Latin America explodes with vibrant people, colors, smells, and landscapes. The region draws worldwide tourists and houses one-of-a-kind ecosystems; but it also has an increasingly-popular pull on successful enterprises looking to expand their operations. Nearshoring in Latin America means working with countries in the same time zones as US- and Canadian-based companies, allowing international teams to operate unhindered during shared working hours. Likewise, the currency in many LatAm nations is actually the US dollar, while local economies are still much cheaper than those of their North American neighbors.
These advantages– along with a high understanding of business culture and widespread mastery of the English language– ensure that this megadiverse region also provides businesses with mega-advantage.
In this article, we take a closer look at 4 of the best countries in Latin America for nearshoring.
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Nearshoring in Latin America – Mexico
According to World Bank statistics, Mexico’s IT outsourcing industry grows 10-15% each year. In fact, the country is now the third largest IT outsourcing market worldwide, charting at about US $46 billion. As the trend rises to outsource software services, Mexico is quickly making a name for itself as one of the most competitively advantageous options.
In a nutshell:
- Mexico ranked as 15th economic power worldwide (according to GDP)
- Mexico is the United State’s biggest trading partner
- Mexico is the 2nd most-visited flight destination from the US
- Mexico offers the world’s most comprehensive Free Trade Agreements
- Mexico is the world’s 15th largest FDI (Foreign Direct Investment) recipient
- Mexico ranked 1st in Latin America for Ease of Doing Business
- Mexico is the world’s 13th top export country
- Mexico ranked 4th in the world’s most satisfied countries
The Advantages of Nearshoring in Mexico
Close
Mexico uses the same time zones as the United States, and many locations observe daylight savings changes on the same dates as their northern neighbors. This implies that Mexican teams work simultaneously with those in the U.S., and scheduling meetings and calls is a painless process. With a large number of direct flights—often taking no more than an hour or two—from many U.S. locations to Mexican airports, the country is also within close reach for travelers, easier and less expensive to reach than offshore countries. Much like business travelers up and down the U.S. east and west coasts, many professionals crossing the border in either direction arrange their flights as day trips, without overnight stays. Business hubs such as Guadalajara and Mexico City are also well-connected to freeway systems (Getting to Mexico, 2020).
Clued in.
Don’t forget the cultural closeness. In the border states and beyond, many Mexicans watch U.S. television, root for U.S. bands and sports teams, shop with U.S. companies, connect with their friends on the same social media, and share political and cultural perspectives. Language barriers practically do not exist. Among business people and in the IT industry, English proficiency is generally at a professional level, although many are fluently bilingual. Professional English competence is a graduation prerequisite in universities and technical degree programs. Familiarity with U.S. business culture also entails a customer-focused mindset that emphasizes tangible results, responsive communications, flexibility, collaboration, creativity, and efficient time management; we often hear from clients that their experience with outsourcing companies in other regions did not rise anywhere close to the same quality (Moskal, 2017) (Advantages, 2020).
Smart.
The country’s 120+ universities and technical schools graduate about 120,000 students with engineering and IT degrees every year (Latin American, 2019). Mexico holds 2 slots in the list of top 10 Latin American universities, with both institutions renowned for their data science and engineering programs (Top 10, 2019). All over the country, software developers join in many noncompetitive forums, conferences, and social groups– learning from each other and fomenting a culture of innovation (Técnicas, 2020).
Supported.
At the federal and state levels, Mexican government provides financing and resources to advance the IT industry, strengthen nearshoring connections, and grow business with North American companies. A few of the most important, countrywide initiatives include:
- SocialTIC investigates, trains, accompanies projects and catalyzes multidisciplinary communities of change actors to strategically use digital technology and information to generate social change.
- MexicoFIRST aims to grow Mexico’s highly-educated and competitive IT talent pool.
- WORTEV Capital helps entrepreneurs to develop high-impact startups.
- CONACYT supports R&D and technology infrastructure investments and IT innovation projects.
- Reto Zapopan gives entrepreneurs free support in starting innovative new tech companies.
Challenges Facing Nearshoring in Mexico
Social Unrest.
In the past decade, some fear has surrounded the much-publicized network of cartels in Mexico. However, for urban companies, the uncertainty has proven to be much more dangerous than the violence itself; most gangs work far from populated business districts, and both public and private entities have increased the security in and around office buildings. Further, IT outsourcing services providers have strengthened their network of back-up infrastructure, ensuring that operations continue smoothly and safely from a number of prepared locations (Tanaka, 2011).
Final Comments
Forrester Research summarizes it the best: “Companies interested in the cost and quality benefits of offshore labor, but which require a closer, less risky solution, should strongly consider Mexico as an important nearshore option.” Over the past decade, Mexico has made significant strides toward becoming a diversified economy, with a deep skill base that offers more than just low-cost labor. It