Latin American governments are investing in the technology industry to help reduce their dependence on commodity exports and to help stimulate international investment.
To help boost economic diversification and reduce dependence on commodity markets governments across Latin America seek to nurture and develop their technology industries.
Governments have different approaches, but these investments mean technology hubs and start-up incubators are spawning across the continent. Mexico, Brazil, Chile, and Colombia lead the way, and now boast developing tech clusters near key cities, for example the technology-focused co-working spaces of El 3er Espacio, Mexico City; the Porto Digital tech cluster in Recife, Brazil; or the emerging tech clusters around Bogota and Medellin, Colombia or Santiago in Chile.
Brazil and Mexico together comprise the biggest tech scenes in Latin America. Mexico will invest $600 million in boosting tech startups through to 2018. The country now has over 100 incubators, 20 accelerators and numerous crowdfunding platforms in place. Mexico City’s Startup Mexico “super hub” provides entrepreneurs with a host of resources, talks, workshops and introductions to sources of funding. The technology focused LATAM Tech Meetup helps build ties between Mexico and US firms.
These initiatives are creating tangible results – at present over 45 venture capital funds have launched in the country, most recently Alta Ventures recently closed a $70 million venture fund, one of the largest VC funds in Mexico’s history.
The complexity of doing business in Brazil remains a challenge for foreign companies to take position there, but the country already boasts multiple tech hubs, with 40 scattered nationwide accounting for around 1.5 million ICT employees.
Investment in the sector has helped develop the Porto Digital hub in Recife, home to over 200 firms and located within the city’s historic centre. The cluster is a recognised hub for highly skilled IT professionals, partly thanks to the presence of the widely respected Federal University of Pernambuco and its world-class computer science program.
Foreign technology firms are interested in taking places there. Accenture is hiring 1,000 more staff in Recife, Brazil. “There is a wealth of technology talent in Recife,” said Flavia Picolo, Accenture Technology director in Recife.
Rio is Brazil’s biggest focus. Brazil’s Start-Up Brazil scheme offers up to $100,000 in support to local entrepreneurs. Microsoft, General Electrics, and Cisco have all announced plans to launch innovation centers in the city.
“We see significant growth opportunities in Latin America and having the best technology and solutions will ensure we maintain GE’s competitive edge,” said GE Chairman and CEO Jeff Immelt.
These huge investments mean the ICT sector is expected to comprise 11 percent of Brazil’s GDP by 2020, according to Brazil IT.
Colombia is an emerging success story. It began when the government first sought to attract technology firms with tax incentives and professional training schemes to help foster a tech hub around Bogota and Medellin. The government has since spurred numerous funding initiatives to help finance tech innovation while in Medellin city government has ring-fenced $389 million over ten years to support technology and innovation. The country is also investing in essential infrastructure; it aims to get 63 percent of the population online by 2018.
Columbia’s efforts are yielding returns - technology is now a $6.8 billion industry and the country now competes with Brazil and Mexico.
The Start-up Chile initiative is attracting potential entrepreneurs from inside and outside of Chile. The scheme, which offers selected entrepreneurs up to $40,000 in start-up seed capital, is not restricted to Chilean nationals. Start-up Chile currently supports over 1,000 start-ups from 75 countries, with much activity based around Chile’s own tech hub in Santiago, (also known as “Chilecon Valley”). The scheme recently extended its available funding offer in an attempt to encourage entrepreneurs to remain in the country, offering an additional $100,000 to selected technology firms willing to base themselves there for at least a year.
The Word Economic Forum in its 2015 Leveraging Entrepreneurial Ambition and Innovation: A Global Perspective on Entrepreneurship, Competitiveness and Development" report notes "Colombia and Chile combine high early-stage entrepreneurial activity with a high proportion of ambitious and innovative entrepreneurs.”
These investments in technology start-ups and infrastructure are married to spending on education. Latin American governments recognise their populations are already tech-savvy: The continent is home to 156 million smartphone users and already accounts for 20 percent of Facebook’s user base, prompting Mark Zuckerberg to host a public Q&A session with Facebook users in Bogotá, Colombia.
Colombia’s government is spending $19 million on its Digital Talent initiative (Iniciativa Talento Digital), offering citizens free technical, technological, professional and related postgraduate degrees related to Information Technology.
Along with tax incentives and government support, the development of an educated tech-savvy workforce is helping attract much-needed foreign investment from technology firms. At the same time, Latin America’s continued investment in the technology sector means the country is becoming fertile ground for IT recruitment.
“Vast IT workforces sit in regional skill center hubs around the world,” remarks Edge Zarrella, Global Head IT Advisory Services, KPMG. “At the same time, the demand for skilled IT people ‘on the ground’ has seen huge recruitment surges in numerous countries…. A very real skills shortage many be starting to open up.”
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Jon Evans is highly experienced technology journalist and editor. He has been writing for a living since 1994. These days you might read his daily regular Computerworld AppleHolic and opinion columns. Jon is also technology editor for men’s interest magazine, Calibre Quarterly, and news editor for MacFormat magazine, which is the biggest UK Mac title. He's really interested in the impact of technology on the creative spark at the heart of the human experience. In 2010 he won an American Society of Business Publication Editors (Azbee) Award for his work at Computerworld.