In recent years, Latin America (LATAM) has experienced an economic revival, and it's not expected to slow down any time soon. Latin American economies are estimated to increase to 9.2 trillion USD by 2030, placing LATAM at a more prominent position in the global market in the near future.
Startup ecosystems are thriving with a new generation of entrepreneurs transforming the region into a promising business destination, thanks to progressive legislative reforms, subscriptions to international standards, and higher connectivity.
New generation entrepreneurs in LATAM are creating tech startups with fresh and innovative ideas that center on fundamental challenges in diverse industries, including agriculture and education. Cities across the region are developing vibrant tech ecosystems that are restoring economic prosperity.
Let’s dive deeper into why Latin American tech startups are driving regional economic growth.
Tech startups are capitalizing on LATAM’s steady economic development and middle-class consumerism
Despite LATAM being one of the regions worst affected by the pandemic, tech startups have been capitalizing on its solid economic foundation and the consumer-ready middle class' insatiable need for digital connectivity. By providing innovative solutions to solve day-to-day problems, tech startups are ensuring they meet the recent significant changes in consumer habits.
The Latin American market has become diverse and multicultural, with hundreds of opportunities for commercial expansion. Today, major countries, including Brazil, Argentina, and Colombia, hold a significant 90% share of the South American economy, and others like Mexico reached an all-time high of 1315.35 USD Billion in 2014. LATAM's middle-class is experiencing a reset and turning its focus on technology.
Tech startups are taking advantage of LATAM’s growing mobile market
Today, Latin America's middle-class is trading middle-market goods and services for quality, wellbeing, experience, and convenience. A recent survey found that Latin America's priorities have shifted towards education and technology. Smartphones and mobile devices have quickly become an essential part of Latin American society accounting for up to 70% of the web traffic generated in the region, with Brazil being one of the largest mobile phone markets.
One startup that capitalized on the booming mobile technology market in the region was the Colombian on-demand delivery startup Rappi. By connecting businesses with delivery drivers, Rappi offers consumers the possibility to purchase any product or service in one place. This innovative tech company has been operating in nine Latin American countries since 2015 and is currently valued at USD $5.25 billion.
Digital technology startups are transforming Latin America’s agriculture
Entrepreneurial talent in LATAM is creating digital technology startups that are transforming the economy by centering on industries in desperate need of change, such as agriculture. The agriculture industry is a critical contributor to the growth and trade in the region. Farmlands create jobs, raise incomes, and help reduce poverty. Therefore, many startups are utilizing digital technology resources to improve farmland productivity and eliminate logistical bottlenecks.
Frubana is a perfect example of this as it is a “farm to restaurant” platform that cuts out the middleman in the food supply chain. Since its launch, it has aimed to generate better prices, discoveries, and transparency. The platform has successfully built trust between parties and improved logistics by facilitating the buying and selling of products between restaurants and small retailers across Latin America.
EdTech startups are using digital technology to change education
LATAM tech startups are also working hard towards improving education, which pushes the economy forward. In 2021, educational technology (EdTech) skyrocketed in Latin America, with 1,500 EdTech startups innovating education systems across the region. This recent boom in EdTech has led to better access to education, enriched learning experiences for primary school, high school, as well as college students, and improved student outcomes.
Teaching students of all ages the new skills needed to thrive in a digital economy are at the center of most EdTech startups. Platzi, founded in 2011, is one of the largest online professional education platforms in LATAM. It has become the leading ed-tech platform in technology-focused courses, including basic programming, design, and marketing. Preparing students for careers in digital technologies is of utmost importance for Latin American EdTech startups since digitalization is one of the main drivers of global economic growth today.
Fintech startups are Innovating LATAM’s finance industry
In recent days, LATAM has become one of the hottest fintech markets in the world partly due to its lack of established advanced financial services. Poor financial services combined with high mobile app usage create the perfect environment for fintech startups to thrive. Fintech startup hubs such as Palenca are innovating financial services while also collaborating with LATAM’s gig economy. With the rise of jobs within the gig economy, many informal workers that struggled during the pandemic are now turning to it in order to earn a daily profit.
Nevertheless, the rise of the gig economy has also brought up some issues. Verifying prospects' work history and personal information has become much more difficult for employers. Palenca has solved this problem through API implementation. The company provides access to real-time employee data utilizing database integrations. Individuals can also leverage their gig payroll history and performance to apply for car loans, personal loans, and other credit products that require a background check. Everybody wins.
Latin American tech startups are solving local challenges and creating global opportunities. The potential for digital transformation in the region's market is exponential. As long as tech startups continue to push innovation forward, LATAM's digital economy growth will thrive alongside the rest of the world.
As pioneers of venture studios in Latin America, we are committed to strengthening the region's entrepreneurial ecosystem. Learn more about how we are building startups in developing economies here.