The World Bank says the nearshore software development trend is a much-needed boost to the LATAM economy. No wonder, since 87% of US software firms consider nearshoring, and Latin America is one of the key markets. But how do these countries stack against each other? Take Colombia vs Mexico for nearshore technology outsourcing. The affinities are countless. The key difference between Colombia and Mexico regarding nearshore technology outsourcing is taxation.
Iโm David Gomez, Alcorโs Lead IT Recruiter in Latin America. With Alcor, you can get your own software development center in Colombia, Mexico, Argentina, or Chile. We help US technology companies grow and go global, providing Silicon Valley-caliber software development teams from 0 to 100 devs in a year and beating traditional nearshoring for long-term scaling goals.
In this article, Iโll unveil the similarities and differences between nearshoring in Colombia and Mexico, including market stats, talent comparison, cost and savings, and more. Letโs dive in!
Why Choose Between Colombia and Mexico
Why pick Colombia or Mexico for IT nearshoring to Latin America? What about nearshoring software development to Argentina or Chile, for instance?
In a nutshell, these nearshore outsourcing countriesโฆ
- Are perfect for US tech companies to increase their staff close to home offices. Mexico has three overlapping time zones with the United States, and Colombia is in the GMT-5 zone, just one hour behind EST.
- Benefit from the biggest nearshore talent pools and the largest numbers of ICT graduates: 124,000 in Mexico and 13,000 in Colombia.
- Outperform Chile and Argentina in tech skills, according to Coursera.
- Are buzzing with startups and unicorns, attracting total VC funding from $260 million to $832 million in 2023.
Colombia and Mexico Tech Sector: Key Statistics
For insights into nearshore technology outsourcing stats, letโs compare these two locations in greater detail.
| Criteria | Nearshoring Locations | |
| Colombia | Mexico | |
| Market potential | $2.05 billion of revenue in IT Services in 2024; projected to reach $2.77 billion by 2029 Growth rate โ 6.21% IT Outsourcing dominates the market by 33.6% | $17.8 billion of revenue in IT Services in 2024; projected to reach $23.3 billion by 2028 Growth rate โ 5.51% IT Outsourcing dominates the market by 34.7% |
| Business climate | A4 67/190 for ease of doing business | A4 60/190 for ease of doing business |
| Startup Ecosystem | Hubs: Bogotรก, Medellรญn, Cali #2 in South America, #38 globally in Startup Ecosystem Index | Hubs: Mexico City, Monterrey, Guadalajara, Merida #1 in Central America, #41 globally in Startup Ecosystem Index |
| Government initiatives | MinTIC and INNpulsa grants | Fondo Nacional Emprendedor and 500 Startups LATAM |
| Software development companies | 11,000 | 12,900 |
| Startups and unicorns | 1,300 startups Unicorns: Rappi, Habi, Lifemiles | 1,153 startups Unicorns: Kavak, Clip, Bitso, Nowports, Merama, Clara |
| Talent pool | 150,000 | 700,000 |
| Coursera rating | #5 in overall technology skills in Latin America Rank highly in operating systems and computer networking | #3 in overall technology skills in Latin America Rank highly in data visualization and statistical programming |
| Tech skills | JavaScript, Python, C++, PHP, Java, and Ruby | Python, SQL, C#, JavaScript, React.js, and Angular |
| English language proficiency | 17th out of 20 in Latin America | 19th out of 20 in Latin America |
| Average annual salary | Middle: $37,500 Senior: $54,800 | Middle: $40,000 Senior: $57,800 |
| ะกultural traits | Open, adaptable, excel at time management, value trust and show initiative and dedication | Assertive, expressive, famous for passion for excellence, teamwork, and continuous learning |
| Sources: Statista on IT Services in Colombia, Statista on IT Services in Mexico, English Proficiency Index 2024, Coursera Global Skills Report 2024, Coface, Nearshore to Guadalajara | ||
Market
Mexicoโs IT services sector generates eight times higher revenues. At the same time, Colombiaโs market is experiencing a more rapid growth rate โ 6.21% against 5.51%. For both countries, IT outsourcing brings in a sizable revenue share, with the US being their biggest IT export partner. Overall, both business climates are equally conducive to nearshoring software development.
Innovation
When it comes to nearshoring for innovation, are Colombia and Mexico neck and neck? Mexico takes the lead in fintech, ranking #24 worldwide with 773 fintech startups. The Mexican startup scene is also strong in e-commerce, energy, transportation, and healthtech and boasts twice as many unicorns as the Colombian.
Colombia, meanwhile, excels in the transportation industry with 421 startups to date, and it also shines in foodtech, energy, and environment. As a result, Mexico wins as a more innovative destination: in the Global Innovation Index, it ranks 3rd in Latin America, and Colombia comes 5th.
Wondering how Colombia stacks up against some other LATAM locations? Compare Colombia vs Uruguay for tech nearshoring, Colombia vs Argentina for technology outsourcing, and Colombia vs Brazil for nearshoring technology to find out!
Talent
Mexicoโs software development talent pool is 4.5 times larger. Still, both countries are recognized for top-level tech skills in Latin America: Colombian talent is unparalleled in web development, cloud computing, and data analysis, as well as JavaScript technology thanks to its 3,000 JS community and regular meetups in 8 cities; Mexican talent stands out in data science, mobile development, fintech, and Python.
Regarding English proficiency and cultural similarities, both nearshore destinations are comparable. Software developers from Mexico share the traits of openness and collaboration with software developers in Colombia. As for the differences, Mexican programmers come off as more assertive, while Colombian devs are celebrated for dedication.
Costs
The average software engineer salary in Mexico is slightly higher than the software engineer salary in Colombia. The annual average wage cost makes a big difference when you nearshore and build software development teams. For example, hiring a Senior DevOps Engineer will set you back $72,000 per year in Mexico, compared to $69,600 in Colombia. In the United States, expect to pay at least $138,000 a year for the same expertise, a staggering 48% higher!
Conclusion: Both Mexico and Colombia offer solid incentives for US product tech companies to nearshore โ considerable talent pools, high-quality education, and software developersโ expertise, booming IT services markets, government technology initiatives, cultural and geographical proximity, and more.
Key Differences of Tech Nearshoring to Colombia and Mexico
Trends in Technology
By now, you shouldnโt doubt the nearshore potential for software development innovation in Colombia and Mexico. However, the countries focus on different spheres of technology. Depending on which trails you want to blaze, you will either offshore software outsourcing in Mexico or Colombia.
Letโs break it all down:
Tax Nuances
Mexican and Colombian taxes are not for the faint-hearted. What are the main things to know if opting for nearshore outsourcing?
Mexico offers tax relief thanks to the Canada & US treaty, but the crucial nearshoring choice concerns employment models. To hire a dedicated development team in Mexico, you should decide between a full-time employment contract and a B2B contract. The former presupposes a 1.92%-30% income-dependent tax for the employee paid by the employer, while the latter involves a 25% income tax rate for programmers. In a full-time employment contract, the employer must also pay 1%-3% payroll tax and social security contributions between 24.9% and 33.6% of the employeeโs base salary. Meanwhile, if your business performs research and development activities, you can get a tax credit of up to 30%.
Unlike Mexico, Colombia has no tax treaty with the US, meaning less favorable tax rates for foreigners and higher risks of double taxation. On the other hand, Colombia supports research and development activities much more seriously. For instance, software development companies can obtain a 25% tax discount and a 100% tax deduction for tech, scientific, and innovation projects.
Alcor excels at both tech recruitment & Employer of Record services. Learn how we built 100% compliant dev teams for People.ai, Ledger, Sift, and other clients.
Secret Tip to Ease the Process
Itโs easy to get lost in the Latin American tech ocean. Thatโs why Alcorโs here to propel you forward to Silicon Valley-caliber talent & savings. Weโll shield you from the legal & cost undercurrents while youโre expanding to either Mexico, Colombia, Chile, or Argentina.
Put briefly, our R&D center model beats IT staff augmentation in Mexico and all other types of outsourcing.
Hereโs why:
- We combine tech recruitment, EOR, and full operational support to help you scale compliantly and hassle-free.
- Youโll save more than when you outsource: pay 40% less for the same talent or get top-10% of the market devs for the same price.
- Youโll get transparent pricing without markups, only direct salaries.
- Zero buy-out fees: your team belongs to you from day one.
If you nearshore to the LATAM region with us, we guarantee you a software development team in 2-6 weeks. Moreover, our hires stay with clients for 2.5 years on average.
Ready to set sail towards hiring developers in Colombia or Mexico? Describe your specific needs, and weโll weigh up all the pros and cons to suggest the best market for you. Contact us and get salaries, team setup time estimates, and more!