In recent years, there has been an impressive increase in the demand for outsourcing by US companies. Some of the reasons driving this growing demand are related to talent shortages and high salaries for developers within the US. In this regard, the Deloitte Global Outsourcing Survey report states that for 50% of executives, the main internal challenge for organizations is talent acquisition. On the other hand, the report states that the driver of outsourcing growth is the need to cut costs.
Parallel to the increase in demand for third-party providers, the spotlight on one region began to skyrocket: all eyes are on Latin America. The reasons for this region’s boom are primarily related to the immediate needs of US businesses. Talent, as well as the optimization of technology budgets, are priorities.
In addition, the region is considered part of the Nearshore model, because it shares a similar time zone to the US, geographic proximity, and an important level of compatibility in cultural aspects.
In this article, we will analyze in detail the reasons why Latin America and its talents are attracting the attention of US companies.
What are the advantages of the Nearshore model?
In previous articles, we explained the differences between the Offshore and Nearshore models. In this case, we will characterize some of the advantages offered by the Nearshore model, which will allow us to understand the reasons why Latin America is one of the main targets for US companies looking to build and improve their IT teams.
Time zone and geographical proximity:
First, Latin America is considered Nearshore because it has a time zone similar to the US, which is a great benefit when it comes to building remote teams that can overlap their working hours.
In addition, there is also a certain geographical proximity between the countries (especially Mexico and other Central American countries) which means that, if necessary, it is not an extremely long trip to the outsourcing location.
Language and cultural similarities
Latin American countries tend to have a strong cultural affinity with the US because they share Western values, unlike in other regions of the world such as Asia and Eastern Europe. This affinity is because the US has a high influence on Latin America and many US companies are active throughout the region.
Regarding language, many countries have English proficiency because it is usually the second language of most people and is taught from an early age. According to EF EPI (EF English Proficiency Index), there are 10 Latin American countries in the top 50 countries with the best quality of English. Among them, are Argentina, Costa Rica, Bolivia, and Chile.
Intellectual property laws
Intellectual property laws are fundamental to generating a framework of confidence for investors in a region. Latin America has made considerable progress in recent years, which has allowed, as we will see below, great growth in Venture Capital investments.
In 2022, the Chamber of Commerce Global Innovation Policy Center (GIPC) published a report on the 55 countries with the best intellectual property policies. Of the 55 countries included in the ranking, 11 are from Latin America. Some of the countries are Mexico, Chile, Costa Rica, Peru, Argentina, and Brazil, among others.
Why did attention shift to Latin America?
Some of the reasons why Latin America is a good option for US companies have to do with the benefits of the Nearshore model. But in recent years, there have also been several changes that have shifted the spotlight to Latin America: US labor market needs, geopolitical conflicts, economic factors, and other advantages that make the region extremely attractive.
The following are the factors that brought Latin America into the spotlight:
The increasing skill gap
One of the challenges to overcome for businesses in 2023 will be the talent shortage and the skill gap. The lack of talent in the US makes it necessary to look for talent across borders.
In Latin America, there is a large pool of talent and salaries are less expensive than those available in the US or Europe.
An untapped market
One advantage that Latin America has over other regions is that it is an untapped market. This makes it easier to access the best talent in each technology. However, to explore the region in the most efficient way, it is recommended to hire a provider with experience that knows the best talent pools and how to attract and retain top developers.
Ukraine-Russia armed conflict
Russia’s invasion of Ukraine caused quite a stir in the way the IT outsourcing market was organized. Ukraine was one of the main poles from which US companies drew for their technology projects. Due to the difficulties in accessing talent, US companies had the urgency to look for new vendors and talent. And Latin America was one of the most attractive markets due to the time zone, cost-effectiveness, cultural affinity, and the substantial number of developers available.
The growing number of startups in the region
After the pandemic, the growth of startups accelerated, and in the last two years, nearly 23,000 have been established in Latin America. In addition, the region has about 50 unicorns in industries such as fintech, services, sales, and logistics. The growth of Venture Capitals investment is not only generating an environment of confidence in the region, but it is also empowering talent and encouraging increasingly young people to study STEM careers as there are tempting job opportunities.
The boom in the region can be explained by two important factors:
- Investment: VC investors’ attention was focused on Latin America because there are under-exploited markets with great business opportunities to lead the market. 2021 and 2022 became record years in terms of millions of dollars invested in the region.
- Connectivity: Several Latin American countries are among the top countries with the best connectivity quality, and at the same time, in the last year, it was the region with the highest growth in internet access rates. The growth of connectivity and improvements in terms of infrastructure generate the basis for the digital transformation of the region and a favorable environment for innovation and the incorporation of cutting-edge technologies.
Quality technical universities and government programs throughout the region
One reason for the increase of software developers in Latin America is the region’s extensive education programs and initiatives. Many countries provide free college education, particularly in computer science, technology, engineering, and related fields. Furthermore, many government and non-profit programs are incentivizing tech companies, and other businesses to hire interns, which encourages citizens to pursue careers in tech.
The cost-effectiveness ratio is on point.
The region is characterized by offering a great value-for-money service. Although prices per developer are slightly higher than in regions such as Asia, outsourcing in Latin America has its competitive advantages. As it is a Nearshore model, as we mentioned, it has a time zone similar to the US, in addition to having experienced developers with high technical knowledge.
Top Latin American talents want to work for the US!
Working for American companies provides an excellent opportunity for Latin American talent to progress. Working in North American companies implies significantly higher salaries than those available in local companies, as well as greater stability.
In this way, attrition rates are combated not only because developers are economically motivated, but also because working for major US companies represents a significant challenge and a great step in their careers.
How to find the best talent?
To find the best talent available, the best alternative is to rely on Outsourcing companies with knowledge of the region and how to find, convince and retain the best talent. The candidates usually are bombarded with messages from many recruiters but having knowledge about the needs and cultural particularities of programmers can be a differential to getting the professionals you need.
In addition, the outsourcing model offers the advantage of technical advice at the time of recruiting. In this way, it is possible to detect the best talent before the competition in the shortest time. And without overspending.
If you are looking to build or strengthen your teams with the best talent in Latin America, contact us.
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