A lot happens in a year. The world learned that lesson in 2020 when covid hit and effectively pulled the rug out from life as we knew it. In 2022, we’ve experienced economic shake-ups, rising interest rates, inflation, elections, foreign wars, the World Cup, and endless news cycles, on the future of work, the Will Smith slap, Elon Musk, and Elon Musk. If you’re in the tech industry, you’ve heard about talent shortages, tech layoffs, and worrisome economic projections.
What’s the view look like in Latin America and the Mexico IT industry?
After all, today’s world is intricately intertwined with supply chains and industries depending on each other and remote teams working across borders.
As the year comes to a close, we thought we’d look at some of the major events and turning point moments (tech-related and non-tech-related) in Mexico and Latin America, and why they are part of the big picture.
LATAM and Mexico IT Industry and Tech Ecosystem
Covid hit Latin America hard. Statista estimated the region lost up to 1.7 million as of November 2022. Like in all other parts of the world, the impact of covid extended far beyond the casualties and the pain of their loss. The pandemic affected every aspect of life. Latin America also experienced lockdowns and many businesses moved into digital transformation.
Yet, the region pushed on. Countries like Mexico and its tech hubs invested enough in technology that the tech ecosystem remained robust.
Here are a couple of noteworthy aspects of the LATAM region in 2022:
#1 A High Rate of Internet Penetration
Investors with their eyes on Latin America noticed the region has a growing rate of internet use. With a combined population of 660 million people, the region has a lot of growth potential when it comes to implementing technological solutions. According to one report by a venture firm that does work in Latin America, the internet penetration rate surpassed that of India and China in 2022. The use of smartphones in the region is also growing, which means people will begin to seek solutions via technology.
#2 The Potential for a Growing Middle Class
Despite some slowdown in 2022, the potential for growth remains high in Latin America. The potential is in part due to the thesis that there is an emerging and growing middle class. Interest in the LATAM middle class goes further back than just 2022. As the economies of many of the bigger LATAM countries— like Brazil and Mexico— grow, a larger number of people reach middle-class status. In August of 2022, for example, the Wall Street Journal reported that the venture capital industry had eclipsed private equity. This was due to the growing middle class that pushed demand for new technologies, services, and products.
#3 Unique Startups and a Growing FinTech Industry
In recent years Latin America has seen several unique startups become successful companies and even reach unicorn status. In 2020, Mexico saw its first unicorn form. Kavak created a successful used car-selling platform. As it turned out, Latin America was a huge market for the buying and selling of used cars. In 2021, with the growth of cryptocurrency, Bitso reached unicorn status. By 2022, Mexico and Brazil were the prime startup destinations in Latin America and had several unicorns operating including Clara, Clip, Incode, and more. These companies range from business management solutions, payment applications, and identity verification platforms that utilize A.I.
The War in Ukraine Has a Unique Impact on Tech Development
Another major lesson the world learned from covid was the intricate and delicate interconnected network of supply chains. In the U.S., people learned just how fragile this vast chain of interconnected transactions really was and how much it depended on other countries and their policies. The war in Ukraine had reverberations around the world including in the U.S., Europe, and Latin America.
In February, Russia launched its first invasion of Ukraine by firing missiles toward Kyiv. For the next few months, Russian and Ukrainian forces battled it out in various areas of the country. The Ukrainian response was unexpected and surprising, as it held back the Russian forces and drew support from the rest of the world.
Yet, the conflict had ripple effects, affecting supply chains, gas prices, gas supplies, and inflation across the board. The instability affected Latin America by increasing the price of food and oil (as many LATAM countries import oil), and spreading to other commodities as well.
As the Ukraine conflict dragged on, many engineering centers and remote tech talent working for European or American companies found it exceedingly difficult to continue. Eastern Europe has been a popular outsourcing destination for many growing companies, but the conflict meant that the region effectively shut its doors. This led American companies to focus attention on Latin America and realize the vast talent pool that awaited a few hours away.
The Tech Talent Shortage Makes Finding Talent a Challenge
During accelerated growth after covid, many companies in the U.S. faced what became known as the tech talent shortage or tech talent gap. In the tech industry, this phrase made the rounds. It spoke to what many companies trying to hire software developers or engineers experienced: difficulty finding quality talent.
The shortage had many reasons behind it. One reaspm was that large tech companies held on to a lot of the talent and the U.S. did not produce enough graduates to cover the growing demand.
Tech Layoffs by Big Players Raise Eyebrows Around the Industry
Then, in November of 2022 Elon Musk takes over Twitter and all hell breaks loose. Of course, the Twitter layoffs were just one small part of what many people soon discovered had been happening throughout 2022: big tech companies laying off workers. The amply shared tech layoffs tracker revealed just how big the numbers were in terms of layoffs and the big names that were involved. Companies like Meta, Stripe, Twitter, were put in the spotlight when they made deep cuts to their staff numbers. In Latin America, the story was not so different. The major Mexican unicorn, Kavak, laid off several of its employees as did Bitso and several other startups in the region.
The reasons for these layoffs focused on two main factors: over-hiring during the pandemic and a miscalculation of economic conditions and worries about inflation, economic slowdowns, and rising interest rates.
What’s Ahead for the LATAM and Mexico IT Industries in 2023?
Here at CodersLink, we are optimists. We see the vast potential that exists in technology and technological solutions. The Mexico IT industry is robust and creative. While there might be a major reshuffling of talent and a difficult reset period, the path toward tech innovation continues.
We like to think that we contribute to the bigger picture of innovation by linking quality talent with world-class opportunities. Mexico has a competitive tech industry with a diverse pool of talent.
Want to learn more about how to link up with LATAM’s best software developers? Schedule a call with our team today.
