Uruguay: a Tiny Country Turned Mighty Nearshore Outsourcing Hub
Uruguay might not come immediately to mind when it comes to Latin American nearshore powerhouses, yet its potential, talented pool of developers and facilities for foreign companies has definitely made this little South American destination worth a more thorough look.
Discover what has earned Uruguay the nickname “The Silicon Valley of South America” and what it has to offer.
Technological Advances & Investments
Uruguay is the #1 software exporter per capita in South America and the third worldwide. In the last few years, nearshore software companies have flourished all over the country and billing has been growing exponentially in the last five years, so much so that the IT industry today accounts for 2.7% of the national Gross Domestic Product (GDP).
In the last five years, Uruguay’s IT industry has experienced great growth. In fact, according to the Uruguayan Chamber of Information Technologies (CUTI in Spanish), 2018 set a new turnover record, billing a total of 1,67 billions, 6% more than in 2017 (1,59).
The United States are Uruguay’s main client, accounting for 64% of billings, followed by Japan.
According to CUTI’s chairman, Leonardo Loureiro, this trend will continue to grow steadily. The IT industry today accounts for 2.7% of the national Gross Domestic Product (GDP) and in five years this number is expected to reach 5%.
In terms of technological advances, several indicators make Uruguay an ideal nearshote destination to outsource software services, including:
- Being one of the first countries to adopt protocol IPv6 (#8 according to Google IPv6)
- Having the highest internet by optical fiber in homes and businesses, at the lowest prices. It also has one of the region’s fastest internet download speeds.
- Having one of the best Data Centers in Latin America and several underwater connection points in Argentina, Brazil and the U.S.
- Being the #1 country in terms of e-governance in Latin America, according to the United Nations.
Another interesting indicator to consider is Cisco’s Global Digital Readiness Index 2019, that measures the level of digitization as a key factor to achieve competitiveness, increase GDP, promote innovation and create new jobs. Uruguay is the second Latin American country with the highest score, behind Chile.
COVID-19: Uruguay turned to tech to successfully contain pandemic
Since the first confirmed COVID-19 case back in December, the world has struggled to get rid of this unprecedented pandemic.
Uruguay is one of the few countries worldwide able to contain the disease, reporting only 1.044 cases and 30 deaths since the beginning of the outbreak (as of July 20th).
Immediately after the first few cases were confirmed nationwide, public officials joined forces with the software private sector to launch Coronavirus.uy, an app that guides users on how to identify the symptoms and the right way to proceed and alert health authorities in case they suspect to be infected.
A few weeks after, the initiative caught the eye of tech moguls Google and Apple. Uruguay became the first country in the Americas selected to try their new contact -tracing technology on the app, which notifies the user whenever they might be at risk of having the virus due to close contact with a confirmed patient of COVID-19.
Thanks to its success in flattening the curve, slowly yet steadily the country has started opening its schools, restaurants and stores, and allowing flights from and to Europe.
Montevideo, the capital of Uruguay, is the epicenter of the software development industry of the country. Currently, approximately 700 IT companies are operating in the country and this number continues to grow.
Most small and medium sized IT companies and enterprises have settled down in Montevideo and in the country’s main free zones and hubs, including World Trade Center, Zonamerica, Aguada Park, Parque de las Ciencias and Parque Tecnológico de LATU (Technological Laboratory of Uruguay).
However, some companies have opted for starting their operations in other cities, such as Abstracta, helping to create new IT-related opportunities and stimulate the local economy.
There are several successful Uruguayan companies, including AstroPay, Bankingly, BGlobal Solutions, Buxis, Bantotal, dLocal, Feng Office, GeneXus, GlamST, ICA, Infocorp, Info Casas, IronHide, MVDtrading, Paganza, PedidosYa, Quanam and Top Systems.
Additionally, important foreign multinationals in the IT industry have also either settled in the country or hired local developers to provide their services, including Globant, IBM, Indra, Microsoft, New Context, NetSuite, Tata Consultancy Services and VeriFone.
Through the years, Uruguay has produced several very successful, top of the line tech companies, including Dynamia, DVelop, Innuy, Kaizen, Moove It, Octobot, Practica, Rootstrap, TangoCode, UruIT and VAIRIX.
Coworking Spaces & Accelerators
Coworking spaces have become increasingly more popular in the last few years in Uruguay among entrepreneurs, freelancers and small companies. Most coworking spaces are located in the capital, although since 2018, several spaces have started opening in other departments of the country.
The most popular spaces today are Sinergia, YouHub, Cowork Latam, Espacio Serratosa and Coworking Center. However, several new coworking spaces have opened in the last two years in some other areas of the country, including Co-Lavora in San José, Colonia Cowork in Colonia, Incubación Cowork in Paysandú and Startup Cowork Café in Punta del Este.
In addition to coworking spaces, several different incubators and accelerators have started operating in the country, including:
- Sinergia incubator: created by Sinergia group, currently with 58 startups and an investment of almost 3 million dollars. Additionally, it’s the only incubator that works with fintech startups.
- Impulsa Industria: created by the Uruguayan Chamber of Industries, this incubator is aimed at industrial companies and entrepreneurs.
- Ingenio: this incubator was funded by the Technological Laboratory of Uruguay (LATU) in 2001 and it’s the country’s first incubator.
There are also accelerator programs that provide tutoring, workshops and networking sessions with investors and corporate partners to help new companies and entrepreneurs, such as Acelerador 500 Montevideo.
When it comes to connectivity, Uruguay is definitely the one to keep an eye on. Not only does 97% of Uruguayan homes are connected via LTE technology, but 82% of them also have broadband connection, positioning itself well over every other country in Latin America.
In addition, Uruguay is also at the forefront of the region’s 4G-LTE mobile communications (a 63,3% penetration rate) and it has recently launched its first 5G network, and the first 5G network in Latin America. Mobile penetration is the second highest after Panama.
With a total investment of 800 million dollars, Antel, the state-owned telecommunications company, expects to provide full national FttP coverage by 2022. Uruguay is also one of the very few countries in the world where broadband access via cable modem is non-existent.
Skills & Employment
Uruguay’s public education system is one of the best in the region and the literacy rate is 96%. In terms of technological skills, Uruguayans begin learning technological skills from the first years of primary school, thanks to the One Laptop per Child program (OLPC).
Uruguay adopted OLPC in 2008 and today, almost 300,000 children in public schools have their own laptops.In addition, the plan also provides laptops to low-income high school and college students. In 2015, Cisco included Uruguay as one of the countries with 100% connectivity in schools.
In addition, Uruguay was one of the first 10 countries to adopt an official AI strategy, and the second in Latin America, after Mexico.
In terms of employment, approximately 13,000 people work in the IT industry in Uruguay, according to the 2019 Uruguayan Chamber of Information Technologies (CUTI) Annual Survey and unemployment rate is virtually zero.
Local Universities with IT Degrees and Masters
Currently, 11% of all college students enroll in Engineering programs, although many other students are opting to enroll in other degrees such as electronics and information technologies, which are also highly demanded by IT companies. Overall, the country produces 1 engineer per 8,000 inhabitants.
According to 2016 data, most IT graduates get their degree from the public university, UdelaR (57%), although more and more students are opting for private colleges.
UdelaR (University of the Republic) is the only public university in the country and it consistently ranks among the best in the region. In fact, according to U.S. World News & Report, it’s #21 among the best Latin American universities and #1 in Uruguay. Students interested in computing can either opt for a Bachelor degree in Computing Engineering or a three-year degree in Computing. UdelaR also offers masters in:
- software engineering
- computing engineering
- electric engineering
However, private colleges have been growing consistently in the IT area, adopting more modern curriculums, hiring several teachers and experts from renowned companies and offering internships at important companies in the country.
In fact, recently the ORT University was included among the top 150 best universities in the region. It specializes in technology and offers several different degrees in the IT field, such as animation and video games and design, art and technology.
High school graduates can also begin specializing in technology by enrolling in the Labor University, known as UTU, and complete a two year degree in networks and software, in telecommunications or in networks and optic communications technician.
According to the EF English Proficiency Index, Uruguay is #39 out of 100 countries and has a moderate level, with a score of 54.08 above the region mean score, which has an average low proficiency level. Uruguayans spend an average of 8.7 years learning the language.
Furthermore, according to recent data from the Test of English as a Foreign Language (TOEFL), Uruguay has the highest level of proficiency in the region, with a total score of 94 out of 120 points, followed by Argentina and Costa Rica with 91, and well over the region mean score of 85.
Also, a recent report produced by Panama, Chile, Costa Rica and Uruguay states that the latter has the best qualified English teachers out of the region. This is mostly due to the fact that in order to start studying to become a teacher, applicants must have a B2 level. Most primary school English teachers in Uruguay have a C1 level and most high school English teachers have a C2 level.
Currently, every school in the country provides mandatory English courses for the last three years of primary. Also, the British Council provides almost 350 weekly hours of English to public school students as part of the OLPC project (known in Uruguay as Plan Ceibal).
In addition to all the virtues mentioned before, there are other aspects that make Uruguay a very attractive country for nearshore and outsourcing companies:
- Its living cost continues to be remarkably lower than in the United States and most developed countries and emerging countries such as India or the Philippines.
- Its work culture is extremely compatible with the U.S. work culture and most software developers are used to working according to U.S. standards.
- Its time zone is convenient to U.S. companies, and developers can get up to 8 hours of overlap with the U.S.
- Its airport is among one of the 10 most modern in the world, making it easier for foreigners to travel in and out.
- It has a 100% income-tax exemption for exports of software
It definitely has its share of challenges going forward, but overall it does appear to live up to its nickname of “the Silicon Valley of South America”.