IT Outsourcing

Comparing the Best IT Nearshore Outsourcing Countries in Latin America

Today’s global economy has caused an unprecedented demand for tech talent. With technology driving innovation across industries, companies in the US are struggling to fill key tech positions within their oversaturated IT talent market.

In this scenario, a Deloitte survey found out that almost 90% of tech companies are considering nearshore outsourcing to Latin America. With its proximity to the US and a growing pool of highly skilled professionals, the region is swiftly becoming a go-to destination for outsourcing software development services.

Among the Latin American countries that are highly performing in the outsourcing arena, Colombia stands out as a rising star; its strategic location and favorable business environment are just some of the factors that make the South American country an increasingly attractive business option.

Let’s explore the outsourcing landscape in Latin America, comparing the top nearshore options and uncovering the significant value that the region offers. From Mexico to Argentina, with a notable emphasis on Colombia, massive opportunities await companies aiming to leverage the advantages of nearshoring.

Why Latin America is Such a Popular Outsourcing Location:

According to the Inter-American Development Bank, exports from nearshoring in Latin America could reach up to 78 billion annually. Such optimistic estimates result from the region becoming the preferred outsourcing destination for North American companies.

Moreover, last years have shown a 156% increase in foreign countries’ interest in hiring Latin American staff, the most of any world region. Clearly, the region’s talent is in the spotlight, and many factors are behind it.

So, why nearshoring to Latin America? Some of the most predominant reasons are the following:

  1. Proximity to the US: Most Latin American tech hubs are a few hours away from the US. Companies find it easier to control their offshore teams when they can easily take a three-hour flight and visit them.
  2. Time zone alignment: Being in a similar time zone as the US means companies can work at the same time as their offshore teams. That means less hassle with communication and faster responses, which equals more productivity.
  3. Cost-effective workforce: It’s no secret that hiring skilled talent in the US is becoming increasingly harder and expensive. By contrast, Latin America offers vast pools of tech talent that are nowhere near US wages. Cost savings can go up to 70% without sacrificing staff’s quality or knowledge.
  4. Bilingual proficiency: Latin Americans’ English language skills have steadily grown during recent years, surpassing the efforts of other outsourcing powerhouses, like Eastern Europe and Southeast Asia. Moreover, offering Spanish as native language is a desirable plus for US companies, as the Latino market is growing exponentially in North America every year.

The Best Latin American Countries for Nearshore Technology Outsourcing

As shown above, Latin America has become a hot spot for nearshore technology outsourcing, offering a winning combination of talent, proximity, and cost-effectiveness. But with so many countries in the region, which ones are the best for nearshoring in Latin America?

We’ll explore the top Latam countries for nearshore technology outsourcing. Brazil, Mexico, Argentina… all pose as alluring options, but we’ll dive deeper into the attributes of Latin America’s hidden gem: Colombia.

Comparing the Top Countries in Latin America

There are several aspects that play a pivotal role in determining the ideal fit for your nearshoring endeavors.

From talent pool and language proficiency to infrastructure and business environment, we’ll delve into the main differentials to consider when thinking about nearshoring to Latin America.

At this point, if you’re still unsure about nearshoring and whether it is the right choice for your business, we recommend you read this in-depth article to fully understand the potential of tapping from neighboring talent pools.

Colombia vs. Mexico for Outsourcing

Colombia and Mexico stand out as top tech hubs in Latin America. Mexico boasts a massive IT workforce of 700,000, while Colombia follows closely with 150,000 skilled professionals.

With Mexico’s impressive numbers, it’s tempting for US companies to consider outsourcing there. But hold on, Colombia offers some compelling advantages too. Let’s consider some facts that might explain why it might just be the better choice, even compared to Mexico.

  1. English language skills: While both Colombia and Mexico are making strides in integrating English into their education systems, Colombia is taking the lead. The latest EF English Proficiency Index ranks Colombia slightly higher than the North American country, with cities like Bogotá, Medellín, and Barranquilla surpassing the global average score.
    Since effective communication and cultural alignment are vital for nearshoring success, overcoming language barriers is crucial. In this turf, Colombia simply delivers better results.
  2. Talent regeneration: Indicates countries’ score in availability of software development skills, plus the level of educational institutions, patents, start-ups, ecosystem responsiveness and government support.
    Results of this indicator, published on the 2023 Kearney Global Services Location Index, show once again Colombia outperforming Mexico. The study also highlights the country’s robust investment in expanding the IT industry and its high-tech innovation capabilities.
  3. IT Labor costs: According to a 2023 IT salary report, the average tech salary in Colombia hovers around $27,000 USD per year, notably lower than the $36,000 USD average in Mexico.
    Furthermore, Mexico’s recent amendments on its labor laws are expected to directly affect outsourcing operations within the country, increasing overall costs for foreign companies.

Colombia vs. Argentina for Outsourcing

With over 115,000 software development professionals, Argentina is emerging as a tech powerhouse in Latin America’s outsourcing landscape. Notably, it boasts the highest English proficiency in the region, with all its major cities surpassing global averages.

However, despite these strengths, Argentina presents challenges that may deter US companies from selecting it as their nearshore destination, particularly when compared to Colombia.

  1. Geolocation: Colombia shares time zone with US eastern for much of the year, fostering real-time collaboration and communication. Plus, with flight times as short as 4 to 5 hours from major US cities, Colombia offers convenient accessibility for frequent visits and effective management of nearshore teams.
    In contrast, Argentina’s time zone difference and longer flight durations of 10 to 12 hours pose challenges for synchronization and oversight. In the end, Colombia’s advantageous geolocation maximizes efficiency and minimizes logistical barriers, tempting leverages for US companies seeking for strategic outsourcing.
  2. Political and economic stability: Argentina’s recent history of economic volatility, marked by financial crises and triple-digit inflation, creates uncertainty for businesses looking to outsource. The country’s political landscape, characterized by division stemming from past regimes, adds another layer of instability.
    In contrast, Colombia offers a more stable environment for nearshoring, with a consistent political climate and steady economic growth. This reliability makes Colombia an attractive choice for companies seeking assurance and continuity in their outsourcing ventures.

Colombia vs. Brazil for Outsourcing

In terms of software development workforce, there´s no more extensive hub in Latin America than Brazil. With a massive 750,000 IT talent pool, the country is the most obvious choice for scalable outsourcing operations.

In addition, Brazil’s economy shows the best projections in the region. In 2023, FDI rose by 70% to 86 billion, the second-highest level ever recorded. Undeniably, Brazil is a safe bet when considering nearshore outsourcing in Latin America.

Now, how does Brazil perform in the outsourcing scenario compared to Colombia? Let’s analyze some strategic aspects.

  1. Talent skills: While Brazil may lead in workforce availability, Colombia shines in talent skills and expertise. In fact, according to Coursera’s 2023 Global Skills Report, Colombia ranks first in Latin America for business talent skills and second for technology.
    This showcases Colombia’s strength in delivering highly skilled professionals and its commitment to providing top-tier IT education.
  2. IT Labor costs: Colombia surges as a more economical choice compared to Brazil, mirroring the trend seen in the comparison with Mexico’s tech salaries. With Brazil’s average IT wages nearly double those of Colombia – $47,823 USD to $27,264 USD – the cost disparity is substantial.
    For small to medium-sized US companies looking to scale up their business operations, this significant gap could be the key to unlocking success in their growth endeavors.
    Opting for Colombia as a nearshore destination offers the potential for considerable savings without compromising on talent quality, making it an attractive option for companies aiming to expand efficiently.
  3. Spanish as native language: Colombia holds a strategic advantage over Brazil simply because Spanish is its native language, instantly aligning with approximately 63 million Spanish speakers in the US.
    Opting for Colombia as a nearshore destination grants US companies access to a vast Spanish-speaking demographic, fostering market expansion and growth opportunities.

Colombia vs. Perú for Outsourcing

Peru demonstrates remarkable English proficiency levels, with most major cities performing above the global average despite a slight decline in the overall score in 2023.

Additionally, Peru’s tech workforce ranks among Latin America’s top five most skilled, positioning it as a burgeoning nearshore software development hub.

However, the Peruvian outsourcing industry still has ground to cover compared to regional tech giants like Mexico, Argentina, and specially Colombia. Here’s why.

  1. Unstable economics: According to World’s Bank data, Peru’s economy contracted by 0,6 in 2023. Alternate studies also estimate that about 80% of all employment in Peru comes from the informal job market.
    These figures raise greater concern when contrasted with other outsourcing tech hubs in Latin America, including Mexico, Brazil, and Colombia. Each of these countries demonstrated stronger economic performance, averaging a growth rate of 2.2%.
  2. Political turmoil: In the past five years, Peru has seen six different presidents, with Dina Boluarte’s election sparking violent protests nationwide, resulting in numerous casualties.
    This persistent instability serves as a cautionary tale for companies considering outsourcing operations in the country, as scaling business ventures amidst civil unrest and uncertainty proves challenging.

Why to Choose Colombian Talent for Your Team

As the demand for tech talent intensifies in the global economy, companies in the US are increasingly turning to nearshore outsourcing in Latin America. Among the array of options, Colombia clearly emerges as a standout choice, offering a strategic blend of talent, proximity, and cost-effectiveness.

Here’s why you should definitely consider nearshoring IT Talent to Colombia:

  • Proximity to the US: Colombia’s location just a few hours away from major US cities facilitates convenient travel for oversight and management of nearshore teams, fostering closer collaboration and quicker response times.
  • Time zone alignment: Being in a similar time zone as the US enables seamless communication and real-time collaboration between onshore and nearshore teams, minimizing operational hurdles and enhancing productivity.
  • Cost-effective workforce: Colombia offers a highly skilled IT workforce at competitive rates, with potential cost savings of up to 70% compared to US wages. This affordability without compromising talent quality makes Colombia an attractive option for scaling business operations.
  • Bilingual proficiency: With a growing proficiency in English and Spanish as its native language, Colombia aligns linguistically with approximately 63 million Spanish speakers in the US, providing access to a vast untapped market for companies aiming to expand their reach.
  • Stability: Colombia offers a stable political environment and steady economic growth, providing assurance and continuity for companies seeking reliability in their outsourcing ventures. This stability contrasts with the political and economic turmoil witnessed in other Latin American countries, making Colombia a safer bet for long-term partnerships.

Now that you’ve learn about nearshoring and how it can boost your business growth, are you ready to elevate your team with top-notch, cost effective talent?

Discover here how our expertise in sourcing skilled professionals has helped over 720 clients build exceptional nearshore teams and grow their business.