Companies looking to break into the LATAM region see Mexico as the gateway. Why? It’s not just our Southern neighbor’s geographic proximity. In recent months, changes to the currency have altered the narrative and set in motion some interesting shifts.
That and other factors have made Mexico an attractive destination for companies seeking to do business in other regions in LATAM.
CodersLink has been doing business in Mexico for more than six years now. In that time, we’ve seen a transformation in many of the country’s industries including tech.
The last few years have seen companies such as Google, Pinterest, and others in manufacturing like Tesla, choose Mexico as the place to set up shop. Other small companies—like many we’ve helped including Parlevel and Paystand, have used the abundant talent in Mexico to take their companies to the next level.
#1 The Gateway to the Rest of Latin America
One thing we’ve noticed here at CodersLink is just how prominent Mexico is as the gateway to the rest of the Latin American region. The LATAM region is one bursting with growth potential. We’ve seen in recent years, that the region has exploded when it comes to internet use and smartphone use. What this means is that you have a considerable population (of 652 million people) who are getting online and looking for ways to improve their lives via technology. Not to mention some of the increased investment that poured into the region in 2021 and in recent years.
#2 A Large Pool of Talented Tech Professionals
Second to only Brazil, Mexico is one of the countries with the largest pool of tech talent. In recent years, Mexico has really outperformed a lot of other LATAM countries when it comes to producing tech talent and training them adequately through increased programs, collaborations with U.S. companies and universities, and increased investment in the realm of technology education.
We’ve seen that Mexico graduates up to 130,000 software developers and engineers every year.
A recent count by Bloomberg Linea puts the counts of software developers in Mexico at around 326,000.
#3 Overlap of Business Practices and Shared Business Culture
One less-talked-about reason is the cultural overlap that Mexico has with the United States. This goes far beyond the day-to-day culture similarities but also a trickling down of business processes and ways of working in a tech environment. For example, Mexico was an early adopter of the Agile framework, so most of the tech professionals—seasoned and entry-level— are very familiar with this type of project management approach.
It provides a common business language for software developer teams as they engage in cross-border collaboration and teamwork.
So, the Mexican market has the added benefit that most of its talent pool is well-versed in the many frameworks commonly used in software development projects and teams in the U.S.
This overlap allows for added fluidity in collaboration, strategizing, and communication among team members.
Other Recent Considerations for the Mexico Tech Labor Market
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A Quick Note on the Currency Exchange Rate and How That Might Affect Hiring
By this point, most business owners in the U.S. have felt the economic situation in some form or other. Whether it’s the high inflation or the slowdown of the supply chains, the economic situation has manifested in a variety of ways. For those of us who do business across borders, the devaluing of the U.S. dollar has been a topic of some discussion.
At the same time that the dollar has devalued, the Mexican peso has gained. As Forbes reported in June, May saw the Mexican peso reach its highest level against the U.S. dollar since 2017.
The first quarter of 2023, shows the Mexican peso rising more than 7%. According to Reuters, as of August 2nd, it’s been more than 14% against the dollar. This strength of the currency does not extend to the rest of Latin America. Most of the region’s currencies have either fallen or remained stagnant against the dollar and many experts predict that Mexico’s economy is therefore poised to grow at a faster pace than the rest of the LATAM region.
Companies that conduct business in Mexico may see several effects from the rising currency. Many companies that operate in Mexico might see some rise in labor costs due to the peso’s strength against the dollar. Those who pay employees or workers in Mexico might see this as a consideration as well, as it might affect some of their business and hiring decisions as they move forward in today’s economic climate.
When the exchange rate is lower and the peso is stronger against the dollar, U.S. companies that have Mexican employees can continue to pay them the same amount in dollars, but the recent exchange rate means the same amount of dollars translates to less pesos, and, therefore, less purchasing power.
Increased Investment by State Governments
We’ve spoken a lot in the past about the investment that the Federal government in Mexico has engaged towards technology and tech education. This initial push by the federal government set Mexico in the right direction by encouraging the growth of this industry.
As it stands today, however, we are seeing a shift in this investment from the federal government to the state government. As certain states benefit from increased investment, nearshoring, and growth, they seek new ways to continue to encourage this activity.
For example, when Tesla announced a possible plant in Mexico, several Mexican states including Michoacan and Veracruz engaged in hot competition to win Tesla over. In the end, Nuevo Leon won out, but it shows the keen interest that state governments have in expanding investment in their states.
Mexico as a Unique Tech Hub for Growing Companies
As we’ve explored previously, nearshoring has picked up in Mexico in the last few years thanks to the collapse of many supply chains and international relations during COVID-19. Companies want to keep operations close, but they also seek to expand to new territories and new talent pools.
The competition for talent in the U.S. remains fierce and Mexico has a wide talent availability.
Mexico serves as the perfect place for a company that seeks to expand to new markets, whether they are building a small team, supplementing their existing software development efforts, or envisioning a more long-term or eventual expansion to Mexico and Latin America.