When you think about technologically advanced countries and nations leading the tech revolution, you tend to think of the U.S. or European countries, but the fact is, Latin America is steadily growing in the tech sector and is on the way to becoming a leading supplier of tech talent to North America. Not only are some of the fastest growing economies in Latin America adding to the global GDP, with Deloitte stating that regional growth surpassed pre-pandemic levels in 2021, the region has continued to outperform global growth despite severe challenges including inflation and interest rate hikes.
A large part of this growth is attributable to the tech sector, and in 2022, Brazil, one of the biggest countries in the region, alone received over $45 billion in IT investment, signifying the growing importance of the most technologically advanced countries in Latin America. While economic growth has slowed down in tune with global economic concerns, the tech industry in Latina America is still prospering and according to many, ripe for investment. Increased internet usage, despite Latin American countries barely featuring among the countries with the highest internet penetration rates, and increased mobile phone usage, combined with governments providing additional incentives to the tech industry are all leading to a burgeoning sector.
A network of technicians in lab coats testing the performance of a sensor-based solution. Editorial photo for a financial news article. 8k. --ar 16:9
While historically Latina America, including some of the most technologically advanced countries in Latin America, has seen its GDP derived primarily from energy, commodity and infrastructure, the region is continuing to innovate. With increasing economic stability in most countries and market-friendly policy, Foreign Direct Investment is continuing to increase and according to White & Case, could be primed for greater merger & acquisition deals in the tech sector.
To this end, fintech is one of the fastest growing industries in Latin America, and in 2021, fintech investments exceeded $5 billion, which may seem insignificant but is a major improvement from $2 billion in 2020, while in just the first half of 2022, telecommunication and media transactions exceeded $6.5 billion. One of the biggest advantages that Latin America has is a growing younger population which is more connected to the global economy, while some of the most technologically advanced countries in Latin America including Brazil, Colombia and Mexico have enacted policies which benefit entrepreneurs and encourage a greater percentage of the population to enter the tech space, particularly startups.
While there are a lot of positives regarding the development of the tech sector in Latin America, the region is not without its challenges, with startups continuing to struggle in obtaining capital because of the aforementioned interest rate hikes. As the industry becomes more defined, stricter guidelines on investment for venture capital funds and private equity are also impacting the ability of startups to raise cash, which is another contributing factor to increasing merger and acquisition deals as startups and established corporations both aim to remain competitive in an everchanging landscape.
The Inter-American Development Bank has also realized the potential of the most technologically advanced countries in Latin America, and in September 2023, launched “BID FOR THE AMERICAS,” a program which includes a tech tool aimed to connect venture capitalists and private equity with investment opportunities in businesses and start-ups.
Amidst all this euphoria, it is important to remember that the global tech sector is also going through some uncertain times. After reaping record profits during the pandemic, economic slowdown saw many tech companies not just freeze hiring but laying off tens of thousands of employees, though this is another area where Latin America is bucking trends. MercadoLibre, Inc. (NASDAQ:MELI), an Argentinian e-commerce company, added over ten thousands jobs in 2023 and its share price has been incredibly strong in 2023, increasing by nearly 47%, outperforming NASDAQ's tech sector. In its Q2 2023 earnings call, MercadoLibre, Inc. (NASDAQ:MELI) called out it strong performance and the potential offered by various of the most tech advanced countries in the region, stating "This growth was driven mainly by Brazil and Mexico, which overtook Argentina to become our second largest commerce geography for the first time. Brazil and Mexico both delivered an acceleration of successful items growth compared to the previous quarter. As we continue to bolster MercadoLibre's value proposition, our leadership position in the region has been going from strength to strength. Other highlights in commerce include fulfillment penetration in Brazil, which is accelerating and reached a new high, and also a further pickup in growth of our first-party business, which grew well ahead of overall GMV during Q2." In addition, the company also called out the performance and potential of Latin America in the future, and increasing competition in the tech sector in its call, stating "Today, we want to share a more detailed view of our fintech operations in Mexico. For Mercado Pago, Mexico represents an exciting opportunity. It's a growing country with a large population that currently has lower adoption of financial services than other markets in Latin America such as Brazil. Over the last few quarters, we have been rolling out our fintech product stack in Mexico, positioning Mercado Pago as one of the leaders in the development of the market for digital payments and other financial services. Our strategy is to serve both payers and merchants, focusing on users that are already within our ecosystem. As we do this, we build on the trust of MercadoLibre's brand, and build on the user relationships and knowledge from the commerce business to better serve our fintech users. Mercado Pago users in Mexico can open their digital account within minutes for free. The money stored in the account generates interest at the benchmark rate through a partner and can be used at any time with our free debit card, money transfers and online payments."
Because of Latin America's potential in the tech industry, many American tech giants have found success there too, with some corporations working together with businesses in the area. One example of this is Boticario Group, considered to be the world's largest cosmetic franchiser, which Apple Inc. (NASDAQ:AAPL) mentioned in its Q2 2023 earnings call, where it mentioned "Turning to the enterprise market, we see business customers continuing to invest in the Apple platform to drive higher employee productivity and satisfaction. In Brazil, Boticario Group, the world's largest cosmetics franchiser, originally starting with iPhone, 12 employees manage operations across a network of retail stores, franchisees and resellers. As it continues to digitize its business, Boticario has chosen to move all software development in house and adopted Mac as the standard device for all of their developer teams across the world. In small business, we see an increasing number of customers relying on Apple hardware, software and services to power their businesses forward, from accepting payments on iPhone, to tracking inventory on Mac or iPad, to managing employee devices with Apple Business Essentials." In Q3 2022, Apple Inc. (NASDAQ:AAPL) posted double digit growth in Mexico, and is one of the most important regions for the company's growth, as emerging markets continues to be an area of focus for tech companies.
While the slowing down of business has impacted most companies and industries across the world, Latin America's tech industry has continued to prosper. In fact, MercadoLibre, Inc. (NASDAQ:MELI) took on an additional 13,000 people in 2023, even when most tech giants have significantly reduced headcount to cut down on costs. A somewhat negative impact of this prosperity has been the fact that foreign companies are now establishing bigger footprints in Latin America which is stifling the growth of local companies, especially smaller businesses. Fintech companies in particular have seen strong growth, and the largest digital bank in Brazil, Nubank, recently earned a valuation of $30 billion as millions of Latin Americans who didn't even have traditional bank accounts have now joined the digital financial system. In Argentina, even buskers use QR codes as fintech continues to grow in popularity. This isn't to say that the Latin American market has not faced any hiccups during a time of turbulence; venture capital investments in the region shrank to just $800 million in Q1 2023, less than 25% of what was invested in Q1 2022, though both the short and long-term outlook remains bullish, especially for the most technologically advanced countries in Latin America.
Methodology
To determine the most technologically advanced countries in Latin America, we used multiple criteria to assess their level, including their rankings on the Global Innovation Index and World Digital Competitiveness Ranking, along with total number of patents granted, with 30% weightage to the first two criteria and 40% to the latter. We then ranked countries based on their overall score, from highest to lowest. Since only 7 Latin American countries were included in the World Digital Competitiveness Ranking, we based the ranking of the rest on the first two criteria only.
Insider Monkey Tech Advancement Score: 27
We kick off our list with the Dominican Republic, which has established itself as a hub for tech manufacturing.
Insider Monkey Tech Advancement Score: 29
An insight into the lucrative potential of Panama's tech industry can be seen in the fact that the U.S. recently signed a new partnership with the Latin American country to explore opportunities pertaining to the semiconductor supply-chain industry. As the importance of semiconductors continues to increase heavily, Panama has the opportunity to play a pivotal role in the sector.
Insider Monkey Tech Advancement Score: 31
Like many of the most tech advanced Latin American countries, Costa Rica is aiming to become an attractive proposition for tech investors and is continuing to ensure that it is able to cater to the ever increasing needs of a digital economy. Green tech is a specific area of focus for Costa Rica in a bid to become a leading country in global innovation in clean technologies.
Insider Monkey Tech Advancement Score: 34
dLocal became the first company in Uruguay to achieve a unicorn status, which means that it was worth over $1 billion. In the ICT sector, Uruguay has made significant advancements and is considered to be a leader in Latin America. The Belt and Road Initiative between Uruguay and China has increased investment in Uruguay and could be a driver in the coming years for further tech advancement in the country.
Insider Monkey Tech Advancement Score: 35
Ecuador has emerged as a surprising candidate for one of the most tech advanced countries in Latin America, as it is now home to an emerging tech hub, with an increase of around 2,500 companies engaged in the tech sector in just the last decade. These companies are driving technological advancements in the nation, along with greater investment.
Insider Monkey Tech Advancement Score: 37
Despite a lot of potential, Venezuela has struggled to prop up its tech startup scene. Backed by foreign investors, Wave Tech Hub founders have been aiming to improve this by converting an empty P&G facility into a tech accelerator.
Insider Monkey Tech Advancement Score: 39.3
Peru is aiming to increase IT exports to the U.S. and is providing cheap talent as a replacement for American tech workers. Additionally, conservationists in Peru have been using robots in a bid to reforest the Amazon.
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Disclosure: None. 12 most technologically advanced countries in Latin America is originally published on Insider Monkey.
