Latin America vs Central America for IT Nearshoring

Patrick Ward Patrick Ward Follow Jun 09, 2020 · 7 mins read
Latin America vs Central America for IT Nearshoring

If you’re a US-based tech company looking to move some processes out of office, I generally recommend nearshoring for this purpose.

The US has two different options for IT nearshoring: Central America and Latin America.

When I say Latin America, I’m referring to South American countries like Brazil and Uruguay. Central America encompasses everything from Mexico through Honduras, Costa Rica, and Panama.

Now, the Americas may be close together, but the specialties and pricing you’ll find ranges wildly from country to country. What’s more, both regions have established these specialties through very different approaches to computer science education.

So, what are the main differences between Central American tech talent and Latin American tech talent — and why do those differences matter when you’re scouting for IT staff augmentation?

Developer Profiles: Latin America vs Central America

Latin America on the whole includes countries like Brazil and Argentina that have made very conscious investments in tech through national education policies that emphasize STEM and particularly computer science.

These countries, as well as lesser-known Latin American tech markets like Uruguay and Colombia, have deliberately invested in becoming smart countries in terms of technological innovation. They’ve all worked to build infrastructures that support the creation of new technology, which puts them at the cutting edge of developer talent. We see this with Buenos Aires, the capital of Argentina, in particular. It has committed vast resources to honing blockchain technology. So when I talk about Latin America, I’m talking about a region that covers very specific, forward-thinking technologies.

Central America is more focused on the functional aspects of technology. Rather than creating a lot of new tech, they’re excellent for completing specific IT functions within your existing system. Back-office, digital consulting, and services functions are what tend to attract companies looking to nearshore in Central America.

Recap: If you have a system in place and you just want some routine work done within that framework, Central America can competently, quickly, and reliably execute on it. But for more innovative or creative tech talent, Latin America supplies a unique talent pool suited to things like app development, custom software development etc.

Educational Pipelines for Latin & Central American Developers

There’s an important linguistic and functional distinction to be made here.

  • If you need someone to perform business functions that require heavy English usage, Central America has high English literacy rates compared with those of Latin America. Now, you’re probably beginning to see why they’re able to capitalize on client-facing functions like customer support.

  • If you’re looking strictly at technical talent, Latin America has an unmatched education system that is both stringent in its requirements and provides a lot of practical experience in software engineering. This is why they’re perfect for when you need high-quality programming talent and not necessarily perfect English.

Time Zone Considerations

As we’ve said in the past about nearshoring, the rule of thumb is to keep operations within about three time zones of your location. Why? Because this is when you can begin to reap the benefits that come with regular communications. But let’s dive a little deeper into the geography at play here.

  • If you’re in the West Coast (California-based, for example), then Central America is within a single time zone of you.
  • If you’re on the East Coast, Latin American hotspots like Montevideo, Uruguay will fall within a single time zone of you.

So, no matter what part of the US you’re in, either of these options would be considered nearshore. (And they’ll certainly be more efficient than offshoring to a country across the globe.) But your particular location in the US may be closer to one rather than the other. Once you’ve identified which region is** within one time zone** of yours, then you can actually run regular 9:00–5:00 operations with them as though you were onshore. Even better, you won’t be paying as much as you would for actual onshore or insourced talent.

Specific Locations to Choose Based on Price Point

We’ll look at specific locations within both Latin and Central America.

Latin America

Top-tier talent in Latin America can always be found in Uruguay. Dubbed the “Silicon Valley of South America”, Uruguay has made some seriously heavy investments into its developer pipeline—to the point that it takes five to six years of formal education for an Uruguayan student to become a certified software developer.

Uruguay’s tech talent is almost entirely focused in its capital city, Montevideo, so the talent pool is much smaller. Since you’re getting the cream of the crop, it can be a hair more expensive than its neighbors—but you’re practically guaranteed to find high-quality developers here.

Furthermore, they tend to be humble people. Remember, quality isn’t only determined by skill set. It also includes a developer’s mentality. Are they ready and eager to do good work and take real pride in it? When they are, then the product of that is something that you as the client can be proud of, too.

Affordable talent in Latin America can be found more easily in Brazil, which has the sort of sizable talent supply to allow downward cost pressure. Argentina’s talent pool, though not as big as Brazil’s, is also fairly substantial. Because of that, they both offer really flexible pricing.

The caveat of cheap labor is that you have to be careful you’re getting value for your money. I can’t tell you how many times I’ve seen software “rescue missions” because someone has chosen a location strictly based on price. But if you make sure to vet developers thoroughly, then you really can find both quality and affordability in a developer here.

Central America

Top-tier talent can be found in Costa Rica, which is a location very conducive to doing business with the United States. The quality of their IT talent is unmatched—but again, keep in mind we’re specifically talking about IT rather than developer talent in general. If you have a process in place for back-office, digital consulting, or services functions, Costa Rica can deliver on that. Pharmaceutical companies like Merck, as well as banking and financial services companies like Citibank have a number of their operations in Costa Rica. These companies aren’t tech-focused, but they are tech-enabled, and the technology that supports them is crucial to driving business.

Affordable talent from Central America resides mostly in the US’s number one trading partner, Mexico. Mexico has a large supply of tech talent, particular in Mexico City and Oaxaca. Similar to Argentina and Brazil, however, the size of their developer pool is not the only reason they’re so affordable. There is an unfortunate level of economic instability in these areas, which can create good pricing due to factors like inflation. But this can equally be problematic if you want a longer term engagement. After all, you want to be confident that you can finish what you started with a nearshore team, and not lose team members along the way due to poor infrastructure.

Methodology

As a sort of barometer, there are a few questions you can ask yourself in order to sniff out the best opportunity for you. When you’re looking at a country, consider how often rescue missions come out of that country. I’ve seen a high proportion more failed tech projects from Central American countries like Mexico than I ever have from Latin America. Of course, this doesn’t mean they haven’t got excellent talent on offer. It just means that you can’t choose them solely based on price, because you’ll be overlooking possible flaws in the developers you find.

Also, look for bigger companies as a sign of a good talent pool in any particular location. Then, keep in mind what type of companies these are and what types of processes they tend to perform. Central America, as mentioned, has the strength of talent to support industries like pharmaceutical and banking, because they are tech-enabled and not tech-focused. On the other hand, Latin America’s hosts IT conglomerates like Tata Consultancy Services (TCS), Globant, and Cognizant, which require software engineers as part of their workforce.

The developer pool wherever you go will serve a particular type of industry or business function. Looking at successful companies from a certain location can tell you what type of function that location will serve best. Of course, it can be hard to go against the conglomerates—but you can still acquire individual talent or small teams of developers by following their trail.

Patrick Ward
Written by Patrick Ward Follow
Hi, I'm Patrick. I made this site to share my expertise on team augmentation, nearshore development, and remote work.