An Expert Overview of The Latin America Software Industry

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It’s no secret that Latin America (LATAM) has experienced unprecedented economic, technological, and entrepreneurial growth in the last few years. The LATAM software industry is especially booming, generating revenue worth $22.1 billion in 2021. Countries like Mexico, Brazil, Colombia, and Argentina are home to some of the best companies in the region, outdoing many top American software companies. In 2021, Argentina’s software market was valued at $1.9B and was expected to rise to $2.8B by 2026. 

Brazil is another country whose software market was predicted to rise by roughly $6B by 2026. 

In 2020, the region’s Software as a Service market also grew exponentially, with Brazil’s SaaS market peaking at $1.5B, rising by 26% compared to 2019. The SaaS industry in LATAM has grown due to rapidly expanding internet usage and mobile tech. Also, various governments have implemented measures that ease the opening of a new business to allow foreign companies to expand quickly in the region.

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VC activity in the region has also exploded in the past five years. The region is now home to 23 unicorns. In 2021 alone, LATAM made deals worth $4B for the second year in a row, closing a record of 488 deals, with its startup exits earning a massive $11B profit. That goes to show you how massively the LATAM software industry is growing. And according to Entrepreneur, LATAM continues to produce top-notch software developers across the region to cater to the industry’s growing needs. 
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Also, well beyond the region, businesses are taking notice and looking for talent in LATAM. A recent study revealed that companies interested in hiring from LATAM have risen by 156%, with software engineering being at the top of the recruiting effort. This makes the region one of the most popular worldwide in matters of software outsourcing. 
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If the Latin America software industry is uncharted territory for you, and you’re looking to hire nearshore talent from the region, check out our overview of the industry and how it can benefit your startup.

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Content:

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Latin America software development market overview
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Here’s an overview of some LATAM countries’ software development markets: 
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Argentina

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Population: 45 Million
‍Economy: 2nd largest in LATAM
‍Languages: Spanish and English (highest proficiency in LATAM)
‍Unicorns: 11
‍Number of developers: 115,000
‍Average senior software developer annual salary: $56,000
‍IT companies: approx. 3,800

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Argentina is a fast-developing software development market. The country is well-positioned and has 3,800 local IT companies, which makes it a robust outsourcing hub. U.S companies choose Argentina as their preferred near-shoring region because of their English proficiency, affordable rates, and convenient time zone. 
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The country has a growing software development market, with a projected $2.7B revenue expected to be generated within the next five years. The U.S. accounts for approximately 60% of Argentina’s outsourcing services, making it the biggest contributor to the country’s IT sector growth. 
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IT companies in the country provide custom software development, IT consulting, mobile apps, web development, etc., and serve industries such as IT, finance, and eCommerce. 
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Examples of well-known companies that outsource IT jobs to Argentina include Cisco, Google, Microsoft, Nokia, and more.

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Brazil‍

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Population: 212 Million
‍Economy: 9th largest economy globally
‍Unicorns: 20
‍Number of developers: 500,000
‍IT companies: approx. 25,000
‍Software development outsourcing: Ranked 13th country globally
‍Average senior software developer annual salary: $52,000
‍Languages: Portuguese, English (intermediate proficiency)

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Brazil is believed to be the “promised land” due to the number of software developers available for U.S. and North American companies to recruit. The country has roughly 25,000 IT companies, fair developer rates, high-education standards, and is close to the United States, making it attractive for many U.S-based startups interested in outsourcing software development projects in the region, or recruiting. 
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The country’s IT development market is valued at $49.5M, accounting for the biggest share of the entire LATAM’s IT outsourcing market. Over 6,400 companies operate in the custom software field, serving eCommerce, Telecom, Finance, and IoT industries. Big companies outsourcing IT projects to Brazil include Amazon, Dell, Google, and Meta.

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Mexico‍

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Population: 128 million
‍Number of developers: 220,000 (ranked second in LATAM for best developers and programmers)
‍Unicorns: 7
‍Languages: Spanish and English (intermediate proficiency)
‍Average senior software developer annual salary: Approx. $49,959

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Mexico is reputable for sourcing IT professionals, particularly for U.S-based organizations, due to its close geographical proximity, a great time zone, diverse and skilled workforce, and a good ranking in the Ease of Doing Business. 
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The country’s IT companies generated revenue worth $60B (an 8% increase from 2020), mainly from product development and IT service providers. The country’s startup scene is also growing significantly, generating $3.38B in 2021. IT outsourcing in the region deals mainly with Telecom services, Finance projects, and Consumer Products and Services. Tech behemoths that outsource to Mexico include Amazon, Google, Microsoft, and Netflix. 

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Why the software development industry is thriving in LATAM

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Latin America is a software developer hotspot because of several factors: 

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Education

The region’s extensive education programs and initiatives are a factor behind the growing number of software developers in LATAM. Many LATAM countries provide free education, especially for tech careers, computer science, engineering, and related disciplines. Also independent and government programs are also encouraging tech organizations, companies, and businesses to employ interns, which further motivates locals to take careers in the field. For example, Chile’s Ministry of Education introduced the National Plan for Digital Languages to encourage more students to take up computer science and engineering careers. This plan starts before college, with comprehensive teacher training and institutions teaching lessons in computer science topics.
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IT and software growth 

Due to education, the Latin America software industry has seen tremendous growth, even beyond the region. For example, Mexico’s IT outsourcing industry has been growing by 10-15% yearly, making it among the largest IT services exporters. Local governments and infrastructures are incentivizing individuals, companies, and organizations to continue learning and focusing on computer science, putting LATAM countries at the top when it comes to providing IT and software services. 
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Tech startups are growing in LATAM

According to Crunchbase, LATAM was, in 2021, the world’s fastest-growing region for venture funding. In the past three years, the number of tech startups in the region has grown almost six times in value, increasing from $38B to over $216B. There are no signs of slowing down either, with the region’s startups pulling in over $450M within the first two weeks of 2022. The reasons why startups are growing in the region include greater involvement by foreign investors, the big market opportunity to provide services to LATAM’s growing middle class, and talent maturity (Latin American founders with ties to Silicon Valley are going back to their native countries to launch startups and regional unicorns’ alums are starting their own ventures).

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Why the tech workforce in LATAM is thriving‍

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Many U.S.-based tech startups have started to see and understand the value of nearshore development. The cost-benefit value and the increasing number of people in the LATAM workforce are the main reasons companies prefer to hire from the region. While the well seems to be drying in the U.S., especially in places like Silicon Valley, more young people from Latin America are joining the workforce. 

The young software engineers and developers hail from universities in Argentina, Brazil, and Mexico, where software engineering is a key focus. Their educational experiences at these institutions include hands-on development work and learning a foreign language, which sets them up with the skills and knowledge to work and communicate globally. Also, increased mobile device adoption and usage have increased interest in tech, as students are interested in learning the functionality of the programs they use daily.

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Benefits of outsourcing software development to LATAM countries

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South America software development has grown exponentially over the years. Working remotely for U.S- and Europe-based countries has filled a void in most LATAM countries’ economies and created many well-paying gigs by their standards. But how can your startup benefit from outsourcing to Latin America? Here’s how: 

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Expert software developer services

Over the years, there has been a massive amount of tech investment in the region, leading to its growth and development as a region with booming tech. Many famous tech giants and startups are outsourcing IT projects to LATAM, further contributing to its influence as the place for IT and software engineering. Besides, some tech bigwigs, including Amazon, Airbnb, Dell, GoDaddy, Google, Netflix, and HP, for example, have already set up shop in Brazil.

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It’s cost-effective

Even though Latin America software developers’ rates are higher than some countries usually associated with offshore software services, they’re significantly cheaper than their North America counterparts. Staff augmentation is convenient for startups because it lowers the number of full-time positions and the amount spent on salaries. It also eliminates other costs, including paid vacations, benefits, and other perks. 

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English proficiency

The 2021 edition of the EF English Proficiency Index (EPI) revealed that several LATAM countries had optimal positions on the globe’s biggest ranking of nations and regions by English skills. Argentina was the top LATAM country, with “high proficiency” in English competencies. LATAM’s English proficiency is rising, beating competitor outsourcing regions in Asia. Better English skills translate to streamlined communication with fewer hiccups that could cause errors and issues in collaboration. 

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Less time zone differences

It can be challenging to get remote work done in Asian and European countries since most have a 12 to 24-hour time difference. Most Latin American countries have only a 1 to 3-hour difference from the U.S., making communication easier. 

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‌Proximity to the U.S.

Modern tech allows people from the farthest reaches of the globe to interact with each other in real-time. Still, being geographically close can be beneficial. Hiring from LATAM means you’re closer to the action. So, if you need to hop on a plane to visit your remote team and get involved in the development cycle, you don’t need to travel halfway across the globe. This makes culture and team building also much easier.

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Less culture clash

There are certainly distinct differences between North Americans and South Americans that you need to consider when choosing where to hire talent. But, you should also consider the similarities between these two cultures, especially if you’re considering expanding in places like Asia. Despite their different origins, there are noticeable commonalities between North, Central, and South America’s cultures. For example, cultural constants evident in the history of the Americas include the traditions of European settlers and Native Americans. While these countries’ cultures evolved as time passed, some core values have remained the same, including a strong work ethic and a great belief in an individual’s potential to make a change for all. Also, LATAM countries consume media similar to the United States, buy the same brands, use the same technologies, and follow American working standards. 

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FAQ

Why is Latin America a good place for startups?

Latin America’s consumer markets are growing fast thanks to a fast-growing, digitally underserved, middle class and tech permeating through every element of consumers’ lives. So, there’s an increased demand for digital offerings, leading to more startups and, consequently, high investor interest. 
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How much does it cost to hire a software developer in Latin America?

You can expect to pay a price range of $35-$40 for a junior software developer and between $50-$61 for a lead developer if you decide to recruit talent in South America. 
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How many software developers are in Latin America?

There are roughly over 1 million software developers in Latin America. Here are the stats according to Statista that only include some LATAM countries:

• Brazil - 500,000 developers
• Mexico - 225,000 developers
• Argentina - 115,000 developers
• Columbia - 62,000 developers
• Chile - 61,000 developers

Why do companies prefer developers from Latin America?

LATAM countries are winning the hearts of U.S.-based companies due to a tech-savvy demographic, lower hiring costs, time-zone compatibility, proximity to the U.S., reduced communication barriers, and cultural similarities.

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Scale Your Tech Teams with TECLA

The projected worldwide outsourcing market is expected to increase by over $40B in the next three years. So, outsourcing will only become more globally accepted. And the case for turning to the LATAM software industry for staff augmentation is clear. So, recruiting top LatAm developers in the region may be vital to the success of your startup. TECLA has a proven record for connecting U.S-based companies with the best talent software developers in Latin America. Our professionals, including software developers and engineers, bring high-level skills and experience to tech businesses of all types located anywhere. Our specialists help you fill in hiring gaps and complete processes productively and efficiently, leading to project and company success. Get started today and make TECLA your LatAm recruiter of choice.