Are you wondering about the global dynamics of IT outsourcing in Latin America? In 2024, the region will generate $9.8 billion in outsourcing revenue, projected to grow to 15.3 billion by 2029. An impressive CAGR rate of 9.34%, major tech players like Microsoft, Oracle, and IBM on the scene, and IT market trends are just the tip of the iceberg explaining the trend of outsourcing software development to LATAM. I’m David Gomez, Lead LATAM IT Recruiter for Alcor. We provide an innovative staffing model for tech companies looking to establish in-house software development teams in Latin America and Eastern Europe. Our comprehensive solution combines Employer of Record (EoR), Tech Recruitment, and operational support to effectively scale tech teams from 0 to 100. In today’s article, I’ll brief you on the pros of IT outsourcing to Latin America, top locations where big tech outsourced their operations, and the reasons for doing so. Exclusive stats on software development salaries, skills, and talent pools packed in, as usual! First, let’s outline the specs of…
You’ve seen the stats: the market for outsourcing software development in Latin America keeps leaping. Its consistent development in foreign direct investment is a promising sign. After a steep drop to $91.8 billion in 2020 due to the pandemic, FDI in Latin America and the Caribbean has more than doubled. According to the World Investment Report 2024, the region attracted over $195 billion in 2022 and $193 billion in 2023. Let’s delve into the economic developments of this phenomenal growth:
The IT Services market in Latin America is experiencing significant growth, driven by an increasing demand for software outsourcing to Latin America. This market is characterized by a robust 7% CAGR rate, highlighting its expanding influence and potential for further investment.
The Business Process Outsourcing sector, already surpassing $17 billion in 2024, is projected to exceed $21 billion by 2029, indicating a bright future for software outsourcing to Latin America.
Another boost for outsourcing in Latin America comes from the development of innovation. AI is expected to fuel the Latin American GDP by an impressive margin by 2030. According to The Economist, this growth will be significant, contributing to a substantial increase in economic output.
Cloud computing is drawing significant interest from investors due to its impressive growth trajectory. With a compound annual growth rate surpassing 16%, it stands out as a key area of investment opportunity.
The rapid fourfold increase in fintech investment aligns with global demand in the BFSI sector.
This is just part of the bigger outsourcing picture, but it clearly demonstrates the economic pros of IT outsourcing to Latin America. What about tech-related incentives?
Latin America has emerged as a prime destination for nearshore outsourcing, attracting major tech companies with several key advantages:
The region boasts a vast pool of 1.75 million software engineers across Central and South America. This talent is well-educated, with 25 regional universities featured in the QS ranking, including 15 with top scores. Latin American developers are highly skilled in popular programming languages and frameworks such as Java, Python, C++, C#, React, Node.js, .NET, and Ruby.
Software outsourcing to LATAM can cut your costs in half. How so? Firstly, the salaries for software development in Latin America are 2.5-3 times lower than for the same position in the US. Secondly, government incentives aimed at increasing outsourcing provide tax benefits. Take taxes in Mexico vs. the US. Unlike in the United States, companies are taxed only at the federal level for corporate and personal income tax. While differences apply depending on location and business type, there’s a chance to save on taxes by benefiting from IT outsourcing to LATAM.
Nearshore outsourcing to Latin America is a strategic choice for many companies seeking growth and innovation. The region is home to over 9,000 startups and 60 unicorns, attracting significant venture capital investment—$3.9 billion in 2023 alone. Dealroom identifies four Latin American cities—Bogotá, Belo Horizonte, Curitiba, and Mexico City—as part of the top 10% of global next-generation software development ecosystems. These cities exemplify the region's dynamic tech landscape.
Another perk of software outsourcing in Latin America is its geographical proximity. Countries like Mexico, Argentina, Chile, Colombia, and Uruguay are only 2-4 hours ahead of San Francisco and 1-2 hours behind New York. Moreover, Buenos Aires and Montevideo are in the same time zone as New York. Such closeness contributes to a smaller cultural gap with Latin America.
Despite the US vs. LATAM differences in hierarchy perception, task achievement approaches, and long-term planning strategies from a cultural perspective, collaboration remains feasible. Understanding these differences can facilitate smoother interactions when working with developers from Latin America.
On the other hand, in this model, you are limited to communicating with the team via a third party, so complications are inevitable. There’s a way to avoid this, such as creating your own team of programmers to follow your corporate culture and brand. How to get there? See in our following sections.
If you want to succeed with software development in Latin America, pick the best location in the region to outsource your product tasks. Who leads in startup ecosystems? Which country has more outsourcing tech hubs? And where do Latin American developers speak perfect English? Find out in the overview below:
The IT outsourcing market in Mexico is projected to grow from $6.2 billion in 2024 to $9.3 billion by 2029.
The tech landscape includes 400 tech businesses and 450 startups.
Foreign direct investment increased from $31.8 million to $36 million between 2021 and 2023.
Major tech hubs: Mexico City, Monterrey, Guadalajara, and Mérida.
Talent pool: 700,000 professionals and 124,000 ICT graduates annually.
Mexican software engineers are proficient in JavaScript, Python, C#, SQL, React.js, and Angular.
Ranks in the top 20 in Latin America for English proficiency.
Average salaries: $40,000 for middle specialists and $57,750 for senior specialists.
Mexico is making significant strides in AI development. From 2021 to 2022, the number of AI-trained workers increased by 45%, placing the country among the top five for AI adoption in Latin America. Anticipating $240 million in AI-based investment by 2024, Mexico attracts companies looking to outsource AI-related tasks to skilled professionals. The establishment of the first GenAI lab in Guadalajara further cements its position as a hub for AI innovation.
Despite a A4 business climate and incentives such as up to a 30% tax credit on R&D income and 50 free trade agreements, incorporating your business in Mexico can be challenging due to complex legal requirements. You can bypass the legal hurdles by using EoR services in Latin America. At Alcor, we help companies grow while complying with local legislation, just like we did for Ledger.
The IT outsourcing market is expected to grow from $690 million in 2024 to $1.1 million by 2029.
The IT landscape features 11,000 IT businesses and 1,255 startups.
Foreign direct investment increased from $9.5 million to $17.5 million between 2021 and 2023.
Major tech hubs include Bogotá and Medellín.
Talent pool consists of 150,000 professionals with an additional 13,000 ICT graduates annually.
Colombian developers are skilled in Java, C++, Python, SQL, and Ruby.
Ranks in the top 20 for English proficiency in Latin America.
Average annual salaries are $37,500 for middle specialists and $54,750 for seniors.
Colombia’s startup ecosystem has been enjoying an upward momentum: from 2021 to 2024, it jumped from 5th in Latin America to 2nd! It’s a true unicorn hub with world-famous companies like Rappi, LifeMiles, and Habi. What’s more, La Haus, Plazzi, and Ontop are poised to reach a $1B valuation while 41 Colombian startups have made it to Y Combinator!
Regarding outsourcing, Colombian labor law frameworks differ considerably from US ones. Starting with employment types and contracts and continuing with worker misclassification penalties and higher employee rights protection. Ideally, you should find a provider in Latin America to navigate the legislative pitfalls.
IT Outsourcing market: $435 million in 2024; projected to reach up to $700 million by 2029.
IT landscape: Comprises around 3,800 IT businesses alongside over a thousand startups.
FDI (Foreign Direct Investment) from 2021 to 2023 increased sharply from $6.9 million to $22.9 million.
Major tech hubs: Buenos Aires and Córdoba.
Talent pool: Comprises of 130,000 professionals plus an additional 20,000 ICT graduates annually.
Tech & English skills: Proficient in Python, TensorFlow, Cloud APIs, SQL, R, and NLP; Argentinian developers rank #1 in Latin America for English proficiency.
Average annual salary: $35,500 for middle specialists; $53,250 for seniors.
Argentina has secured top spots in innovation—5th spot in Latin America on the Global Innovation Index (2023), ranking fourth in regional e-commerce—and shows positive development across sectors like IoT, cloud computing, BFSI (Banking Financial Services and Insurance), healthcare, blockchain among others. Its startup ecosystem is solidified within LATAM's top five. Notably making waves in Agtech as four Argentinian cities—Buenos Aires, Rosario, Cordoba, and Río Cuarto—are recognized among the industry's top ten cities.
The Argentinian government offers tax incentives for IT businesses under Law 27,506. To qualify for these incentives requires registration as a legal entity within the National Registry of Beneficiaries along with proof that at least seventy percent of annual income is derived from activities specified by law. For those outsourcing software development into Latin America who may not have time or resources available immediately necessary towards establishing such entities locally—the EoR solution remains beneficial.
IT Outsourcing market: $716 million in 2024; projected to reach up to $1.1 billion by 2029.
IT landscape: Includes 200 IT businesses and 303 startups.
FDI (Foreign Direct Investment) from 2021 to 2023 grew from $12.6 million to $21 million.
Major tech hubs: Santiago, Valparaíso, and Concepción.
Talent pool: Comprises of 61,000 professionals skilled in PHP, ASP.NET, Java, Python, Node.js, and Perl; Chilean IT specialists rank among the top ten for English proficiency in Latin America.
Average annual salary: $37,750 for middle specialists and $54,500 for seniors.
Chile is your best bet if you're seeking senior programmers. It has the highest density of senior IT talents in Latin America — with about 45%, according to Coursera — ranking fourth for tech skills. It shines particularly in cloud computing development and data analysis while demonstrating tangible innovation potential as the region’s second most innovative economy. Despite having a double tax treaty with the US allowing shareholders a full credit on corporate income tax payments; dealing with Chile's taxation can be cumbersome.
For those nearshoring without similar treaties elsewhere may face a hefty withholding tax of up-to thirty-five percent yet only receive credits covering sixty-five percent of their corporate taxes paid abroad—consulting local legal experts before scaling operations into Chile is advisable.
Software market: $282 million in 2024; projected to reach up to $342 million by 2029; expected to hit $1 billion in IT exports the same year.
IT landscape: Includes 530 IT businesses and 1,010 startups.
FDI (Foreign Direct Investment) from 2021 to 2023 increased from $1.9 million to $3.4 million.
Major tech hub: Montevideo
Talent pool: Comprises of a skilled workforce of 21,000 professionals plus an additional 4,000 ICT graduates annually.
Tech & English skills: Proficient in JavaScript languages and frameworks as well as AI technology; ranks among the top five for English proficiency among software developers in Latin America.
Average salary: $34,750 for middle specialists; $52,750 for seniors.
Uruguay has shown itself as an excellent hub for back-office operations tested by Amazon, Microsoft, Sabre, and PWC as stated by the ITA. The country is also active in embracing innovation with the highest Internet penetration rate in South America and the highest density of IT specialists per capita.
Despite being less developed than Mexican hubs which appear more vibrant for nearshoring activities but lacking sheer talent numbers currently although government efforts focus on boosting outsourcing talent-wise regarding infrastructure development compared to other outsourcing destinations mentioned here—Uruguay is less developed than Mexican hubs which appear more vibrant for nearshoring activities but lacks sheer talent numbers currently although government efforts focus on boosting outsourcing talent-wise.
Can’t wait to start outsourcing to Latin America, but leery of the legal risks? We at Alcor feel your pain. Aware of the pitfalls of IT outsourcing and similar models, such as IT staff augmentation in LATAM, we developed a 360-degree solution that combines EoR and efficient tech recruitment. Ultimately, we offer R&D center services to build your own in-house software development team and payroll, accounting, legal compliance, office lease, and IT infrastructure setup fully managed.
People.ai experienced these benefits firsthand. When expanding their development team to an offshoring location, they turned to Alcor for our comprehensive package of employer-of-record and full-cycle recruitment services. We exceeded their expectations by hiring 25+ top-tier software devs, cutting tax costs, ensuring double legal compliance, and opening their own R&D office!
Alcor is your one-stop shop for Silicon Valley-like talent and unmatched savings. We take the hassle off your shoulders: manage the legal queries through our own legal entities, hire software developers in Latin America, and launch an entire R&D office! What about quality? Our retention rates speak volumes: 99% of clients continue cooperating with Alcor, and 98% of the talent we hire passes the probation period. Alcor’s reach spans Latin America and Eastern Europe, including Mexico, Colombia, Poland, Romania, Ukraine, and more. In addition to the available IT pools, we have amassed 253,000 tried-and-tested software engineers to match your IT seniority needs.
Want to hire someone in-house? Forget buy-out fees; insource your coders any time at no cost. The icing on the cake: there’s no rate-card trap, only direct salaries, allowing you to save up to 40%. Interested? We’re a click away!