Latin America is rapidly becoming one of the most important technology hubs on the planet. Research has found that the area is the fourth-largest Internet consumer in the world. In addition, Latin America has the highest projected growth in IT revenues of any region, with a predicted growth rate of 5.3% into the 2020s–a full two points higher than the 3.3% global average.
Part of this growth comes from native startups, which have achieved success in Latin America and are attracting investors from the United States, Europe, and China. Alternatively, many companies have turned to software development outsourcing firms in this region to expand their access to experienced developers.
This article will look at the rapid growth in the Latin American tech sector and investigate the reasons behind the area’s remarkable success.
Native Tech Growth
Latin America is not only a hub for software outsourcing and remote offices. Countries in the region are producing an impressive array of native startups as well.
The Argentinian tech company MercadoLibre is one of the best examples of Latin American innovation. The online marketplace connects sellers and buyers together in a single, easy-to-use website. In addition, the company offers loans and credit cards to consumers.
The company leveraged its intuitive sales platform and wide range of services to secure $1.85 billion in funding in 2019. This includes funding from the tech giant Paypal and the Dragoneer Investment Group.
Dragoneer’s founder described the company’s interest in MercadoLibre, saying “Through its investments in FinTech, logistics, and customer experience, MercadoLibre is solidifying its leading market position in e-commerce and digital payments across Latin America, and we believe we are witnessing a major tipping point in the region.
The American tech industry has taken notice of Latin America’s tech success. Prior to 2011, the top three startup accelerators in the United States (Y Combinator, 500 Startups, and TechStars) had not accepted a single company from Latin America into their membership. But things have changed quickly.
In 2019, Y Combinator invited a record 10 Latin American startups into their organization. In addition, 500 Startups has invested in over 70 Latin American tech companies in the past eight years. American and Chinese interest in the region has resulted in an estimated $5.7 billion being invested into Latin American tech startups–and the growth is only expected to continue.
One of the main reasons for Latin America’s emergence as a tech hub is the region’s high consumer demand for new technology. All of the region’s largest countries are in the World Bank’s higher-middle-income range (with a GDP per capita greater than $13,000) and have an urbanization rate of more than 80%.
In addition, the residents in Latin America have high rates of access to the internet. An estimated 66.1% of people in the area are online– a full 10.3% of global internet users.
The widespread adoption of the internet and smartphones make the region a prime market for native and international tech companies alike. In fact, several American companies, such as Google, Amazon, Facebook, and Netflix, have identified the region as a key strategic market.
For example, Facebook recently introduced the Internet para Todos for Peru. This initiative is designed to bring internet access to all 6 million Peruvians without internet access. The program has already successfully brought the internet to more than 600,000 peasant and native Peruvians.
The rise in internet access has directly corresponded to an increase in demand for tech products. Columbian residents spend the 3rd highest amount of time on the internet of any country in the world, while Brazil sits just below their neighbor in the 4th spot.
In addition, “last-mile” delivery jobs are becoming important sources of income for many in Latin America. Internet delivery companies like MercadoLibre and their Columbia counterpart Rappi employee hundreds of thousands of independent contractors who work as local couriers.
Hidden Source of Talent
American tech executives have identified finding experienced tech talent as one of their biggest challenges over the next several years.
That’s because software engineers in the United States are enjoying a historically low unemployment rate of just 1.9%. This means that even the most prestigious companies are struggling to fill open positions.
Many of these Western firms are turning to Latin American offshore development companies in order to combat the talent crisis. These outsourcing partners help businesses hire the most talented software engineers in the world, regardless of their country of residence.
Latin America has a vibrant higher education community and continues to increase the number of computer science and engineering degree offerings in order to keep up with private sector demand. This allows offshore development services to source experienced programmers quickly–allowing companies to start a development project on-cue.
Latin America is on its way to becoming one of the most important tech hubs in the world. This is because of the region’s unique mix of native tech startups, high consumer demand for electronics, and the large number of experienced software developers that call the region home.
Western businesses, along with China, are investing billions of dollars into the region’s hottest tech companies. In addition, major tech firms are utilizing Latin American offshore development services to find talented software engineers outside of the competitive American job market.
Experts anticipate that the region’s tech industry will continue to grow rapidly as outside investors pour more money into the native tech field. Finally, expect to see more Western companies look for offshore developers in the region given the dearth of available talent in traditional tech centers in the Global North.