Did you know nearshoring is booming in the Latin American market, poised to add an extra $78 billion in exports annually, especially in tech? US tech giants like Google, Microsoft, Oracle, Amazon, and Cisco are already innovating there. But which LATAM country is the best bet? Let’s compare Colombia vs Uruguay for nearshore technology outsourcing, two frequent picks among tech companies.
I’m David Gomez, Alcor’s Lead IT Recruiter in Latin America. We make team expansion for tech companies slick and smooth by building software development centers in Colombia, Uruguay, Chile, Argentina, and Mexico. With our solution, you scale the development team from 0 to 100 tech talents in a year, plus you get 100% legal compliance and freedom from buy-out fees and operational hurdles.
In this article, you’ll get an in-depth overview of the Colombian and Uruguayan technology markets, the pros and cons of nearshore outsourcing to each of these locations, and, as a cherry on top, a viable solution to expand in LATAM. Buckle up, and let’s go!
Colombian and Uruguayan Tech Industries: Key Takeaways
Market
Both Colombian and Uruguayan IT services industries are vital contributors to the national economic growth, each making up 3% of the GDP. Colombia’s revenues in tech services are about 2.5 times larger than Uruguayan ones, exceeding $2 billion in 2024. However, the Uruguayan IT market revenue is growing five times faster, estimated to reach a whopping $1 billion by 2029.
IT Services Exports
The mature IT market in Colombia is an ultimate leader in exports, reaching $1.6 billion in 2023. Despite being an emerging technology market, Uruguay shows unmatched results, growing at an average annual 21% over the last ten years. Unsurprisingly, 86.6% of ICT services export share belongs to the United States, followed by the UK (4.8%) and Argentina (1.9%). Tech services represent the highest share of the sector’s exports in both nearshoring destinations.
Tech Sectors
Both Colombia and Uruguay shine in fintech but differently. While Colombia is trying to compete with fintech heavyweights like Brazil and Mexico, ranking 3rd in the region with over 295 fintech startups, Uruguay is acting behind the curtains. Once an overlooked fintech ecosystem, Uruguay entered the top 20 in the Global Fintech Index 2021 with its unicorn dLocal, leaving everyone with a jaw dropped. What’s the secret to such a windfall success? A combination of governmental support and private initiatives have propelled Uruguay to the top 10 best fintech hubs in the region.
How does Colombia stack up to Brazil in tech developemnt? Explore the differences by comparing Colombia vs Brazil for nearshore technology outsourcing!
Another thriving technology sector in Uruguay is AI, ranking 3rd in LATAM for its adoption and development and boasting the highest AI talent per 10,000 inhabitants in the region. Agtech & foodtech are also booming, placing Uruguay among the top 8 LATAM countries in investment. Bioenergy is surging as well, as Uruguay generates 98% of its electricity from renewables and is already among top 10 countries worldwide for renewable energy adoption.
Meanwhile, Colombia is making waves in the Cloud, already heating $1,2 billion in 2023, with its public cloud injecting $17.3 billion into the national GDP. Other prominent tech sectors are AI, set to reach $665 million in 2024, and e-commerce, the 3rd largest market in LATAM. Among the emerging technology sectors is proptech, which already boasts 100 startup companies, with its unicorn Habi that raised 29% of the total investment last year.
Business Environment
When comparing Colombia vs Uruguay for tech nearshoring, Uruguay has everything it takes to start a technology business: a long track record of political and economic stability, a favorable A3 business climate, and quite a sufficient quality of the entrepreneurial environment. As a result, Uruguay already boasts 550 software companies, including branches of such tech enterprises as Amazon, Microsoft, Netflix, IBM, and PwC, as well as 1,010 startups, ranking #5 in South America for the startup ecosystem.
Meanwhile, Colombia has fostered its business environment through the National Entrepreneurship Policy, Digital Business Development, and Colombia 4.0 programs. Now, it hosts 1,720 startup companies, ranking 2nd in LATAM for the startup ecosystem, and boasts 12.8% of the region’s tech companies.
| Criteria | Nearshoring Locations | |
| Colombia | Uruguay | |
| Market potential | $2.05 billion of revenue in IT Services in 2024; projected to reach $2.77 billion by 2029 Growth rate – 6.21% | $795 million of revenue in IT Services in 2024; projected to reach $1 billion by 2029 Growth rate – 31% |
| ICT service exports | $1.6 billion USA, Mexico, Costa Rica, Uruguay, Spain | $1.02 billion USA, UK, Argentina, Canada, Chile |
| Key sectors | fintech, cloud, AI, e-commerce, proptech | fintech, AI, agrifoodtech, bioenergy, cybersecurity |
| Government initiatives | MinTIC and INNpulsa grants, Colombia 4.0, Digital Business Development programs, National Digital Strategy | 2025 Digital Agenda, Uruguay XXI, Ceibal project, ANII innovation funding |
| Business climate | A4 | A3 |
| Quality of business environment | 37 | 28 |
| IT hubs | Bogotá, Medellín, Cali | Montevideo |
| Software development companies | 11,000 | 550 |
| Startup Ecosystem Index | #2 in South America, #38 globally | #5 in South America, #58 globally |
| Startups and unicorns | 1,720 startups Unicorns: Rappi, Habi, Lifemiles | 1,010 startups Unicorn: dLocal |
| Foreign tech giants | Google, Microsoft, Amazon, Oracle, IBM, Cisco | Amazon, Microsoft, Netflix, IBM, PwC |
Pros and Cons of Nearshore Outsourcing to Colombia and Uruguay
Pros of nearshoring to Colombia
- Extensive & skilled talent pool
Looking for a wide variety of software engineers? Colombia is one of your best nearshoring countries! With 150,000 tech specialists, it boasts the third-largest talent pool in Latin America. Each year, it expands with 13,000 STEM graduates from the National University of Colombia, the University of America in Colombia, the University of the Andes Colombia, and Pontificia Javeriana University.Hiring developers in Colombia is your bet, as they rank 5th for tech skills in LATAM, shining at data science, operating systems, and computer networking.
- Business benefits
Technology companies operating in Colombia enjoy a 25% tax discount and a 100% tax deduction for investments in innovation, science, and technology projects. In addition, double taxation treaties and free trade agreements allow access to over 60 countries, encouraging entrepreneurial and economic development and easing international collaboration. Colombia has also implemented Base Erosion and Profit Shifting (BEPS) measures and introduced a digital nomad visa to ensure fair taxation and promote a business-friendly and innovation-driven environment.
- Moderate salary rates
The average software engineer salary in Colombia ranges from $37,500 to $54,800, depending on the expert’s expertise level and skill stack. For instance, a senior Golang developer costs tech companies about $60,000, while a .NET developer of the same level demands $54,500 a year.
Wondering how much you would pay for the same developers in Mexico or Argentina? Read about Colombia vs Mexico for nearshore outsourcing and Colombia vs Argentina for nearshore technology outsourcing!
- Convenient location
Colombia shares a close geographical proximity to the US and has only a one-hour difference from the US East Coast and two hours from the West Coast. This is a win-win scenario for tech companies willing to hire software developers in Colombia.
Pros of nearshoring to Uruguay
- Tax incentives
One more advantage of opting for nearshore technology to Uruguay is its myriads of tax incentives. Technology companies that export IT services get a 100% exemption from income tax. They can also enjoy 35% credit for R&D expenses and 45% when collaborating with certified tech centers or universities. This is coupled with economic free trade zones and a non-double taxation rule in Uruguay.
- Affordable salaries
Have you been craving to slash costs on labor expenses? Guess what, Uruguay boats the lowest developer remunerations in Latin America! For instance, a senior mobile developer earns $61,000 a year, an AI Engineer of the same level charges about $60,000, while a senior DevOps Engineer makes $64,000 annually. Software development outsourcing to Uruguay is an absolute bargain!
- Tech-versed talents
Paying less doesn’t mean compromising quality, as Uruguayan software developers are #1 in Latin America for tech skills. Be sure to get top-notch results, especially in data analysis, mobile development, statistical programming, and computer networking. Uruguay is actually a unique country with the highest density of people with tech skills (64 per 10,000 inhabitants) and one of the highest literacy rates (98.7%) in LATAM. 76% of software engineers hold university degrees, primarily from the University of the Republic, ORT University, Technological University of Uruguay, and Catholic University of Uruguay.
- Multilingual abilities
Language barrier? Haven’t heard about that! 68% of programmers in Uruguay possess English skills, being #4 in Latin America for proficiency in this language. Meanwhile, 15% of these tech experts hold expertise in Portuguese, and 4% are knowledgeable in Italian. Besides that, the ETI survey found that it’s common among Uruguayan programmers to know German, French, or Mandarin Chinese, making them perfect remote workers for international tech companies.
Cons of nearshoring to Colombia
- Intricate taxation
While Colombia has multiple tax incentives for businesses involved in R&D activities, paying taxes is not a piece of the cake. For instance, payroll tax in Colombia stands at 9%, but if a developer earns less than ten times the minimum monthly wage, employers are subject to a self-withholding income tax. Plus, both employers and employees must pay social contributions. Then, the added complexity of managing cross-border payments and indirect taxes requires careful handling. So, what to do? Use the services of a local Employer or Record provider to avoid any possible legal pitfalls.
- Cybersecurity risks
Data protection is another concern of tech companies that pursue an outsourcing strategy in Colombia. Colombia ranks among the top 5 LATAM countries most vulnerable to cyberattacks. Last year, a massive cyberattack hit 34 Colombian entities and 762 companies across Latin America. On top of that, outsourcing software development can also increase the risk of IP theft. A smarter, safer option? Build your own engineering team, fully controlling security software, protocols, and encryption standards.
Cons of nearshoring to Uruguay
- Modest talent pool
Unlike its giant neighbors, Uruguay has a pool of about 33,000 tech specialists, which may pose challenges for companies seeking prompt team expansion. Still, for a country of fewer than 4 million people, this number is very impressive. Local universities produce 1,260 STEM graduates each year, while the government implements various educational programs like “Sembrando TIC,” “Holberton,” “Jóvenes a Programar,” and “SoyHenry,” which collectively graduate over 5,000 tech experts annually.
- Emerging tech landscape
Another challenge technology companies may face when pursuing a nearshore outsourcing strategy is scaling limitations. Uruguay is one of the smallest South American countries both in terms of territory and population. All of its tech scene is concentrated in one city – Montevideo, which poses obstacles in talent availability, infrastructure, and funding, etc. One more possible issue is ensuring compliance. Navigating local regulations, tax, and labor laws can be a challenge for international tech companies unfamiliar with Uruguay’s legal landscape.
Distinction Between Tech Nearshore Outsourcing to Colombia and Uruguay
Colombia vs Uruguay for nearshore outsourcing, which country should you choose? Colombia has a larger pool of software developers dispersed over three ripe IT hubs, with developed infrastructure and startup ecosystem. Another advantage is geographical proximity and overlapping time zones with the USA, which adds to effective communication and productive cooperation.
On the other hand, Uruguay offers access to elite software developers with exceptional tech skills and multilingual abilities. It provides lots of tax incentives and business-friendly conditions for effective expansion. The icing on the cake is the lowest developer salaries in the region, about 40% lower than in the US.
When comparing Colombia vs Uruguay for nearshore tech outsourcing, each brings its unique perks to the table. Objectively speaking, Colombia surpasses Uruguay with a more mature IT market, larger and more diverse tech talent pool, and stronger business ecosystem. On the flip side, if you want to dip your toes into a fast-growing market with less competition for talent and lower costs, Uruguay could be your perfect match.
Secret Tip to Ease the Process
Despite the location you pick, having an experienced and trustworthy partner by your side is a smart move. Since traditional outsourcing models pose lots of risks and pitfalls for technology companies, it makes sense to opt for a safer and cost-effective option.
We at Alcor help companies like yours enter LATAM markets without hussle via our all-in-one software R&D center solution. It grants 100% operational coverage, from full-cycle tech recruitment to extensive EOR services and operational support.
Our unique solution disrupts traditional outsourcing models, offering:
- Silicon Valley-caliber talent for 40% less expenses;
- Zero buy-out fees, as the development team is yours from day 1;
- Direct management & full integration into your corporate culture, no middleman in your communication with developers;
- Transparent pricing, without any markups and hidden costs;
- Freedom from setting up a legal entity and managing legal hurdles.
Our R&D center solution has proven effective for tech companies like People.ai, ThredUP, Sift, BigCommerce, and many more. Are you curious to learn more about setting up an R&D team in Colombia, Uruguay, or any other LATAM country? Drop us a line to discuss your expansion plans in greater detail!