Nearshore Software Development in Latin America: 8 Compelling Benefits

Sep 1, 2023 | Perspectives

From a rise in unicorn startups in Mexico to Colombia’s rapid IT sector growth, Latin America has become a hotbed for software development ventures. 

This also makes it an excellent destination for nearshoring software development.

But which is the best country in the region for your nearshore outsourcing needs?


We’ll cover seven popular Latin American nearshore outsourcing destinations for your software development projects. Plus, learn how partnering with Distillery can make this process a breeze.

Further Reading:

Looking for a powerful strategy to quickly onboard top-notch talent? Discover 6 Ways Nearshore Staff Augmentation Helps Your Business. Explore 8 Benefits of Nearshore Software Development in Mexico, along with three popular development hubs in the country.

This Article Contains

8 Reasons to Opt For Nearshore Software Development in Latin America 

Here’s why Latin America is a promising nearshore software development destination:

1. Robust Laws to Incentivize Foreign Direct Investment

Latin American Foreign Direct Investment (FDI) laws provide benefits such as tax advantages, financial rewards, and safeguards like protection from direct expropriation, which shield investments from being taken away by the government.

Think of it this way: It’s like a welcome mat with exceptional offers.

For example, in 1993, Mexico enacted the Foreign Investment Law. It guarantees foreign investors the right to take profits, dividends, and capital out of the country. 

Some of the strategies employed to promote FDI in Latin America are:

  • Investment assurance: These safeguards shield foreign investors from political turmoil, currency issues, and conflicts.
  • Tax advantages: Several Latin American countries (like Brazil and Uruguay) extend tax breaks to foreign investors, including exemptions from import fees, corporate income taxes, and sales taxes.
  • Financial perks: Foreign investors are offered financial advantages, like low-interest loans, grants, and subsidies, to sweeten the deal.
  • Streamlined rules: For example, Brazil has modernized its customs regulations and employs initiatives like the RECOF program, which suspends taxes on imported raw materials intended for later export, effectively boosting the country’s export promotion efforts. 

2. Close Geographical Proximity and Time Zone Alignment

Latin America’s time zone synchronization with North America brings valuable strategic advantages. For example, Atlanta (US), a thriving business hub, shares a one-hour time difference with cities like Bogotá (Colombia) and Lima (Peru). 

This enables easier real-time interactions, making remote collaborations more efficient. Moreover, Latin America’s location makes business travel from the US more efficient and cost-effective. 

In contrast, you will have to deal with a significant time difference of 9+ hours when you offshore software development to regions like Asia.

3. Cultural Similarities

Latin American countries may have some cultural similarities with the US. So, developers from these regions naturally grasp American workplace ethics, deadline anticipations, and stringent quality benchmarks. 

This familiarity helps them form close connections with US-based product development teams, avoiding misunderstandings due to cultural differences.

But it doesn’t end there. 

This nearshore team may also share some national holidays, making syncing and ensuring workflows and deadlines easier.

4. Cost-Effective Talent

The primary motivation behind nearshoring software development to Latin America is cost reduction. 

For example, the average salary for a software developer in Argentina is about USD 129.72/month. In the United States, it sits at about USD 7650/month. 

Note: Actual salaries may vary based on the developer’s experience, qualifications, and location. 

Additionally, the average cost of living in most Latin American countries is far less than that of the US. For example, the average cost of living in Argentina ($603/month) is 74% less expensive than in the United States ($2317/month). 

This allows companies in the US to offer competitive salaries to remote workers in Latin America while managing their outsourcing budget effectively.

5. Diverse Talent Pool

Since 2021, Latin America has seen a staggering 156% increase in businesses seeking to tap into the region’s talent pool. This is particularly true for crucial roles in software engineering. 

The local governments have taken several actions to empower tech talent.

A key example of this transformation is the collaborative effort between universities, businesses, and various stakeholders. These partnerships play a pivotal role in sparking interest in tech jobs and nurturing a skilled workforce. 

For example, Mexico produces about 130,000 engineering graduates yearly, and their IT talent has a proficiency level of 93% for computer programming and 79% for mobile app development.

When it comes to back-end development, countries like Chile, Argentina, and Colombia offer an extensive talent pool. On the other hand, Brazil provides a large number of high-performing game and graphic developers. 

6. Agile and Innovative Workforce

Latin America’s digital teams embrace collaborative software development methodologies like Scrum and Agile instead of traditional approaches. 

Agile methodologies are more than just processes – they enhance communication and collaboration, which is crucial when working with remote teams. This focus on teamwork is evident in Latin American startups that have achieved Unicorn status. 

For instance, Gympass, a Brazilian Unicorn, attributes its success to Agile Methodology and Sprints, which enabled swift responses to user needs and feedback. 

7. Ease of Communication 

Latin American countries like Colombia, Costa Rica, and Mexico have skilled English and Spanish speakers.

Around 80% of jobs in Latin America require proficiency in English. This is why the government and schools have taken strategic steps to improve English proficiency from an early age.

For example:

  • Costa Rica made learning English a must in 2018. 
  • A plan in 2014 called “Colombia Very Well” made English the primary foreign language taught in Colombian schools. 

8. Fast Internet and Tech Infrastructure 

The backbone of Latin America’s expansion of tech infrastructure is its dependable internet connectivity. For example, Costa Rica offers the region’s best mobile connection and the second-fastest internet speed. 

In 2023, eight Latin American countries started offering commercial 5G services. These include Argentina, Colombia, Brazil, Chile, and Uruguay. 

The internet penetration across the Latin American region also reached an impressive 50.4% in 2022, and estimates point to further growth to 52.8% by the close of 2023. Likewise, fiber optic technology will capture 53.2% of the broadband market by 2023, showcasing the region’s readiness to embrace modern infrastructure.

7 Popular Latin American Destinations for Nearshore Software Development 

Here are some of the top destinations you could choose from for your next software development outsourcing project: 

1. Mexico

  • Tech hubs: Mexico City, Guadalajara, Monterrey
  • Time zones shared with the US: GMT-5, GMT-6, GMT-7
  • No. of software developers: 225,000+ 
  • Average annual salary of a software developer: USD 1 825.99/month
  • Ease of doing business: 60 out of 190 global economies
  • Presence of tech firms: Salesforce, Honeywell, Pinterest, Google, Microsoft, Amazon, Oracle, IBM, Cisco, Motiva Robotics, and more 

Key Advantages of Nearshore Software Development in Mexico

  • Mexico boasts the highest proportion of engineering graduates within Latin America and sees 25% of all tertiary degrees awarded in STEM fields.
  • Various government initiatives in Mexico help propel tech talent, such as:
  • Tuition-Free Tech Universities: Mexico has introduced 120 tuition-free tech universities, encouraging youth to pursue STEM fields.
  • Fondo Nacional Emprendedor: The government-operated initiative Fondo Nacional Emprendedor offers grants to support entrepreneurs in the tech sector.
  • Mexico has over 20 tech parks, including renowned names like Creative Digital City, Apodaca Technology Park, and Guadalajara Software Center.

2. Argentina

  • Tech hubs: Buenos Aires, Cordoba, Rosario
  • Time zones shared with the US: GMT-3
  • No. of software developers: 115,000
  • Average annual salary of a software developer: USD 129.72/month 
  • Ease of doing business: 126th out of 190 global economies 
  • Presence of tech firms: Nokia, Google, Microsoft, AreaTres, NXTP Labs, Wayra, Startup Buenos Aires, Incutex, GiFlyBike, Winclip, Fligoo, and more 

Key Advantages of Nearshore Software Development in Argentina

  • Argentina hosts a vibrant startup scene, with about 268 tech startups in operation. These include unicorns such as MercadoLibre, OLX, Globant, etc.
  • Buenos Aires is home to 10 QS-ranked universities, including the University of Buenos Aires, which ranks #1 in Argentina and 13th in Latin America for Computer Science.
  • Argentina has a strong outsourcing record, with 59% of software outsourcing involving US companies.

3. Costa Rica

  • Tech hubs: San José, Guanacaste, Heredia 
  • Time zones shared with the US: GMT-6
  • No. of software developers: 22,701+
  • Average annual salary of a software developer: USD 4265.36/month
  • Ease of doing business: 74th out of 190 global economies 
  • Presence of Tech firms: Concentrix, Intel Corporation, IBM, Amazon, DXC Technology, Microsoft, DNAMIC, ParallelDevs, Novacomp, and more 

Key Advantages of Nearshore Software Development in Costa Rica 

  • Costa Rica claims the top spot as the world’s best foreign direct investment (FDI) performer relative to the size of its economy, based on the Greenfield FDI Performance Index 2023.
  • Costa Rica is home to 119 in-country IT firms, and government initiatives for enhancing tech skills and software investment have helped it achieve:
  • #1 in per capita IT services export across Latin America
  • #1 in value-added IT services throughout Latin America
  • Notably, it experiences a remarkable annual growth rate of 7.6% in the digital tech labor force, leading value-added services in Latin America.

4. Chile 

  • Tech hubs: Santiago, Valparaíso, and Concepción
  • Time zones shared with the US: (GMT-3, GMT-4, GMT-6)
  • No. of software developers: 61,000+
  • Average annual salary of a software developer: USD 2069.39/month 
  • Ease of doing business: 59 out of 190 global economies 
  • Presence of Tech firms: Tata Consultancy Services, Oracle, Globant, Amazon, IBM, Google, Thoughtworks, SAP, Everis, and more 

Key Advantages of Nearshore Software Development in Chile

  • Securing the top position in Latin America for ease of business, Chile offers an ideal ecosystem for software development outsourcing.
  • Dynamic government programs and startup investments drive Chile’s tech sector. This effort has led to Chile being ranked 1st in Latin America for digital skills by the International Institute for Management Development (IMD). Key initiates include:
  • Start-Up Chile: Fosters startups’ early phases through substantial grants and investments.
  • Tech Visa: Simplifies collaborations and talent acquisition with a dedicated visa for tech entrepreneurs and investors.
  • Girls in Tech Chile: An initiative that empowers women in STEM fields, guided by a dynamic female team.
  • Chile is set to reach $1.9 billion in software development revenue by 2026, showcasing a significant market for outsourcing and emphasizing Chilean programming expertise. 

5. Brazil

  • Tech hubs: São Paulo, Belo Horizonte, and Curitiba
  • Time zones shared with the US: GMT-3
  • No. of software developers: 500,000+
  • Average annual salary of a software developer: USD 1766.16/month
  • Ease of doing business: 124 out of 190 global economies 
  • Presence of Tech firms: Softbank, IBM, Google, Unisys, Nubank, HP, Infosys, B-Wire, Mantra Agency, ateliware, and more 

Key Advantages of Nearshore Software Development in Brazil

  • The Brazilian Association of Information Technology and Communication Companies (Brasscom) aims to train more than 156,000 web developers by 2024. In parallel, the Brazilian Association of Software Companies (ABES) sponsors diverse initiatives dedicated to nurturing tech talent.
  • Brazil’s thriving software industry hosts 6,000+ development firms and is expected to grow by around $12.16 billion in 2023.
  • Brazil has an impressive startup growth rate of 10.2%, closely rivaling the US rate of 10.7%. This landscape includes 13,000 startup enterprises and 16 tech unicorns like C6 Bank, QuintoAndar, and more. 

6. Colombia

  • Tech hubs: Medellin, Bogotá, Cali
  • Time zones shared with the US: GMT-5
  • No. of software developers: 150,000+ 
  • Average annual salary of a software developer: USD 1129.87/month
  • Ease of doing business: 67 out of 190 global economies
  • Presence of Tech firms: Peerbits, Gorilla Logic, Parrolabs, BairesDev, Exadel, PAXZU, Ideaware, Ceiba Software, and more

Key Advantages of Nearshore Software Development in Colombia

  • Since 2020, Colombia has attracted over 60 companies to establish operations there. These investments have surpassed USD 1 billion in just over two years.
  • Colombia produces over 13,000 information and communications technology (ICT) graduates annually.
  • Colombia houses one of Latin America’s largest JavaScript communities, featuring JS-focused gatherings like BogotaJS, MedellínJS, and similar meet-ups in six other cities, uniting over 3,000 members. 

7. Uruguay 

  • Tech hubs: Montevideo 
  • Time zones shared with the US: GMT-3
  • No. of software developers: 15,100+
  • Average annual salary of a software developer: USD 840.16/month 
  • Ease of doing business: 101 out of 190 global economies
  • Presence of Tech firms: Ona, dLocal, MercadoLibre, Nocnoc, Pedidos Ya, Prex, Paganza, Meitre, Prometeo, Strike, Datanomic, Bankingly, and more 

Key Advantages of Nearshore Software Development in Uruguay 

  • Uruguay offers attractive tax exemptions for software exports and related services. Specifically, software development enjoys total corporate income tax exemption, provided that a minimum of 50% of associated costs are incurred within Uruguay. 
  • Uruguay secured the second position among all Latin American countries in assessing digital readiness. The assessment measured technology infrastructure, adoption, and investments from businesses and governments. 
  • This nation houses over 1,000 software development firms that contribute to nearly $1 billion in annual software exports, primarily to the US. 

While exploring the top choices for nearshore software development in Latin America, it’s crucial to consider the possible setbacks that may arise.

2 Potential Challenges of Nearshoring Software Development to Latin America 

Here are two challenges to consider:

1. High Inflation Rates 

Companies considering nearshore software development in Latin America could experience varying inflation rates across the region. 

Some regions have stabilized their inflation after a peak in 2022. However, the ongoing need to tighten monetary policies for economic balance could still impact these economies. 

Inflation can impact your operational costs, potentially affecting nearshoring viability. To navigate this, companies should:

  • Evaluate economic conditions in potential nearshore locations, including inflation projections.
  • Diversify costs and reduce abrupt expense shifts by establishing long-term agreements.
  • Enhance productivity to counterbalance rising expenses.
  • Seek expert guidance: Seek insights from economic experts familiar with local contexts.

2. Competitive Market

As more companies realize the benefits of outsourcing to this region, competition for hiring top talent has intensified. 

To address this challenge, it is best to partner with a reliable nearshore service provider like Distillery. Prioritizing employee growth and offering competitive compensation and a positive work environment can also significantly improve retention.

Now, we’ll tell you the steps to take if you were to hire skilled software developers from the region on your own.

How to Vet and Hire Software Developers from Latin America

Hiring proficient software developers from Latin America involves a systematic approach to ensure you get the most out of your nearshore investment. You will have to:

  • Research and list potential nearshore providers or individual developers based on your requirements.
  • Reach out to shortlisted candidates.
  • Understand their expertise, past projects, and availability.
  • Conduct technical interviews alongside an assessment for cultural alignment.
  • Evaluate their communication skills and English language expertise.
  • Do thorough reference checks.
  • Conduct legal checks to ensure no issues could affect your collaboration.

However, assembling a nearshore team through this process can be time-consuming and challenging. 

Looking for an easier alternative?

Nearshore Software Development to Latin America through Distillery

Distillery is an award-winning nearshore software development company offering adaptable and economical nearshoring solutions to address all your software development requisites.

Through our expertise and network, we simplify the vetting and hiring process, saving you time and effort while ensuring you get the best talent for your software development needs.

Our versatile software development experts offer the necessary engineering strength via three models:

  • Staff Augmentation
  • Dedicated Teams
  • Comprehensive, end-to-end custom software development

Wondering how we find the finest tech talent?

Let’s delve into the details:

  • Targeted talent attraction: We actively seek candidates with in-demand technical skill sets.
  • Technical skill evaluation and verification: Candidates undergo extensive online assessments to verify their skills, followed by live 1:1 coding interviews with Distillery’s technical lead.
  • Behavioral assessment: HR interviews ensure candidates align with your company’s cultural values.
  • Project suitability: We meticulously match candidates to your project’s requirements.
  • Client interaction: You directly engage with candidates to confirm their alignment with your project.

Once you approve the team, they can swiftly commence your software development project. 

Here’s how we guarantee 100% delivery every time:

  • Top-tier technical talent: Your team boasts the same caliber of skills as local hires.
  • Customized cross-functional teams: Our tech talent encompasses UX/UI design, QA, project management, etc.
  • Tailored Service Delivery Approach (SDA): We consistently deliver value with speed.
  • Scalability and flexibility: We ensure the right team size with the right skills precisely when required.

Unlock Latin America’s Software Development Potential through Distillery

The Latin American region is a thriving nearshore destination.

With access to an extensive talent pool, essential tech education, proximity to the US, and a favorable business environment, it emerges as an excellent choice for businesses in search of nearshore software development.

Consider partnering with a reliable development partner to make the most of these advantages.

Why not contact Distillery? 

We can help you realize the full potential of your software development endeavor.