech can help inform public policy decisions. More and more, it is the case that decision-makers have access to data and technology that can help them to make better choices. And this, of course, exerts some sort of long-term positive pressure. There's also a wide sort of realization from parts of society that some things that people have been talking about for 30 years are now really critical. ESG is one sort of business-related thing that I'm trying to use here to sort of merge the business and political worlds. So, I will stay with that example. More and more, as in business and politics, these topics are also starting to be leveraged and start to be important for people with aspirations. So there are some positive trends, but the general outlook right now is pretty tough to predict. And I am increasingly preoccupied by the three trends I mentioned: polarization, deterioration of quality of debate, and proliferation of fake news. I think they have a lot of do with the sort of oscillations that we're seeing in Latin America in terms of just how confident people are in their governments and how confident people are in their markets.


PRISM: I have a follow up question on that. In terms of the deterioration of political discourse and the quality of democracy, I think in the US, there are definitely things that people are worried about. But the concern and worry are a bit diffuse, right? Especially from a business perspective, everyone knows that the January 6 insurrection in the US could have gone worse than it did, but nobody can really put their finger on what that would have meant from a business perspective. So, I am curious: From your perspective in Brazil, where sort of democratic erosion is still within living memory for many, what’s the difference between operating in a democracy and a more authoritarian system? I am not thinking about the sort of North Korean or Chinese side of authoritarianism, but the more Latin American type. I think you can think of Trump as being a bit like Latin American authoritarians? I’d be curious if you have advice for Americans trying to make sense of what a more authoritarian government could mean for the business environment?

CF: That's a tough question. You make a good point about authoritarian regimes being in living memory in Brazil and Latin America. What I get from that is a more general sort of comment on not only Latin America but other parts of the world, as well, and the fact that democracy as a whole is under attack. I don't think it's necessarily coordinated or a planned attack, like anti-democratic forces are not conspiring in a room somewhere to overthrow governments – of course, that also happens – but I think it's just more about democracy collapsing in on itself, if we're not careful enough. Because the rate at which we developed our tech, our communications tools, and opened new avenues for public debate possible, like social media, was much faster than the scale at which we informed our people and educated them to be critical about the information they get, there is a growing disjuncture between having fake news at the fingertips of millions of people versus how people assess the validity of that information and deal with that. 

I think it's this sort of rolling gesture, very much influenced by tech and communications, that is sort of making it seem like democracy can collapse on itself because of us. Like the English phrase – That's why we can't have nice things. That's more or less what worries me; it's not that someone somewhere is plotting against democracy, but that the weight of everything that we've built is sort of collapsing in on us. 

As for trying to help people in the US make sense of things, I think, what's important to understand is that our democracy is very young. It's old for Latin America, but it's young, and because even Latin American democracies have been plagued with problems and at constant risk of being overthrown, it's clear to us that it’s not guaranteed that democracy will continue. And this is one of the things that scares me. I think we've done some very good things in the last 20 years, like shoring up some of our institutions. So with all our faults, with all the institutional problems that we present, I do think that – and here I prefer to speak for Brazil than anywhere else in Latin America – democracy will hold. I do think your institutions in the US will remain in place, and I do think that in the medium to long term, Brazil is an incredible place to invest in, to live in, to trade with.

I do think we have a land of great opportunity here for investment, for trade, for innovation, for a bunch of things. And we have a huge mass of very, very talented, hungry – sometimes in the literal sense, but I mean it in a metaphoric sense – people. People want to do well and really want to make things go forward. So, I do think it's a wonderful place to be. I'm not going anywhere. I'm staying in Brazil. And I think we can go to distant places, but in the short term, it's important to remember that Latin America has been plagued with these kinds of fluctuations for a long time. They’re not going to get fixed in two weeks.


PRISM: Do you see the interest of Chinese companies – like TikTok, Kauai, or Shein – or Singaporean companies that are owned by Chinese firms as an opportunity for Brazil? Or, do you think that they might bring more competition or potentially social-ethical problems?

CF: Well, I'm all about more competition, more alternatives and more products in the market. I'm all for that. I do think, however, that for any of the fields that you mentioned, especially social media but any other field you mentioned, there's always a sort of  a necessity for us to be a little bit aware of the consequences and the risks of technology. I've made a living by defending the booms and the benefits of technology, but in my more academic preoccupations, I do try to look into risks as well. And I do think there's this sort of mismatch between the risks that some technologies and some trends in technology bring. I don’t really concern myself so much with where the tech is coming from, but I do consider more about what the tech is all about. I think there are beneficial and promising technologies and very risky ones. There’s problematic technology coming from everywhere. You have both kinds of tech coming from the US and from China and being developed within Brazil, so I think more about the what rather than the where from.


PRISM: If you think about 10 years from now: How will Latin America or the world in general be different from today? And to that extent what have we missed in terms of the big trends that we've discussed?

CF: I think it's hard to predict what it will look like in 10 years. Right now, it's hard to predict what it will look like in one. In terms of things that I still think will be applicable in 10 years. First, software will eat the world. It's been eating the world, and it will keep doing that but at some point, we reach critical mass in terms of what the internet can do for us. We still have to produce the food. We still have to have clean air. We will still have to have places for people to sleep at night. So, I do worry a little bit about – I wouldn't say a second dot-com bubble or anything like that – but I do worry about something like that. 

Still, we still seem to be lacking some very basic things. At least from the Latin America perspective. I think 10 years from now, we run the risk of being more unequal than we are right now and having more poverty than we have right now, even though we have amazing technology available. We need to be concerned with the basics instead of just focusing on how incredibly advanced we can make things for the top one, two or three percent. The top could approach increasingly more futuristic, Jetsons-style life and a lot of other people could live in really poor conditions.


PRISM: That is a perfect segue into my closing question. If anything, how do you position yourself in what you do and how you operate in the world to prepare or shape where the world is going?

CF: I'm going to try not to give an answer that isn’t futile. I'm trying to read a lot. I'm trying not to be a control freak about everything. Tangentially, one of the things that we didn’t talk about here and that I think about a lot is the pace of technological developments, which is so fast. But our predictive power grows worse the more advanced our technology becomes. There’s going to be a major lack of predicting power, and the technology that we are developing may lead us to places that we had no idea of. So, I’m trying not to be a control freak about everything and to not fixate on perfect analysis. I want to be more adaptable. When I'm managing my team, when I'm trying to give advice to people, and I'm trying to make decisions about myself, my family, and my company, I'm trying more to preserve options and alternatives and trying to adopt very general ways of thinking and conceptualizing things and to have conversations that are highly informed by sort of a conception of the world rather than a prediction of  exactly what is going to happen. I'm trying not to be Mr. Know-It-All and trying to be more adaptable to things that I don't think much of. 

I don't think much about my role in the future. I think it's a bit futile, but I do try to fix little things. Hopefully, at the end of the road, I'll look back and say: “Oh, I made some good decisions here and there.”