Why Latin America is the Future of Software Development

Why Latin America is the Future of Software Development

Why Latin America is the Future of Software Development

2023 was another difficult year for the tech industry as it continued to weather a global economic downturn. The Federal Reserve raised interest rates in response to high inflation numbers, VC funding decreased again across the first quarter of 2024, and there were massive layoffs with U.S. tech employers cutting jobs. Broader economic concerns and the potential for a recession could have made investors more cautious.

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Nonetheless, our reliance on software continues to increase as the world rapidly advances in a century of AI, automation, blockchain, and 5G technologies. This holds for Latin American businesses that are becoming increasingly reliant on digital technologies for their activities. Latin American software developers are an engine for digital transformation in local economies across the continent—and as the global shortage of trained workers in the software development sector across the world continues to persist, companies that once battled to hire employees close to home are now turning to Latin America for talent.

Traditionally, countries in Asia like India, Malaysia, and China have been the go-to choices for U.S.-based companies or those with a strong U.S. presence looking to outsource software development services. But a post-pandemic shift is underway, fueled by heightened interest in reducing reliance on Asia, and it’s benefiting IT workers from Latin America. We are seeing global companies gradually increasing their engineering footprint in Latin America.

This article will explore why Latin America is poised to become a global powerhouse for highly skilled software developers and development companies.

1. Latin America’s Developer Population is Growing

Latin America is the home to a significant tech workforce. While other regions of the world suffer from both skills gaps and shortages, Latin America is not short of talent. As of 2024, there were approximately 2 million software developers in Latin America. The developer ecosystem in Latin America is thriving because of strong demand domestically for developer talent and significant support from big tech. Latin American unicorns are at the forefront of helping drive this growth. The number of tech, remote firms hiring in Latin America more than tripled, with Argentina, Brazil, and Mexico attracting the most new hires.

With large economies such as Brazil and growing technological hubs in the urban centers of Colombia and Mexico, Latin America has become a growing population center for developers as companies continue to invest in the region. Tech hubs like São Paulo, Mexico City, Buenos Aires, and Medellín have emerged as centers for innovation, hosting communities of tech entrepreneurs, startups, and accelerators. This environment nurtures a culture of innovation, creativity, and cutting-edge technology development, and we’re seeing many new developers emerge from these hubs.

As Latin America continues to transform, the region will unlock more opportunities for developers, who in turn will grow the economy.

2. Strong VC Investment in Latin American Startups 

There is a lot of momentum behind tech entrepreneurship throughout Latin America. As local businesses transitioned online across LatAm, they boosted the need for IT services. There is no shortage of capital available for Latin American startups, seeing that the region raised over $16 billion in 2021—a testament to investor confidence in the region’s potential.

By 2023, however, the global VC space had cooled significantly, with Latin America witnessing one of the greatest contractions of startup investment in the world. Total investment into South and Central American startups reached $4 billion in 2023, an 84% drop from its 2021 peak. 

Annual VC investment in Latin America
Annual VC investment in Latin America

But looking at the tech fundraising comparison between 2016 and 2023, it’s mostly just a return to normalcy. The surge in venture funding that created the bubble in 2020 and 2021 was the result of large, global investors upping their activity in the region as well as historically low interest rates.

Therefore, the investor pullback that Latin America is currently experiencing isn’t necessarily indicative of growing pessimism about the region’s startup potential. Rather, this looks more like just a correction than a drop in funding. Fundraising right now feels very similar to how it was pre-pandemic. Even with the recent dip, VC investment in Latin America remains relatively strong.

This sustained investor confidence highlights the long-term potential of Latin America’s tech scene. The region offers a big talent pool, a growing domestic market, and a strategic location—all factors that continue to make it an attractive destination for VC investment.

3. Educators, Technology Companies, and Governments are Undertaking Initiatives to Strengthen the Developer Pipeline

To support the continued growth of Latin America’s developers, technology companies, educators and governments are tackling local challenges through innovative partnerships and programs.

In recent years, Latin America has experienced a notable rise in its educational standards for technology career paths, which has led to substantial growth in the number of skilled software developers in the region. Significant investments by LatAm governments in STEM training and technology entrepreneurship for the next generation of Latinas in tech, have contributed to enhancing the quality and quantity of software developers, engineers, and IT professionals across the region.

Funds invested in educational institutions have led to improved infrastructure, more resources, and better curricula. For example, Latin American countries are investing in the next generation of software developers by incorporating important topics and subjects into their primary and secondary education curricula and offering specialized programs at universities. Consequently, the quality of learning and the results achieved by students mean that they have acquired all the skills and experience necessary to become successful software developers.

Google announced that it will invest 200 million pesos (US $9.9 million) in training for women in Mexico
Google announced that it will invest 200 million pesos (US $9.9 million) in training for women in Mexico to develop their digital skills

Apart from the government, global technology companies are also investing in digital skill-building across the continent to improve job readiness and alleviate the tech talent bottleneck. Bootcamps and certifications that run as part of formal and informal education, are working to bridge the vocational training gap between traditional education and employment moving forward. These programs provide accelerated training in specific programming languages and skills. The bootcamps that are often led by industry experts offer practical, project-based learning, producing graduates ready to hit the ground running.

Several governments have also implemented measures that facilitate opening a new business, with the purpose of enabling foreign companies to expand more easily in the region and hire more developers. Chile and Colombia lead Latin America in world rankings for ease of doing business and offer incentives for companies to set up outsourcing operations. Incentives include:

  • Tax exemption on the import of software development materials.
  • Tax deductibility on technology transfers, licenses, and royalties.
  • Free Trade Zones offering tax breaks on sales into the local market.
  • Co-funding for:
    • Pre-investment studies
    • Project launch
    • Real estate leases
    • Investment in fixed assets. 

4. Investment in Digital Infrastructure

Curie, a Google-owned subsea cable successfully landing and connecting to Chile
Curie, a Google-owned subsea cable successfully landing and connecting to Chile

Given that most outsourced software development services are provided over the Internet, the availability of high-speed broadband connections and mobile Internet services are crucial. In Latin America, governments and big tech are playing a vital role in strengthening the developer pipeline by investing in internet access. 

Consequently, internet usage is rapidly expanding across Latin America closing digital access gaps. Internet access has had a significant impact on Latin American society. It has enabled people to access information, education, entertainment, and job opportunities remotely. According to Statista, 70% of the region’s population has internet access, a significant increase from 40% in 2010. This growth has been driven by the expansion of telecommunications infrastructure and the reduction in access costs.

A good example is the Google-owned Firmina subsea cable that runs from the East Coast of the United States to Las Toninas, Argentina, with additional landings in Praia Grande, Brazil, and Punta del Este, Uruguay. It is the world’s longest subsea cable, capable of operating from a single power source at one end of the cable if necessary—a resilience boost at a time when reliable connectivity is more important than ever. Firmina follows three other significant cable investments in Latin America—Monet, Tannat, and Curie—which together bring more reliable connectivity to the region.

Latin America is also now home to 15 public cloud regions deployed in four countries: Brazil, Mexico, Chile, and Colombia. They belong to Microsoft, Amazon Web Services (AWS), IBM, Oracle, Huawei, Tencent, and Google.

Cloud Regions in LATAM

These cloud regions are important not only because they reduce latency, which is the time needed for the delivery of information, but also because they provide more data management security for enterprises and governments assuring data sovereignty or data residency. Local tech industries stand to gain the most from these investments. Cloud activity has already bolstered associated sectors, including the region’s leased data center industry. Businesses are benefiting by having access to computing power and services that enable them to succeed in the digital economy.

Investment by governments and the private sector in IT infrastructure is a sign of trust and demonstrates conditions are right to support the nearshoring trend we’re seeing in the IT services industry. Additional investments will continue to help more countries in the region accelerate their digital transformation and build towards dominating the software development industry. 

5. Competitive Pricing Without Compromising Quality

The pressures of this era of globalization can be felt everywhere. Globalization is making labor markets around the world more and more one big market. As cash-strapped U.S. companies look to create greater efficiencies, there has been a significant movement to boost recruiting and look for cheaper tech talent beyond their own borders. This has mounted pressure on North American developers in a world where software development can be done much more cheaply in Latin America. 

Today, leading Latin American countries such as Argentina, Brazil, Chile, Colombia, and Mexico are promoting themselves as outsourcing-friendly destinations. Software developers in these LatAm countries can work for lower wages without sacrificing quality. This is in part because the cost of living in Latin American countries is lower compared to the U.S. leading to lower labor costs as well. This allows companies to make their development budgets go further while still accessing a talent pool with skills that are at par with those of American professionals.

Key Takeaways

Latin America’s importance as a provider of global IT outsourcing services is growing given its proximity to the U.S., telecommunications infrastructure, and tax incentives. Continued commitment to improving technology infrastructure, promoting technology education, and strategic collaboration, both locally and internationally, is essential to strengthening Latin America’s position on the global software development industry map.

By taking advantage of growing opportunities, nurturing local talent, and fostering an environment conducive to innovation, Latin America is poised to meet the rising demand for software development especially in emerging technologies like AI, blockchain, and IoT. Additionally, the thriving startup ecosystem in Latin America supported by international investments can lead to the creation of technology solutions that address specific challenges and contribute to sustainable and equitable development.

Considering all these aspects, the outlook for the software development industry in Latin America isn’t just bright; it’s poised to revolutionize the way global tech development unfolds.

Looking to Hire Latin American Software Developers?

At Next Idea Tech, our main mission is to bring opportunities to Latin American talent, promoting their careers and professional development.

Next Idea is a one-stop solution for expanding your team with ready-to-hire talent. We are a remote-first, nearshore software outsourcing company looking to unlock untapped potential in Latin America by providing the most knowledgeable, experienced and highly trained nearshore software engineers, and thus allowing our clients to fill tech roles at very short notice (typically 3 – 5 days). Next Idea Tech is led by a team of veteran software engineers and IT professionals — we understand the developers mindset. By partnering with us you gain access to pre-vetted talent that’s ready to make a difference.

To streamline the recruitment process, we have built an exhaustive recruitment process, consisting of five stages to assess the candidate’s skill set, values, ethics, experience, etc. 

We look for team members who:

  • Possess a combination of soft and hard skills
  • Share our company’s values and capabilities
  • Can adapt to specific project requirements

Furthermore, we limit our pool of collaborators exclusively to senior developers with at least 5 years of experience. This way, you can be sure that you’re getting professionals with a solid technical background and ideally, with previous experience working on US-based projects.

English language proficiency is a prerequisite for all our developers, more so because we primarily provide staff augmentation services to US companies. Therefore all engineers should be in a position to communicate effectively with their managers and peers.

From sourcing relevant talent using our AI enriched database, technical interviews to managing payroll and NDA compliance, Next Idea is a one-stop solution for expanding your team with ready-to-hire talent. We are led by a team of veteran software engineers and IT professionals – we understand the developers mindset. By partnering with us you will gain access to pre-vetted talent that’s ready to make a difference.


Posted on

June 27, 2024