Annex I. USAID_Peru_PD ADD.pdf

USAID/Peru Advancing Digital Democracy (ADD)

Program Description

1. BACKGROUND

Digital Transformation and Connectivity On July 28, 2023 Peru’s Secretaria de Gobierno y Transformacion Digital (SGTD) launched the country’s Digital Transformation Policy, with six priority objectives1: 1) ensuring inclusive, secure, and high-quality access to the digital environment; 2) linking the digital economy to sustainable productive processes; 3) providing inclusive and empathetic digital public services; 4) strengthening digital talent; 5) consolidating digital security and trust; and 6) promoting the ethical use of exponential technologies and innovation. These objectives are translated into actionable guidelines implemented through 82 public services aimed at citizens, entities, businesses, and vulnerable sectors. Digital transformation will play a critical role in accelerating Peru’s economic growth, the effectiveness of government systems, and the delivery of government services. However, the ineffective implementation of legal and regulatory frameworks in Peru’s digital ecosystem, driven by limited government capacity, limited resources, and scarce multisectoral collaboration, threatens to undermine these efforts. This failure jeopardizes human rights protections and digital security, while also restricting equitable access to digital technologies and services. Over the long term, the regulatory gaps and bottlenecks could exacerbate the country’s significant digital divide and increase the risk of misuse of citizen data and government-controlled technologies by bad actors.

According to the Digital Ecosystem Assessment conducted in Peru in 2022, “about 73 percent of the population actively used a mobile phone in 2020, compared to 50 percent in 2013. Mobile broadband networks covered 83 percent of the population as of 2017. More than 50 percent of the population was covered by 4G (fourth generation) networks and 74 percent was covered by 3G (third generation) networks. The majority of network coverage is concentrated in the populous cities along the nation’s coast. The National Institute of Statistics and Informatics reported that mobile phones are the primary avenue through which individuals connect to the internet, with 82 percent of Peruvians ages six years and up using a mobile phone to connect to the internet in 2018.2” Nonetheless, approximately 27 percent of Peru’s population still lacks access to mobile networks, while 61 percent of the country lacks access to the type of broadband internet connection that can be relied upon for providing and accessing government services, or for building digital businesses.

The rapid increase in internet access and social media usage has also exposed citizens to new risks. Cyberattacks, including extortion through social media platforms and misuse of personal data, have become a growing concern. In Peru, there have been numerous reports of cybercriminals using platforms like WhatsApp and Facebook to conduct 'digital extortion,' where

2 USAID (July 2022) DIGITAL ECOSYSTEM COUNTRY ASSESSMENT - DECA 1 National Digital Transformation Policy to 2030 (July 2023) https://cdn.www.gob.pe/uploads/document/file/4932850/Pol%C3%ADtica%20Nacional%20de%20Transformaci%C3%B3n%20Digital%20al%202030.pdf?v=1691014709 individuals are coerced into paying money under the threat of releasing sensitive personal information. For instance, a 2023 report by the Peruvian National Police revealed a significant rise in complaints related to social media extortion, highlighting the urgent need for stronger digital security measures. Malicious actors exploit the lack of robust digital safeguards, targeting individuals who are increasingly dependent on online platforms for communication, transactions, and services.

While broad sections of the country remain disconnected to broadband networks, there are compelling justifications to accelerate Peru’s digital transformation, including the opportunity to bring more efficient and effective service delivery to the 83% of the population that can currently connect to the internet through their mobile devices. Through consultation with over 15,000 Peruvians, the SGTD established 82 commitments that prioritize next steps for transforming Peru’s government, economy and society for the digital age. This prioritization process has not been simple given the breadth of needs and scale of resources that will be required.

Consultations have established that people want connectivity and a single window (“ventanilla unica”) for government services and bureaucratic procedures. The SGTD is grappling with how to transition digital services across government ministries into a single interface as seen in countries like Estonia, Ukraine, Singapore, Taiwan, South Korea and Colombia.

The Secretary of the SGTD was replaced in 2024. Priorities for the current Secretary are increasing digitalization of small and medium enterprises in Peru, strengthening cybersecurity (particularly across the financial sector), and digitalization of subnational government offices.

The recent transition has raised questions among civil society regarding the extent to which the digital transformation can be implemented, given the broad transition of technical staff across the office. While the SGTD has traditionally been a politically appointed role, this uncertainty underscores the benefit of transitioning such roles to permanent civil servant positions. In addition, civil society called for the SGTD to be established as an independent office, similar to the Controller’s Office, to ensure that the transformation continues in a transparent and accountable manner that is insulated from partisan politics. With national elections coming in 2026, there may be an opportunity for political candidates to raise the profile of a wide range of digital policy issues.

Donor Coordination and Prioritization

Donor cooperation has answered the call to support Peru’s digital transformation. The German Government, through KfW Development Bank, has provided a substantial loan to support the digital transformation, while the Inter American Development Bank (IDB) recently launched a new loan to support these efforts. Both investments will focus on accelerating the digital transformation while addressing critical areas in the digital divide, focusing on bridging regional, gender and ethnic divides.

The IDB and KfW funding present critical opportunities to foster further donor engagement on key activities to accelerate a rights-respecting digital transformation in Peru including:

expanding safe digital ID systems and interoperability across government offices, consolidating government services and creating an interoperable digital backbone, eliminating duplicate or conflicting roles/responsibilities across government agencies and reducing bureaucratic red tape, addressing digital divides (focusing on digital access and capacity for women and indigenous peoples), cybersecurity and national data centers.

There is currently no donor coordination group that focuses on digital transformation and digital economy issues, nor is there a dedicated roundtable or working group to address digital policy issues. This was identified as a gap by donors, particularly the need for a multistakeholder platform that could provide greater coordination across government, civil society and the private sector. The USAID Digital Ecosystem Assessment (DECA) found the same gap in 2022, and recommended strengthening Peru’s Internet Governance Forum (IGF) to provide an appropriate platform. Other venues include building a sub-group under the Peru Camaras, the National Association of Chambers of Commerce, potentially in partnership with the American Chamber of Commerce. Another potential platform could be the newly developed multistakeholder working group under the Secretaria de Gestion Publica.

Legal and Regulatory Reform Priorities and Capacity Support

Peru is in the accession process to join the Organization for Economic Cooperation and Development (OECD). The OECD provided the government with a number of recommendations to foster greater alignment with OECD standards, including those related to technology and cybersecurity governance. These recommendations are shaping digital priorities across multiple layers of the Peruvian government, from Congress to the SGTD. Peru’s Personal Data Protection Law (PDPL) provides a critical opportunity to strengthen safeguards against the misuse of digital technologies and data. This legal foundation is part of a broader architecture aimed at ensuring cybersecurity and digital rights. Five key laws further reinforce this framework: the Digital Government Law, the National Digital Transformation Law, the Digital Trust Law, the Digital Innovation Law, and the Artificial Intelligence Law (Law No. 31814). These laws build on the initial groundwork established by the PDPL over a decade ago, as well as the National Cybersecurity Policy, led by the Centro Nacional de Seguridad Digital (CNSD), which addresses cybersecurity risks across digital infrastructure.

The PDPL established the National Data Protection Authority, under the Dirección General de Transparencia, Acceso a la Información Pública y Protección de Datos Personales within the Ministry of Justice and Human Rights (MINJUSDH). This office has an oversight authority that enables it to investigate and sanction government entities that do not comply with the law. The Direccion is also responsible for consumer protection claims in connection with private companies.

As the main authority with data protection oversight, the Direccion identified several critical gaps that need to be filled to protect against the misuse of data by government entities and the private sector. They are: (a) Build technical capacity: This small staff needs more technical training on algorithmic auditing, data auditing, and blockchain technologies; (b) Building out lines of authority/capabilities: The Direccion has a unique staff of lawyers and engineers who https://one.oecd.org/document/DAF/COMP/WD(2024)9/en/pdf https://www.oecd.org/content/dam/oecd/en/publications/reports/2019/06/digital-government-in-peru_2cf04c8f/0c1eb85b-en.pdf are building out the regulations to conduct impact assessments, however, they need further support building these guidelines and establishing the roles/responsibilities across all government agencies; (c) Help Informing people of their rights/raise awareness: There are daily impacts of data misuse of which few people are aware. The Banking association is already doing some of this work to build confidence in digital financial systems, but more general work remains to be done; (d) Policy linked to the Data Officers: Every office in government has a data protection officer and capacity building is urgently needed. They need to understand the importance of and tools for data protection as they are the first line of defense for resolving data issues.

Implementing regulations of Peru’s AI Law are currently under development, with an initial draft issued in May 2024.3 At the time of writing, the SGTD requested comments and recommendations from a broad range of civil society and government stakeholders and many respondents emphasized the importance of aligning Peru’s regulatory approach with international standards, to ensure that AI plays a constructive role in the country’s continued development without undermining democratic values and human rights. Civil society signaled that additional support will be needed across all government entities to implement the new regulations and ensure oversight of AI-based technologies.

Fully implementing the PDPL and the AI Law is essential to mitigate risks associated with digital surveillance and repression in Peru. The widespread use of safe city technology, including facial recognition, to address security concerns necessitates strengthened regulatory capacity to ensure that such technologies do not violate fundamental rights, such as privacy, freedom of speech, and assembly. This need is heightened by the fact that Peru is increasingly affected by organized crime groups that exploit personal data and cellular information for extortion purposes. In recent citizen surveys, crime and insecurity have emerged as the primary concerns for Peruvians. Furthermore, the lack of a citizen-centered focus on data protection when people use government platforms to access public services remains a critical gap. Currently, digital services lack adequate safeguards to protect personal data, which leaves citizens vulnerable and undermines trust in these platforms. Establishing this robust legal and regulatory framework is vital for protecting citizens' rights while supporting Peru's digital development.

Safe, Secure, Reliable and Rights-Affirming Digital Infrastructure

Digital infrastructure plays a critical role in advancing rights-respecting digital ecosystems. As noted above, the DECA found that while approximately 83% of Peru is connected to the internet through 3G or 4G mobile technologies, roughly 61% of the country lacks access to broadband networks. As digital transformation accelerates, access to more secure and reliable connectivity will be critical to avoid exacerbating the digital divide. Similarly, government needs for increased digital storage and compute capacity will continue to rapidly increase at the national and subnational levels as the transformation progresses. The recent IDB loan will provide important https://insightplus.bakermckenzie.com/bm/technology-media-telecommunications_1/peru-the-draft-regulat ions-of-the-law-that-promotes-the-use-of-ai-have-been-published_1 resources to address digital divides, and resources could also be made available to expand the scale of the government’s cloud computing resources.

Opportunities across the Digital Economy

Peru’s digital economy is growing and offers significant investment opportunities, particularly if the regulatory environment is strengthened and digital capacity is cultivated across the workforce. Peru’s digital financial backbone and digital financial inclusion efforts have been slow to get off the ground4, but have seen some extraordinary gains. Peru’s digital financial systems across the banking sector are largely interoperable. The SGTD led an exciting effort to move the population to use digital wallets and to facilitate more e-commerce, with more than 7 million people signed up for digital wallets, many of whom became “banked” for the first time.

However, Peru’s Banco de Credito de Peru (BCP) put a 2.95% tax on the digital wallets which has effectively stalled the program. However, the initial uptake of digital wallets illustrates confidence in the digital system and enthusiasm for increased access to digital commerce. The DECA for Peru highlights that the FinTech Sector may hold some significant economic growth opportunity for Peru, however, the enabling regulation remains weak. Similarly, legislation to drive greater investments into Peru’s digital technology startup ecosystem also lags.

Use of fintech products and other digital services are greatly limited to Peru’s economic centers where internet access and digital capacity skew higher. The concentration of digital skills, digital commerce and access in Lima threatens to exacerbate the digital divide unless intentional efforts are made to expand connectivity at the subnational level. The IDB loan is likely to focus efforts on closing the digital divide, while the recent DECA suggests that alternative modes of connectivity, such as satellite technologies, will be more appropriate for Peru’s rugged terrain than fiber optic cables.

Digital transformation of Peru’s government and economy offer significant opportunities to close digital divides and catalyze equitable growth, however, significant gaps in legal and regulatory frameworks threaten to undermine individual safety and human rights, while weakening overall trust in digital platforms and technologies. These weak frameworks, combined with lack of access to digital networks among the poorest and most vulnerable in Peru, could prevent the nation from realizing significant improvements in service delivery, equitable economic opportunity and overall government transparency and efficiency if not addressed in a comprehensive, cross-sectoral fashion. Peru stands at a pivotal moment in the nation’s development trajectory in which coordinated donor and private sector investment in the nation’s digital transformation could catalyze unprecedented equitable economic growth and improved standards of living.

4 DECA at page 44.

2. PROBLEM STATEMENT

Peru has weak digital governance capacity that jeopardizes the effectiveness of the digital transformation and economy affecting public service delivery, security, and the protection of human rights.

3. THEORY OF CHANGE

IF institutional capacity is strengthened and digital transformation is safely integrated across government entities, and IF Peru’s information environment ensures technology and data systems are rights-respecting, secure, and trustworthy; THEN Peru’s digital governance engaging government, private sector, and civil society will improve government operations, public and private digital services, and citizen engagement.

4. IMPLEMENTATION APPROACH

The activities described herein are intended to be implemented under USAID’s forthcoming Advancing Digital Democracy program, currently in procurement and subject to availability of funding. As noted in the ADD Request for Proposals, the contract will offer opportunities for local partnerships including grants under contract.

5. RESULTS FRAMEWORK

Objective 1: Peru’s Government implements legal and regulatory frameworks related to technology, data and information that align with and fulfills their international human rights and democratic commitments.

The SGTD and the Direccion Nacional of Data Protection will play significant roles in advancing Peru’s digital transformation and implementing critical legislation including the PDPL and the AI Law.

1.1 Regulations are developed, strengthened and/or implemented to foster a rights-respecting digital ecosystem

● Illustrative Activities

○ Identify key SGTD policy priorities that ADD can support with a particular focus on strengthening safeguards across government digital services.

○ Support the SGTD and key public entities in developing and implementing regulations, procedures and easy citizens guides to implement the new legislation framework including the AI Law.

○ Support the Direccion Nacional of Data Protection in addressing the misuse of biometric identification tools in surveillance equipment.

○ Support SGTD, the National Authority of Transparency, and the Data Protection Direction of the Ministry of Justice and Human Rights (MINJUSDH) and RENIEC in establishing safeguards for national digital ID in alignment with international standards (e.g. UNDP).

○ Support Human Rights Impact Assessment for new digital ID program.

1.2 Governments have the capacity and resources to advance a rights-respecting digital transformation

● Illustrative Activities

○ Provide cybersecurity and data privacy capacity-strengthening training to Peru’s

100+ Data Officers through ADD Academy training.

○ Expand ADD Academy to provide training for government ministries that are transitioning to digital service delivery in key areas including data protection and privacy, responsible use of generative AI, etc.

○ Provide technical assistance to the SGTD through embedded advisor(s) to strengthen progress on the Digital Transformation Policy and provide capacity building support to SGTD staff.

○ Partner with the Direccion Nacional to provide technical support for data audits, algorithmic audits, and other oversight activities under the PDPL and the AI Law.

1.3 Information ecosystems support human rights and democratic digital governance

● Illustrative Activities

○ Develop and implement a multistakeholder and decentralized strategic communication program aimed at building media literacy and critical digital skills, with a focus on identifying and resisting misinformation, disinformation, and manipulative content.

○ Collaborate with local civil society organizations at national and regional level and media outlets to create community-based awareness campaigns on the impact of false information and how to access reliable sources.

○ Provide capacity-building workshops for journalists, content creators, and influencers on responsible digital practices and ethical standards, including techniques for identifying and addressing misinformation.

○ Support the establishment of fact-checking initiatives in collaboration with Peruvian media to foster public trust and enhance the accountability of digital content.

○ Facilitate partnerships with educational institutions to incorporate modules on digital literacy, safe online practices, and responsible information sharing within school curricula.

○ Offer technical assistance to relevant government agencies in monitoring digital content and coordinating a unified response to information manipulation, ensuring alignment with human rights principles.

1.4 Governments have greater cybersecurity capacity and resources

● Illustrative Activities

○ Support Peru Compras and related entities in implementing new procurement procedures to procure trustworthy, rights-affirming cloud computing hardware and services.

○ Develops strategic alliances with other USAID activities and donors to complement cybersecurity efforts in procurement processes.

○ Provide technical assistance to relevant public entities on cybersecurity. Build cybersecurity skills into the CERT University (Center of Excellence for Responsible Technology) activity as a fundamental pillar of digital democracy/responsible technology training.

○ Support the Consejo Nacional de Cybersecurity to improve responsiveness and effectiveness and adoption of international practices

Objective 2: Respect for human rights and democratic values are embedded in the development and design of digital technology and data management.

The success of Peru’s digital transformation requires partnership with the private sector to drive the development and distribution of digital technologies, while ensuring that protections for human rights are built across the digital ecosystem as it grows.

2.1 Resources and capacity to produce rights-respecting digital products and services are increased

● Illustrative Activities

○ Identify engineering school/university to partner with to establish a Center of

Excellence for Responsible Technology (CERT) in partnership with similar centers at a U.S. based university such as Georgetown, Stanford or Harvard.

○ Develop protocols and safeguards to protect citizens accessing government digital services at national and subnational levels.

○ Develop a broad nation-wide dissemination campaign for protocols and safeguards to increase citizens’ demand for products that offer safe and secure digital tools.

2.2 Business enabling environments are strengthened

● Illustrative Activities

○ Support local civil society and chambers of commerce to advocate for reform of taxation on digital services, e-commerce, and digital platforms

○ Support partnership with the digital trade program at a local Peruvian university to build capacity for cross-border digital trade and digital privacy laws that foster alignment with international human rights standards.

○ Develop training programs in alliance with the Chamber of Commerce and SMEs associations on the provision of secure digital services.

2.3 Tools, resources and capacity to manage, audit and report on digital risks are more effective and widely available

● Illustrative Activities

○ Identify local Peruvian institutions that could play a role in providing professional auditing and certification services for data impact audits, bias audits, algorithmic impact assessments, etc. Provide training and seed capital through Grants Under Contract (GUCs).

○ Explore partnership with the UN Office of the High Commission for Human Rights’ B-Tech Program and local auditing organizations in connection with commitments made to support auditing efforts under the Global Digital Compact.

2.4 Private sector partnerships are leveraged to strengthen ADD results

● Illustrative Activities

○ Identify digital incubators and startup companies that are interested in growing investments in “rights respecting technologies” and build partnerships to support hackathons, innovation sprints and other methodologies to spur new ideas or approaches.

○ Partner with local and international venture capital funds to develop positive screens for investments in rights-respecting technology companies in Peru.

○ Work with the Department of Commerce and Department of State to sponsor study tours to Peru to showcase opportunities for investment in Peru’s digital economy.

○ Leverage partnership with a large American technology company for ADD Academy to explore other potential opportunities under ADD more broadly.

Objective 3: Multi-stakeholder coalitions and platforms are established or strengthened to empower all digital stakeholders and to advance common goals.

Peru’s digital transformation will require the engagement and support of a variety of stakeholders working in tandem to make progress together. Engaged citizens and effective multi-stakeholder coalitions will be imperative for guiding Peru to have a digital transformation that is inclusive, rights-respecting, and sustainable.

3.1 Multistakeholder approaches to advancing rights-respecting digital ecosystems are locally-owned and sustainable

● Illustrative Activities

○ Identify the most appropriate multistakeholder forum to host a new sub-working group focused on supporting a rights-respecting digital transformation and digital economic growth.

○ Build or strengthen multi stakeholder coalition including private sector, CSOs, universities, and other government entities to identify common goals and objectives regarding digital transformation, digital governance and digital economic growth.

○ Build robust partnerships with the IDB, GIZ and other donors in this space to deepen the impact of respective investments and coordinate programming.

3.2 Stakeholders across the digital ecosystem have capacity and opportunity to influence digital priorities and decision-making

● Illustrative Activities

○ Identify public and private consumer protection advocacy organizations

(including the Direccion Nacional and CSOs) and provide training to address consumer needs and redress under the PDPL, the AI Law and others.

○ Provide support to technology and human rights advocacy organizations to advance stronger legal and regulatory protections to safeguards against the misuse of technology with a particular focus on the misuse of AI and big data analytics, as well as the application of facial recognition technologies in surveillance cameras.

3.3 Support for human rights defenders, including women’s human rights defenders (WHRD) and civic actors provided in transitioning contexts

● Illustrative Activities

○ Partner with WHRD CSOs to advocate for improved civic understanding and legal regulation about impacts of tech on women

○ Partner with youth-oriented CSOs to advocate for improved civic understanding and legal regulation about impacts of tech on youth

6. MAIN INDICATORS

● Outcome Indicators:

○ Legal safeguards

○ A multistakeholder digital committee is formed and actively monitors and supports the implementation of the digital transformation strategy and data protection safeguards.

○ Citizens have increased their digital capacities and awareness on data protection safeguards.

● Performance Indicators:

○ Number of regulations drafted, developed, , or implemented to ensure a rights-respecting digital ecosystem

○ Number of public officials trained in cybersecurity, data privacy, and digital transformation with a human rights approach

○ Number of media literacy and digital literacy initiatives implemented to combat misinformation and promote responsible digital practices

○ Number of multisectoral partnerships and coalitions established to promote an inclusive and rights-respecting digital ecosystem

○ Proportion of SMEs adopting secure and rights-respecting digital practices

○ Number of public entities implementing effectively safeguard protocols in delivering online services.

7. MAGNITUDE OF CHANGE

This activity will achieve the following.

● At least 5 digital laws/regulatory procedures will be strengthened to protect human rights and align with international digital democracy standards.

● 18 ministries and government offices effectively implement current digital policies and procedures that respect human rights and privacy.

● Increased the number of companies adopting digital practices that respect human rights and digital democracy.