“It’s a Bloodbath”: U.S. Companies are Pillaging Latin America's Tech Talent

https://portside.org/2022-01-24/its-bloodbath-us-companies-are-pillaging-latin-americas-tech-talent
Portside Date:
Author: Vittoria Elliott
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rest of world

It took Andrea Campos, the Mexico City–based founder of two-year-old mental health app Yana, six long months to find a senior front-end developer. After launching her app in the early days of the pandemic, Yana’s usership ballooned from just a few thousand users in Mexico to over 5 million across twelve countries. Campos, who said her company has raised $2.5 million in 2021 to scale the app and expand her team, was looking to bring on someone with the experience and skills to guide projects. 

One month after his first day at Yana, the long-sought after developer told Campos he was leaving. 

“An American company was offering him $15,000 per month to work for them,” Campos told Rest of World. “We cannot compete with that.”

Stories like Yana’s have become all too common across Latin America, where, according to every source who spoke to Rest of World and compiled salary data, demand for tech talent is skyrocketing, but supply remains relatively scarce, fueling fierce competition between startups, established tech companies, and outsourcing giants for qualified workers. While other regions across the world face similar shortages, Latin America produces far fewer tech graduates than Asia. Meanwhile, its proximity to the U.S. makes it a prime location for outsourcing for American tech companies, increasing the value of skilled workers to companies at home and abroad.

“Everyone knows it’s a bloodbath out there,” said Campos.

For tech workers like Joel, a Mexico-based developer working for an established American tech giant, the world is their oyster. Joel asked to be referred to only by his first name as he is not authorized to speak on the record by his employer. “This is the best time to be a developer,” he said. “We are basically like rockstars.”

Campos told Rest of World that more junior engineers were applying for senior positions. “They know that they can because there is so much competition for talent.”

For the Latin American startup ecosystem, 2021 was a landmark year, as venture firms pumped up to $20 billion into the region — more funding than ever before. Experts estimate that the region will see 10 million new IT job openings by 2025, driven both by local companies and the increasing demand from offshoring organizations looking for cheaper talent in the same time zones as U.S. companies — a practice called “nearshoring.” 

A recent Everis Digital Talent study revealed that 55% of companies in Latin America said finding the right talent was difficult. That includes Latin America’s most valuable tech giant, MercadoLibre, which has also lost talent to outsourcing agencies, like Globant, that service U.S. firms. Those agencies in turn sell cheaper Latin American labor to foreign companies. 

“This is the best time to be a developer. We are basically like rockstars.”

Pablo, who is based in Argentina and asked that Rest of World not name his employer, works for a similar outsourcing company, which now contracts around 600 Latin Americans for Venmo. In 2019, when Pablo started, there were only 10.

Tech workers often make well above the average salary in their respective countries. In Argentina, they make more than five times more than the average salary, according to data from Salary Explorer and surveys from Latin American IT outsourcing company CodersLink. In Mexico, it’s more than triple the average. However, the idea that going into the tech sector could be a lucrative career move is still relatively new. 

Universities and coding schools have not been able to keep up with the demand for talent. CodersLink found that the region produces only 739,000 IT graduates per year, as opposed to the 7.3 million in Asia, making talent expensive. And even then, schools may not provide the skillset startups need. Many universities in Latin America focus on “systems engineering” or IT roles, rather than more cutting-edge technologies, like machine learning.

“The basic career choices of being a doctor or a lawyer or a civil engineer [are] still very dominant in Brazil,” said Arthur Alvarenga, founder of the Brazilian startup Hubla. “Alongside that, the schools and colleges are not necessarily doing a great job of making the classes larger. It’s a structural issue for sure.” 

For those who do have the skills, the recent transitions in favor of remote work have meant that high-paying U.S. tech companies are now more willing to hire developers in Buenos Aires and Guadalajara.

English speakers from the region with solid internet connections are less interested in smaller, local startups, said Luis Arbulú, a partner at the firm Salkantay Ventures, which invests in Latin American startups. He says that, instead, “they’re looking at working for Salesforce or working for Stripe,” both U.S. companies with valuations in the hundreds of billions.

That makes hiring particularly hard for local startups. To compete, Hernan López Conde, co-founder of Argentine fintech startup Digiventures, and his team have begun to recruit specifically developers who lack English language fluency.

“No one will pay those [high] salaries to someone who is not fluent,” he said. 

Like every entrepreneur who spoke to Rest of World, López Conde said that he too had lost valuable talent to large companies that were able to offer five times what he was able to pay. In Argentina, where inflation has reached more than 50% in the last 12 months, foreign companies can also lure workers by paying in dollars or other foreign currencies, rather than the Argentine peso.

“Compared to Google and outsourcing companies from the U.S., it’s impossible to compete,” said Hubla’s Alvarenga. “But compared to companies that are local, we do pay top of market.” Alvarenga estimates that salaries for tech workers have risen 30% in the past year alone.

Scarcity has pushed regional companies to start offering stock options, a relatively new move in the region. But taking a job for equity, said Pablo, requires workers to believe in the company’s potential for long-term success. “Most people don’t believe in the company; they believe in the pay.”

"Most people don’t believe in the company; they believe in the pay."

Mathias Caramutti, founder of the Argentine startup Celeri, has focused on hiring more-junior developers, and developing their skills in-house. 

“When you have a younger startup or a smaller team, you need to hire generalists,” he said. “We tell candidates, ‘We don’t need you to know a lot about technical stuff, but you need to be willing to learn, be willing to take ownership of problems, and to be able to push it forward.’” 

Arbulú, the venture capitalist, says that Latin American startups can also leverage the same remote work policies that have allowed U.S. companies to snap up local talent. By recruiting workers from smaller cities in their own countries or neighboring markets not yet experiencing their own tech booms, startups may be able to avoid the same kind of stiff competition and inflated salaries.

El Salvador’s Hugo app hires talent in Honduras, while Mexico-based Yana worked with a developer in Bolivia to build the initial version of the app that launched in 2020. 

And for companies just starting out, Arbulú told Rest of World that hiring the most advanced technical talent may not be key — at least not right away. “This is particular to Latin America or other emerging markets, but sometimes the need is so big and the incumbents are so poor that you just need to make something marginally better, but that’s not really high tech,” he said. 

This is true of Caramutti’s company, Celeri, which is less a fintech company than a “regulatory tech” company. 

“Financial companies outsource operational problems to us, and we solve them,” he said. “So we don’t really have a particular need for a cutting-edge machine-learning specialist or anything like that. We need people who can understand the business and solve their problems.”

But as companies scale, the need for higher-skilled tech talent becomes more critical. After three months of searching, Yana finally hired another new senior front-end developer. 

“Most [developers] see their path with startups as just another step in their career in order to get to Google or Facebook,” said Campos. “If someone is very money-driven, there’s nothing we can do.”


Source URL: https://portside.org/2022-01-24/its-bloodbath-us-companies-are-pillaging-latin-americas-tech-talent