Offshore Software Development in Latin America: a Complete Guide

SOFTWARE DEVELOPMENT IN LATIN AMERICA

Unlocking the power of offshore software development has never been more enticing than in the vibrant landscapes of Latin America. According to BusinessWire, by the end of 2023, tech offshoring costs were expected to be more than $1.3 trillion. With its booming tech industry, a surge in skilled talent, and substantial cost advantages, this region has emerged as a top choice for businesses seeking to expand their software development capabilities.

According to a report by Forrester Research, the demand for software development talent in this region is expected to grow at a rate of 10-15% annually over the next few years.

This remarkable growth is due to the attractive combination of skilled workers, cutting-edge technology, and substantial cost savings that businesses can reap from offshoring projects to Latin America.

Also, it is estimated that by 2025, Latin America will experience an increase of up to 10 million tech job openings. This growth is fueled largely by U.S.-based companies seeking cheaper talent located within the same time zones, a strategy known as “nearshoring.”

It took me some time to fully explore this development ecosystem, but now I’m a qualified guide to lead you through the remarkable growth of Latin America as a premier destination for offshoring. 

Join me as I unravel the reasons behind this upward trajectory!

Table of Contents

Key Reasons to Choose Latin America for Offshore Software Development

Understanding the key reasons to choose Latin America for offshoring is vital for startups and high-growth companies that are considering this as an option for their software development efforts. 

Here are the major reasons many U.S.-based companies look to Latin America for their “nearshore” software development efforts:

#1. Very Cost Effective

Offshore software development in LatAm is an excellent opportunity for startups and high growth companies looking to reduce their labor expenses while ensuring high quality products and services. The significantly lower hourly rates of Latin America software developers compared to those in the US allow companies to invest more heavily into their product or service development.

With our HR team’s efforts, we designed the TurnKey retention system that helps you to save even more – by eliminating the real cost of churn!

retention program

#2. Bigger Pool of Tech Talent

With software developers becoming increasingly in demand due to the surge of digital technology and its integration into our everyday lives, Latin America has emerged as an ideal place to tap into a growing pool of talent. Since many of these countries share the same time zones as the US, nearshoring ensures smooth communication.

R1, a prominent healthcare automation leader, experienced firsthand the immense benefits of leveraging offshore engineering talent provided by TurnKey. Faced with the challenge of rapidly expanding their development team across critical roles due to surging customer demand, R1 turned to us for a cost-effective and efficient solution. 

The outcome? A remarkable surge in productivity, with an impressive average of 51 releases per year, demonstrating their ability to maintain a weekly cadence. What’s more, R1 has enjoyed an astonishingly low average annual churn rate of less than 5% over the past three years, ensuring uninterrupted engineering support. Don’t just take our word for it—here’s what R1 has to say about our software development collaboration in Latin America:

TurnKey’s YourShore model allows us to easily integrate developers directly into our organization so that they are truly my team. I honestly forget most of the time that they aren’t working in the same building as me.
Anya AlisovaGeneral Manager at R1

And even more promising is that this pool should continue to keep growing.

Universities across the region are actively replenishing the software development market with highly qualified graduates:

LEADERS IN LATIN AMERICA IN QUALITY OF THE EDUCATIONAL SYSTEM

#3. High Quality-Price Ratio

When it comes to software development, you typically get what you pay for – until it comes to Latin America of course.

Latin America is well known for having some of the highest quality developers on the planet. This is largely due to a mixture of strong technical abilities and deep knowledge of the latest software stacks. 

The region’s high quality and extremely competitive prices provide an unbeatable quality-price ratio when it comes to offshoring software development. No surprise that the technology sector shows no sign of slowing down anytime soon.

#4. Similar Time Zones

Time Zone Overlap with Mexico | TurnKey

Latin America offers the perfect solution for US-based companies when it comes to software development offshoring, since its close proximity to the US makes communication with those onshore a breeze.

By taking advantage of software developers in Latin America, internal dev teams can benefit from similar time zones with the US, or no time difference at all – which means no more staying up late at night to bridge the gap between the two regions. 

And the offshore development team will appreciate the lack of barriers and be able to more effectively work together to reach product milestones.

#5. English Proficiency

Another reason that Latin America is an increasingly attractive option for offshore software development is that many software developers in the region are fluent in English. Indeed, a recent Global Engagement Institute’s (GEI) survey revealed that over 5.4 million software developers in Latin America speak English.

Without a language barrier to worry about, communication between all the teams involved in the software development process becomes smooth and effortless.

#6. Easy Accessibility

The closer time zones and distances to the United States means that offshore development teams are easily accessible. If you need to schedule a business trip – or find yourself in a forced business trip situation – then don’t worry, it won’t take much time or money! You could fly from your home city in the U.S. to South America and be there by nightfall.

#7. Favorable Business Environment

Latin America’s strong business environment and comparatively low software development costs make it an attractive offshore software development hub. Countries in Latin America tend to have stable economies, making the region particularly desirable when looking for offshore development partners (like TurnKey!) Technology startups can save time and money, as well as gain access to a wide range of skilled developers who are familiar with various coding languages and frameworks.

#8. Fear of Missing Out (FOMO)

The last big reason startups and high growth companies choose Latin America for their offshore software development needs is simply because most of their peers are doing it.  Thus, they have a fear of missing out on the competitive advantage that the region provides.

And surprisingly, all the statistics and forecasts I duly researched to gain knowledge of the benefits of offshoring to Latin Americs suggest that this trend will only accelerate in the future. For enterprises looking to offshore their software development process, Latin America is one of the most viable options as it offers reliable and high quality talent at lower costs.

Ready to Build a Super High Performing Software Development Team in Latin America? We Are the Experts.

Risks to Consider Before Offshoring to Latin America

A world of limitless possibilities awaits you in offshore software development in LatAm. As an expert in building remote software development teams, TurnKey has witnessed firsthand the incredible rewards that startups and high-growth companies can reap from this booming market. 

But let’s be real, nothing worth pursuing comes without its challenges. That said, here are the main risks to consider with Latin America software development:

#1. Tax Rates and Policies

When looking to Latin America for offshore development, take into consideration your preferred country’s tax policies since they can become a huge cost factor. It pays off to research both the current rates and any potential changes ahead of time as the taxes in some Latin American countries can be high.

Here are several examples to consider:

  • In Brazil, employers are required to withhold taxes from employees’ income and pay a social service contribution.
  • Argentina also has labor taxes for employer contributions; however, in addition, companies inheriting personnel from another through mergers or transfers may incur reactive liability if proper transfer procedures haven’t been followed.
  • In Colombia, Chile, Uruguay, Peru, and Costa Rica, the employer must ensure they are meeting withholding requirements and imposes high penalties for non-compliance.  And Puerto Rico requires manual calculations according to their formula derived from its Tax Reform Plan.

For startups looking to offshore to Latin America, accurate calculation of these labor costs will go a long way towards minimizing their risk exposure and ensuring a successful venture. 

Moreover, trusted partners in offshoring software development to Latin America, like TurnKey, allow you to leave the administrative work to professionals and rest easy when it comes to tax compliance!

Here’s a clear view of the benefit of partnering with us (hint – you can save on both taxes and equipment):

Yourshoring Benefits | TurnKey

#2. Political Inconsistency

It’s no secret that navigating the waters of foreign politics can be complicated but with proper preparation and research the challenges can be reduced.  Knowing all the best practices for mitigating political risk in a country is one reason why working with an offshore software development partner like TurnKey can be critical to success.  You don’t want to leave anything to chance!

#3. Rising Rates for Software Developers

Though offshoring software development to LatAm offers a huge cost advantage compared to U.S.-based developers, the popularity of the practice combined with strong demand means that prices for talent are inevitably rising.

However, inflation is a global trend, which means you will face the same challenge wherever you decide to offshore your product development and prices will likely rise in lockstep in every region.

#4. Specialization Variability

Startups that are considering offshoring to Latin America should be aware of the varying numbers of technical specialists in different countries. For example, if you are looking for developers that are skilled in blockchain or AI, then Brazil is likely a better choice for you given the larger population there.  But if you need React Native developers, then Colombia may be more of your focus.

It’s important to research the exact country before starting the recruitment process for a specific technical specialty. Otherwise, you may find yourself in a situation where your talent hunting is taking longer than expected. (At TurnKey, we guarantee the first senior hires will be completed in weeks, not months – learn how!) 

yourshore model

If speed and efficiency are must-haves for your product roadmap, do your research first in terms of how many developers in a certain country fit your ideal profile.

Need to Evaluate Which Latin America Country is Best for Your Offshore Software Development Needs? We're Here to Help.

Top Things To Consider When Selecting a Latin America Country

With so many factors to consider – from taxes and regulations to culture and infrastructure – it can sometimes be difficult to determine which Latin America spot should be your final choice.

That’s why picking the most suitable place requires careful thought and research in order to make sure you land on the offshore destination that best suits your company’s needs.

Here are the top things to consider when making a choice:

#1. Product roadmap requirements

By understanding the exact requirements of your software development efforts before making a decision, you’ll save yourself time in the long run.

Consider factors like popular programming languages and frameworks among local developers; what is widely used in one city or country won’t necessarily be favored in another.

Also, make sure your roadmap is based on realistic expectations and has taken into account any localization-based limitations such as language difficulties, cost-efficiency (which can vary between cities), and legal and tax regulations. Having these points addressed upfront will ensure you find the right team for your specific needs.

#2. Budget constraints

Though software development talent in Latin America offers extremely competitive labor rates, it is essential to take your budget into careful consideration before landing on a choice.

Making sure you have the necessary information upfront will ensure that there will be no unexpected expenses later on. Additionally, researching the local tax rules and regulations can save you from any discomfort and help you select the ideal offshore spot for maximum software development success (by the way, we know everything about that.)

#3. Moving off the Do-It-Yourself Model

As I see it after weeks of research, optimizing your entry into the Latin America offshore market can be really difficult and full of plenty of twists and turns. This is why it’s usually cheaper, faster and better to partner with an offshore development agency like TurnKey who can hold your hand and guide you through the entire process.

For example, after a detailed study of your product requirements, TurnKey will help you pick the best country for your needs and custom recruit the top 3% of developers who best fit your ideal profile. 

Don't Waste Time Researching Other Offshore Software Development Partners. TurnKey has All You Need to Build YOUR Product with YOUR Dedicated Development Team on YOUR Terms.

Comparing Latin American Countries in Terms of Offshore Software Development

As mentioned, conducting research into individual Latin America countries is essential to making the right choice for your specific software development needs.

Take into account things like regional demands, technological infrastructure, economic stability, and protection of intellectual property rights in order to select the right country. It may also help to partner up with a consultancy (like TurnKey!) that has deep experience in connecting companies with locations and resources worldwide for successful offshoring.

Here is a quick summary overview of the top countries in Latin America for offshore software development:

Global Talent Competitiveness Index | TurnKey

Mexico

Global Talent Competitiveness Index: 69 (see the report.)

Mexico is becoming a big player in the offshore software game. By offering competitive pricing and an abundance of talented developers, Mexico has tailored its services to match the needs of technology startups and high growth companies from around the globe. 

The country boasts a wide range of specialized software engineers, many of which have deep industry experience. Talent, work ethic and an impressive educational system have all contributed to this success story and it shows no signs of slowing down anytime soon. 

Moreover, it’s common knowledge in the tech community that some of the best software developers in the world come from Mexico due to its hard-working culture. High levels of education mean graduates are well prepared for careers in technology. Furthermore, geographic proximity provides both Mexico and US-based employers with easy access for collaboration and joint ventures. 

Brazil

Global Talent Competitiveness Index: 73 (see the report.)

Brazil is one of the best countries to go for software development offshoring. The 2021 Global Services Location Index (GSLI) report by Kearney has recognized that Brazil is a top five destination for tech offshoring in terms of its favorable financial, people, and digital aspects.

The country’s high ranking in each of these criteria – from its skilled labor force to its level of economic growth – make it an attractive hub for international businesses looking to offshore product development.

Furthermore, Brazilian policy makers’ focus on developing a tech business-friendly environment has enabled key advancements in the country’s digital infrastructure. Now, more than ever, the world should keep an eye on South America’s rising star!

The workforce quality is superb, with a good mix of diverse skill sets available. The average rates are also quite attractive for most businesses and with some favorable laws and taxes in place, this makes a compelling case for setting up a development team in Brazil.

The sophisticated technologies already integrated into the infrastructure also makes it possible to make use of local resources more easily. English language knowledge is also quite high, which ensures that communication between teams is smoother. In addition, Brazilians pride themselves on having high productivity, which leads to reliable, durable, and trustworthy partnerships.

Top Offshoring Countries by The 2021 GSLI report by Kearney | TurnKey

Source: The 2021 GSLI report by Kearney

Note: From January 10, 2024, citizens of the United States, Canada will need an e-visa to enter Brazil.

Colombia

Global Talent Competitiveness Index: 63 (see the report.)

Uniquely located between North and South America, Colombia offers a wide variety of benefits when it comes to hiring an offshore development team. The workforce diversity alone is enough to make it stand out among competitors since it allows you to build a team with a refreshing mix of roles and ideas. Add to that the Colombian work ethic whose values of proactivity, punctuality, and respect are prized generally across startups operating all over the world, and you have everything you need for a successful offshore team.

It’s also impressive to see the progress Colombia is making in its pursuit of becoming the most educated country in Latin America by 2025. With strong governmental support for the tech industry, software engineering pursuits have risen dramatically. In 2022, Colombia ranked sixth of all Latin American countries in the Global Talent Competitiveness Index – a shining testament to how far they’ve come in such a short amount of time.

Argentina

Global Talent Competitiveness Index: 59 (see the report.)

It’s no wonder why Argentine developers are in such demand across the world: they have a literacy rate and best English proficiency of any country in Latin America. Startups benefit from better collaboration and smooth communication in the same language, making it worth the added price tag. In addition to these language advantages, Argentinean developers are experienced professionals whose top skills include web app development, enterprise software, data migration, and DevOps.

A bonus for those looking for an experienced team? It’s likely you’ll find them in one of Argentina’s top tech cities like Buenos Aires, Cordoba, Mendoza, or Rosario – all savvy tech hubs primed with specialists who know their stuff when it comes to coding languages like C, PHP, Java, JavaScript, .NET Framework and Python (with a smattering of Data Science knowledge too!).

The recruiter depicted the Argentine employment landscape as one filled with “job hoppers” – individuals who often switch roles or don’t have a consistent career trajectory. This scenario presents considerable hiring risks.

Therefore, we don’t hire developers from Argentina, as according to our principles, it’s important to maintain a high retention rate.

Peru

Global Talent Competitiveness Index: 78 (see the report.)

Peru is a force to be reckoned with in South America, second only to Brazil and Argentina. Peru has worked hard to cultivate its engineering and tech industry by establishing UTEC (University of Engineering and Technology), the most innovative university of its kind on the continent. As a result, there are more experienced developers than ever before who have a knack for understanding and fulfilling global business processes. It’s no wonder Peru has made its mark as one of the top offshore development destinations – with great cultural compatibility with Western countries as well as brilliant technical expertise.

Uruguay

Global Talent Competitiveness Index: 44 (see the report.)

Uruguay is a powerhouse of innovation and modern technology, having been the first in the world to provide every public school student and teacher with a free laptop. This dedication to tech education access has produced a labor market full of skilled intellectuals who have already caught the attention of global companies such as IBM, Kraft, BBVA, and HBO.

What makes it even more attractive for software development offshoring is Uruguayans’ tendency to work while studying in university – giving them an advantage over their peers from other countries when it comes to relevant skillsets and experiences.

All these features make Uruguay hard to ignore for anyone looking for a reliable, cost-efficient software development team.

Looking for Help Nearshoring Your Product Development? Get a Dedicated Development Team That Perfectly Meets Your Needs.

Costa Rica

Global Talent Competitiveness Index: 42 (see the report.)

If you’ve been considering transferring your software development to Costa Rica, you’ll be happy to know that their tech environment has attracted over 20 Fortune 100 companies and over 200 other multinationals, making the location one of the top exporters of high value-added services in Central America.

According to the 2019 Global Innovation Index, the country exported $3.3 billion in tech-related services in 2018 alone. On top of that, they boast a startup-friendly atmosphere, with accelerator programs and incubators such as Parquetec, Incuba UNA, Carao Ventures, and Auge driving the internal need for more software developers.

Puerto Rico

Many Puerto Ricans choose American universities as their preferred choice for their advanced degrees in engineering and software development, making them as highly skilled as their mainland-based peers.

Moreover, Puerto Rico has the advantage of having many English-speaking engineers comfortable with both American culture and Puerto Rican culture, eliminating any language barriers that commonly cause misunderstandings and delays.

And especially enticing is the host of tax benefits, exemptions and tax rates available to those developing software in Puerto Rico – making costs there even more competitive.

How to Hire a Software Development Team from Latin America

Before you start scouting for talent in Latin America, let’s talk about offshoring for a quick second. Our CEO, Sterling, has some insights to share on when it’s a great time to consider the option of offshoring your software development needs:

Latin American developers indeed possess extensive experience in diverse programming languages and technology stacks, establishing the region as a prime talent pool for startups and high-growth companies. Let’s take a look at some compelling statistics:

  1. According to HackerRank’s 2021 Developer Skills Report, Latin American developers ranked among the top performers globally in programming languages such as Python, Java, and JavaScript.
  2. Stack Overflow’s 2020 Developer Survey highlighted that Latin America had a significantly higher percentage of professional developers with more than five years of experience compared to the global average.
  3. The 2020 Global Skills Index by Coursera placed Latin America countries, including Mexico and Brazil, in the top 10 for technology skills proficiency.

Now, let’s compare the experience and skills of Latin American developers with developers from other regions:

Programming LanguageLatin America (%)Global Average (%)
Python75%62%
Java68%55%
JavaScript71%61%
C++62%49%
Ruby56%43%

The data above clearly demonstrates the wealth of talent and expertise present in Latin America. With their proficiency in multiple programming languages and technology stacks, Latin American developers offer a competitive advantage to startups and high growth companies seeking to build innovative software solutions. By tapping into this talent pool, organizations can access a diverse range of skills and accelerate their development initiatives with confidence.

Here’s a quick checklist on how to seamlessly hire software developers in Latin America:

#1. Define Your Roadmap Requirements

Outline which programming languages and databases will be used, what platforms need to be integrated and how many people will work on the product. This will help narrow down your list of contenders from Latin America’s diverse range of talented software developers and make the hiring process a breeze.

#2. Decide on a Budget for Software Development

Consider what services you need and research typical salaries and hourly rates in Latin American countries. With the right budget, you’ll be able to create clear guidelines and expectations up front while making sure you can provide competitive compensation so your top software developers always feel their work is valued and are less likely to leave.

Need Help Navigating Through Developer Salaries in Latin America? We’ll Give You a Clear Perspective.

#3. Choose the Right Model

When engaging with an offshoring team from Latin America, it’s essential to consider which cooperation model (outsourcing or offshoring) best suits your needs. To unlock the most creativity and innovation plus gain access to experienced teams working in specialized language or technology niches, it may be best to choose a dedicated software development model.

#4. Select the Preferred Programming Language and Framework

The biggest conundrum can often be which programming language or framework to use. The decision largely depends on your specific roadmap requirements. To ensure success, it’s important to take inventory of your specific needs and do your research.

Once decide, seek potential candidates with high proficiency in your preferred language/framework. This is key for finding a team that can provide you with the best solutions no matter how complex the challenge might be!

#5. Analyze Potential Countries

Before hiring talent for your offshore software development, you’ll first need to consider which country within this region is best to focus on. Take each of the countries – such as Argentina, Mexico, Colombia or Chile – and compare them on various criteria depending on who you’re looking to hire.

Analyze aspects like recruitment and labor market trends, the availability of developers in specific technologies, evaluation of education systems, business practices and even cultural compatibility with your organization. 

#6. Create and Distribute a Job Description

The best strategy for hiring is usually to partner with an offshore software development agency like TurnKey to do the job for you. But if you decide to build a Latin American software development team yourself, the key is to create a detailed job description outlining the requirements of the role and distribute it through as many channels as possible in order to find qualified candidates.

After receiving applications, it’s then important to conduct a first interview which should involve asking tech-related questions related to tech stack competency, development process experience, fit within your organization and any cultural nuances that may be critical for success.

Once this has been completed, it is then time to dive into the assessment stage. Be sure to gather opinions from other stakeholders who will work closely with the selected candidate.

Why TurnKey is Your Best Bet for Hiring Offshore Software Development Squads in Latin America

To sum up, Turnkey’s experience shows that offshore hiring in Latin America can be a game changer for a growing technology firm. Here’s what our client, MiResource (mental health network wizards), had to say about it:

Being able to hire high quality engineering talent quickly is a game changer for any early stage startup. TurnKey has made that possible for us and we are proud that it is one of our company’s strengths.
Mackenzie DrazanCo-Founder, CEO at MiResource

If creating your own offshore software development team sounds too painful, partner with TurnKey and we will do all the work for you!

Our unique Yourshore model gives you full control over what your development team works on and when, plus direct access to best-in-class Latin American developers that write the highest quality code.

Our recruiters have their finger on the pulse of talent in Latin America, and they will custom recruit your team in under 30 days – because who has time to sift through hundreds or thousands of resumes?

Morever, our talent retention program dramatically reduces churn so you never need to worry about turnover either.

And to top it off, we deal with all the administrative headaches (like legal and payroll) so you don’t have to.

With years of experience building hyper successful offshore software development teams, TurnKey is the perfect choice for growing tech companies looking to offshore to Latin America. 

map

In conclusion, here’s a quote to inspire you to immediately reap the rewards of offshoring advantages:

…It’s in society’s best interests to have the most output produced with the least inputs.
Warren Buffet Investor and world’s wealthiest man

FAQ

What are the advantages of offshoring software development to Latin America?

Offshoring software development to Latin America can be a boon for startups and high growth companies given the region’s comparatively low labor rates, large talent pool of highly skilled developers, strong English proficiency, and close time zone to US-based companies.

How many software developers are there in Latin America?

According to recent industry estimates, there are upwards of 3.2 million software developers in Latin America, a number that is only expected to grow as demand for developers increases.  Moreover, Latin America’s wide range of technical universities means that the population of developers is only going to expand in the future.

January 5, 2024

TurnKey Staffing provides information for general guidance only and does not offer legal, tax, or accounting advice. We encourage you to consult with professional advisors before making any decision or taking any action that may affect your business or legal rights.

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