Even for those of us who are optimistic about Latin American (LATAM) business prospects, the road ahead is not without its challenges. Political tensions continue. Several major economies in the region continue to seek balance and stability. Indeed, the latest World Bank estimates have predicted regional GDP growth of 1.6% by the end of the year, and further growth of 2.7% next year. Skeptical observers could be forgiven for asking what would propel the region to real, sustainable, and impactful growth. The answer to that question is very simple—it lies in the tech ecosystem that is unfolding across the region.
LATAM’s tech ecosystem is moving in numbers
Over the past decade, internet penetration in LATAM has increased from 43% to 78%, even surpassing the fastest growing China. This, along with government-supported education and training programs, led to an increase in skilled IT professionals. By 2023, Brazil had about 500,000 software developers, with Mexico adding another 220,000. Those two countries are leading the way in LATAM talent growth, while regional estimates show nearly a million software developers.
These highly skilled workers seize market and financial opportunities to launch technology-driven companies, driving the region’s technological growth and surpassing other regions. The 2023 Global Startup Ecosystem Index highlighted 77 growing cities in 11 countries. It revealed that Brazil, Mexico, Chile, Colombia, and Argentina are now outperforming the most established Western technology centers. Despite the difficulties of 2022, business capital in 2023 exceeded pre-pandemic levels, with 770 deals reaching $4 billion.
However, numbers alone do not tell the whole story. To understand why the future of tech startups in LATAM is promising, you need to look at a few other factors.
Rich field and geographical diversity
Another important factor is the diversity of sectors. LATAM unicorns represent many industries, and the list keeps growing. Mexico’s Kavak, worth $8.7 billion, even just a few years ago, is a used car marketplace. Brazil’s Quintaandar, valued at $5.1 billion, is the country’s most valuable proptech. Chile’s Butterfly, valued at just over $1 billion, focuses on health and wellness.
Although certain sectors, such as fintech, have a strong presence—the Uruguayan unicorn DLocal, with a market cap of $1.9 billion, or Brazil’s Nubank, with a value of more than $65 billion—tech is growing in all of LATAM because it addresses many needs in many countries. This natural growth is poised to continue to change the way people in the region do everything from buying cars to seeking medical care.
Local variation is equally strong. LATAM technology startups are spread throughout the region, with São Paulo leading the way with 108 billion dollars and 12 unicorns. Mexico City is next, with a value of 30 billion dollars and eight unicorns. Bogota, Santiago, and Buenos Aires are also thriving. This widespread growth shows that LATAM is not dependent on a few isolated hubs; is experiencing steady, steady growth throughout the region.
Business language and other cultural factors
Although the various businesses in the region are commendable, their bright future is built on a few factors. One of them is the growing knowledge of English throughout LATAM. In global markets where English is the language used by investors, board members, and analysts, being able to compete and collaborate is essential.
Beyond language, broader cultural shifts are also driving change. LATAM embraces entrepreneurship, takes risks, and embraces innovative digital solutions. This change, along with the rise of incubators, accelerators, and increased foreign investment, unlocks the region’s potential. The overlapping time zones of LATAM and the US also provide a strategic advantage, easier cooperation compared to regions like Asia. Together, these factors position LATAM as a strong player in the global technology space.
There are many incentives driving this growth. Government investment in technology is a growing factor for success. The so-called “signature effect” also plays a role, where young entrepreneurs are encouraged by older trailblazers to take risks and start new companies. The region also benefits from a high level of digital transformation in various sectors, from banking to IT, and a culture that celebrates creativity and courage.
Of course, this does not mean that success is guaranteed or permanent. The region is still a work in progress, with much needed efforts in education, government programs, and continued investment. But as we approach the end of the business year, there is much to be optimistic about. LATAM tech is growing, and its growth is strengthening communities—making them healthier and richer. And that is very good news.
Nacho De Marco is the CEO and founder of BairesDev.
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