Why tech companies are expanding into LatAm
Discover the factors that make LatAm an appealing region for tech companies, looking to expand their global presence with top talent.
A large, educated workforce, policies which favour entrepreneurs and startups, and many highly successful startups – over fifty of which are valued over $1 billion. These are all reasons why tech is booming in Latin America (LatAm). It makes sense, then, that LatAm is an attractive prospect for foreign tech companies wishing to hire top talent. In fact, in the past year, international companies’ desire to hire in the region has increased by 156%.
What is the scale of foreign hiring in LatAm’s tech sector?
In an article for LinkedIn, Omar Corona notes that - according to the National Institute of Statistics and Geography (INEGI) - foreign tech companies in Mexico employed 296,000 people in 2020. Using further INEGI figures, Corona also highlights that in 2021, 69% of Brazil's tech workers were employed by foreign companies. According to Business Insider, U.S. companies have increased their year-on-year hiring in LatAm by 50% over 2023 so far.
Latin America is home to 23% of global fintech businesses; Brazil alone received over $45 billion in IT investment in 2022, according to Forbes.
Judging by these figures, it’s safe to say that LatAm is one of the world’s leading tech hubs. However, it is not the only one – India, China, Japan, the U.S., and Canada all boast vibrant tech sectors. So, why are so many foreign organisations eager to hire specifically in LatAm?
Why are tech companies so interested in LatAm?
Skills shortages in North America
Developer shortages in the U.S. and Canada are a constant challenge for companies that require specialised skillsets. Experts predict a shortage of four million developers by 2025. So, North American tech companies are turning to Latin America’s workforce, to bridge the gap.
Deloitte reports that there have been mass layoffs across the U.S. tech sector, as leaders have been tasked with reducing costs, improving efficiency, and spurring automation. Meanwhile, companies are still finding it difficult to source the specific talent needed to support these desired innovations. In a Deloitte survey of technology industry leaders, nearly 90% of respondents stated that recruiting and retaining talent was a moderate or major challenge.
LatAm’s highly educated workforce
Latin America’s highly skilled, well-educated tech workforce of two million is spearheading rapid growth within the region’s tech sector. Forbes notes that Mexico and Brazil produce a combined total of close to 605,000 software engineering graduates per annum. In Mexico, roughly three times the number of engineering and technical students graduate per year than in the United States.
The U.S. is home to over 42 million Spanish speakers, and as most LatAm countries speak Spanish as their primary language, while many boast rising levels of English proficiency, these common languages mean that LatAm workers can easily communicate with foreign colleagues. Close time zones also allow for cohesive team scheduling between North America and LatAm.
Cost-effective business strategy
While hiring top tech talent in the U.S. and Canada can be difficult and expensive, choosing to ‘nearshore’ and hire staff in Latin America can not only broaden the hiring pool, but also save money.
Lower labour costs and costs of living, as well as favourable exchange rates, allow North American companies to save when hiring in LatAm. Exporting goods from LatAm to the U.S. and Canada is also cheaper, than from other locations.
Reduced reliance on Asia
According to Bloomberg, the post-pandemic push to reduce reliance on Asia has directed more North American companies towards Latin America. Bloomberg notes that, “…growing geopolitical tensions between the U.S. and China, … pandemic-driven lockdowns in China, and unexpected power curbs that cause significant delays in the production of Chinese-manufactured goods, all contribute to more companies … adding production capacities outside of China.”
As a result, more U.S. and Canadian tech companies are setting their sights on Latin America as a closer, more reliable partner.
As tech continues to boom in Latin America (LatAm), you may be considering hiring or expanding into the region. Contact our team of experts, to find out how Mauve Group can support your business to go global.
Latest from our Blog
Mauve Group's blog is the place to head for insights into all things global.Blog
The best countries to expand your business internationally: 24 candidates for 2024
Enter new markets around the world, growing your business the right way, with our guide to the 24 best countries to expand your business internationally in 2024.
Questions to ask your Employer of Record (EoR)
Set to compliantly hire global talent via an Employer of Record (EoR) provider? Here are the questions to ask your choices, to help determine which one to partner with.