Nearshore Americas

What’s Behind the Tech Awakening in Central America?

There’s an awakening taking place in the tech sector of Central America. Historically regarded in the US mainly as a source of migrants, the region is gaining traction as a spot where companies can shop for IT services and find potential cross-border partnerships that will allow for the augmentation and sophistication of their tech capabilities.

While there’s still work to be done, particularly in matters of access to education, public investment and cybersecurity, Central American countries like Guatemala, Honduras and El Salvador are gradually building up their capabilities to compete with the bigger players in Latin America. Costa Rica, which is in a category of its own among its regional peers, is polishing its already positive reputation, attracting the attention of business leaders in need of partners with a sophisticated skill set and tech expertise.

What follows is an overview of the circumstances that have led to Central America’s tech awakening. Though not comprehensive, it provides a better understanding of what’s happening in the region and opens up questions of what might follow shortly.

Remote Work

Remote working models opened the path for a set of transformations in the global tech space. In Central America, the decentralization of working space brought a surge of global companies attracted to labor markets that remain relatively unexplored.

“Most of the software engineering talent in Central America worked for local companies. But remote opened up the gates for all these global IT companies to start hiring,” stated Mario Siman, Co-Founder of Salvadoran software company Novatech, during a panel at Nexus 2023. 

US companies are not the only ones hunting for talent in Central America. Big Latin American players are eyeing the developments taking place in the region. Guillermo Carreras, Head of Agile & Digital Transformation at BairesDev, told NSAM that he’s noticed a surge in capable programmers and software developers in countries such as Guatemala and Honduras. 

Remote work has also permitted a more equitable distribution of talent, widening and multiplying the pools into which companies can cast their lines.

“Remote work has caused the bigger population centers to break apart and distribute throughout several locations,” Carreras stated.

Returning Migrants

Central America’s Northern Triangle –conformed by Guatemala, Honduras and El Salvador–is one of the main sources of undocumented migrants flowing into the US. But there’s also a considerable flow of regular immigration from the region.

Between FY2017 and FY2022, the US issued over 40,000 work-related visas for non-residential migrants coming from the Northern Triangle: 22,000 plus for Guatemalans, over 10,700 for Hondurans and more than 7,600 to Salvadorans, according to data from the US Department of State. 

“Because we have had so much migration from Central America to the US, and back, there has been a fertile petri dish for cultivating awareness about the possibilities of the digital industry”—José Antonio Muñoz, Chairman of Dentons Costa Rica.

This flow of specialized workers has allowed Central Americans to build and hone their skills in the US, returning to their home countries with a new set of skills which can be put to use by local or foreign companies.

“Because we have had so much migration from Central America to the US, and back, there has been a fertile petri dish for cultivating awareness about the possibilities of the digital industry,” stated José Antonio Muñoz, Chairman of Dentons Costa Rica. “You have these young kids growing up with incredible abilities that they learned in the US, so they have much less of a limitation to where their brains can go”

“In the case of El Salvador and Guatemala you see that. Their governments are focusing on attracting back the next generation of immigrants and seeing how they can help in their country, bringing new skill sets,” he added.

Education

Central American entrepreneurs will be among the first to recognize the shortcomings in the region’s education system. Nevertheless, governments and private companies (both local and foreign) have partnered to push for the development of digital skills, especially among women and people in the lower end of the income scale.

“The government is vested; the companies, the private sector is vested; foreign universities and local universities are vested,” commented Nora Zamora, Chief Client Officer at Sibú Digital, a digital agency from Costa Rica. 

There’s no shortage of publicly and privately-sponsored programs which aim for the growth of tech skills in Central America. For over a decade, Microsoft has been promoting a STEM education program for young girls in Guatemala and other Central American countries. SIEMENS partners with schools in Ecuador to incorporate STEM skills into local educational curricula. The US Agency for International Development (USAID) has an array of programs for countries of the Northern Triangle, including some which seek to develop tech skills and entrepreneurial capabilities in the region. 

Self-Education

In the face of a lack of educational opportunities, software engineers in Central America have taken matters into their own hands, learning new skills through online programs. 

“Knowledge is more readily accessible today. You don’t need colleges today, as long as you have a computer with a broadband Internet connection,”commented Guillermo Carreras.

“It’s crazy the amount of people that are self-thought, especially in the AI space. They became machine learning engineers by themselves”—Mario Siman, Novatech Co-Founder

Though the phenomenon is not unique to Central America, the trend is allowing talents in the region to compete more directly with their global peers. 

“Even us locals were amazed by the quality of talent and the ability of the talent to upskill by themselves,” said Mario Siman. “It’s crazy the amount of people that are self-thought, especially in the AI space. They became machine learning engineers by themselves”

Self-Confidence

The fame of Latin America in general is growing in the eyes of the US market. Global staffing company Deel reported that, in the first quarter of 2023, over 3,000 US companies hired Latin American workers through its platform.

Though Central America still lacks the level of notoriety achieved by Mexico, Brazil, Colombia and Argentina, its tech sector is convinced that that will change soon.

“I do feel that there is some kind of inherent bias about the [Latin American] talent being inferior. [But] I do believe, and by example we’ve seen it, that Nearshore talent is at the same level,” commented Mario Siman. “The perception is that it’s not a mature market, but that has changed significantly since COVID […] I think it’s going to continue on an exponential curve.”

Salvadoran tech firm Applaudo, for example, has built a noticeable portfolio of clients over the past couple years, which includes GAF Energy, Walmart and the Miami Heat. TCS LATAM plans to turn Ecuador into one of its hubs for regional IT exports. 

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There’s a lot of rubble that the Central American tech sector will need to move in order to shine on a global stage. Nevertheless, its people are showing themselves to be tenacious and willing to prove to everyone what they’re made of.

“Having worked for years in New York, New Jersey and Los Angeles, I’m going to say that the talent that I find in Central America, and specifically in Costa Rica, by far surpasses [that of those US cities],” commented Nora Zamora. “When I hear somebody say to me or to my team ‘Please, make sure your talent is good enough’, my response is ‘Honey, we’re gonna kill you’. We’re ten times better”. 

Cesar Cantu

Cesar is the Managing Editor of Nearshore Americas. He's a journalist based in Mexico City, with experience covering foreign trade policy, agribusiness and the food industry in Mexico and Latin America.

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