Engineering Talent Distribution: Mexico and LATAM

I recently published a post on the US-Asia-Latin America (LATAM) tech nexus I witnessed during my visit to Mexico earlier this year. (The piece was first published on TechCrunch the week before.)

(The audio version of this post can be found on the Interconnected YouTube channel):

Today’s post is a follow-up observation on the engineering talent distribution of Mexico and other parts of LATAM. The learnings I share here are mostly based on conversations I’ve had with startup founders and operators based in Mexico and Colombia. Thus, they are limited and subjective, but fresh and relevant. As an investor focused on developer-focused products, open source startups, and infrastructure technology companies, I care deeply about engineering talent, both quantity and quality, as a proxy to discover and evaluate these “pure tech” opportunities.

Talent Level Distribution

The LATAM region should not be treated as a monolith when it comes to engineering talent distribution, or other matters like business culture and market entry strategies. Here’s the general impression I got from the people currently starting companies and competing for talent.

Mexico: The developers in Mexico tend to be mostly junior. An often-cited number is that Mexico graduates 130,000 engineers every year from its university system. Assuming that’s accurate, this pipeline of fresh graduates has a lot of unrealized potential. Anyone who has operated a tech startup can tell you, while having access to young, affordable developers is great, they require training, hand-holding, and more than a little top-down management attention to ramp up and become productive. Learning computer science concepts with problem sets and attacking real world engineering problems are quite different.

Argentina: Unlike Mexico, Argentina has a reputation for boasting one of the most experienced engineering pools in the LATAM region. Despite being a relatively small country in terms of population (45 million vs Mexico’s 128 million vs Brazil’s 211 million), the bench there is deep. There’s a high proportion of talent experienced in leading engineering teams, managing large scale tech organizations, and running development methodologies, like agile. (I’ll discuss why this is happening in Argentina later in the post.)

Brazil: Also known for having more experienced engineers, one case in point worth citing: Uber put its LATAM engineering and data science hub in Brazil, even though its initial market entry point to the region was Mexico. By speaking Portuguese, Brazil may be more of an “island” when it comes to doing business -- less integrated with the rest of the Spanish-speaking LATAM countries. But engineering communication is different. As I discussed in Part I of my “Global by Nature” series, English is the default language among engineers worldwide and developer communities are formed more along technology lines (e.g. C++, Golang, React, Vue, etc.), not national borders. Putting a sales hub in one country to service a continent would not work. Building an engineering hub where the technical talent is dense to service that same continent, however, can be a good approach.

Colombia: Similar to Argentina’s population, Colombia’s engineers are also “punching above their weight” when it comes to experience level, managerial capabilities, and leadership potential. Colombia’s ecosystem is nurturing a solid corp of mid-level engineers and technical managers.

Two other countries I want to mention are Chile and Uruguay. Chile is known to have a vibrant tech ecosystem, thus it should have some strong engineering talent too, even though it did not come up as often in my conversations. Uruguay, a tiny country less than 4 million people, is also gaining recognition within various developer circles. In 2019, the Rust programming language community held its very first LATAM regional conference in Montevideo, Uruguay’s capital. Other countries don’t really come up when it comes to technical talent.

Mature Companies, English Proficiency

To explain this distribution and disparity of engineering talent, two lenses have been helpful to me: local mature companies and the country’s English proficiency.

Mature Companies: nowhere is this lens more applicable than assessing Argentina, where two of the most mature tech companies on the continent are headquartered: MercadoLibre and Globant.

The e-commerce giant MercadoLibre was founded in 1999, trades healthily on the NASDAQ (ticker: MELI), and, by the words of famed investor Fred Wilson, is “one of the greatest Internet companies ever in any region.” MercadoLibre survived the dot-com bubble and has been flourishing since. Because of its scale, reach, and longevity, Argentinian engineers who’ve worked at MercadoLibre have an unique advantage in growing their skills -- both technically and managerially -- in ways that aren’t available to most people in other countries.

Founded in 2003 in Buenos Aires (now headquartered in Luxembourg), Globant is another force in the Argentinian tech ecosystem and publicly traded on the NYSE (ticker: GLOB). With a global workforce of 16,000+ people, its main business is to provide engineering capabilities for other more well-known companies, like Google and Electronic Arts. While this kind of “outsourcing” shops usually do the “dirty work” and thus don’t house top-tier engineers, Globant appears to be higher on the technical “food chain.” Rumor has it that it works closely with Disney and is the main product engineering force building Disney+.

There’s no question that the growth and maturity of these two “anchor” tech companies play a huge role in Argentina’s tech ecosystem and talent development. Similarly, Brazil’s Nubank and many other fast-growing startups are having the same effect there. Along the same line, Rappi’s growth and the many “Rappi mafia” startups it has spawned are having a big impact on Colombia’s tech talent development.

Learning how to code in school is one thing. Seeing rapid scaling first-hand (and surviving it) is everything. That’s why Mexico, despite its population size and large economy, doesn’t yet have a big pool of senior talent. However, that will likely change soon with the quick rise of Kavak. The used-car marketplace startup (and the first Mexico-born unicorn) just reached a $4 billion valuation earlier this month.

English Proficiency: Because the default language of engineers worldwide is English (and all computer languages are quasi-English: if-then, not 如果-那就), English proficiency affects the speed and effectiveness of technology know-how dissemination. This factor also impacts the initial phase of growing a tech industry in emerging markets, which tend to be serving developed markets that are predominantly English-speaking. India is an example and beneficiary of this dynamic with its large, English-speaking population.

So how do the 19 LATAM countries’ English proficiency stack up against each other? Of the countries we mentioned, here’s their ranking based on Education First’s English Proficiency Index:

• Argentina: #1
• Chile: #3
• Uruguay: #9
• Brazil: #10
• Colombia: #17
• Mexico: #18

Despite its proximity to the US, Mexico’s ranking is surprisingly low. Argentina’s top ranking and Mexico’s low ranking do lend some credence to a connection between English proficiency and engineering talent depth. However, I don’t want to mislead anyone and don't profess to know if there’s any causation between the two factors and, if so, in which direction.

Perhaps having a strong English education leads to better technical talent development. Perhaps having great engineering talent to start leads to more English speaking and learning opportunities. It’s simply a dimension worth keeping in mind as you think about the opportunity set of the region.

Implications for “Pure Tech” Entrepreneurship

When I wrote “Where Will the Next 50 Million Developers Come From?” a few months ago, one of the most exciting trends I discussed that will follow this global explosion of developers is more global-scale startups being started in emerging markets. I see that future unfolding, slowly but surely, in the LATAM region.

With deep, experienced technical talent pools in Argentina and Brazil, more “pure tech” startup products in AI/ML, DevOps, infrastructure, and APIs should form in the next few years. Up and comers like Chile, Colombia, and eventually Mexico will follow suit. These pure technology LATAM-born products will have the potential to not only serve the local region, but also the more mature US and EU markets.

However, the playbook for finding the right ideas and building the right team for “pure tech” startups are quite different from fintech, marketplaces, e-commerce, and other direct-to-consumer products that still dominate the scene in LATAM.

Because of the talent level disparity we discussed before, an early-stage startup may be tempted to hire engineers from different countries and have a distributed team set up, which is fashionable these days. However, that typically results in slower engineering iteration speed when product directions change frequently in search of product-market fit -- a death knell of startup survival.

Instead, if you keep the initial small team local, the proximity helps with quick iteration and product adaptability. The drawback is you are limited by the local talent pool and hiring competition. Even hiring from the mostly junior-level engineering pool of Mexico is becoming fiercely competitive -- between rising giants like Kavak, new startups that are popping every day, and large American MNCs, like IBM, Intel, and Oracle.

There are many reasons why startups succeed. There are many more reasons why startups fail. Knowing how to build and evolve an engineering team is one of the main ones. It’s something every tech ecosystem needs to wrestle with -- LATAM would be no different.

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