Uruguay: A Tiny Country Turned Mighty Nearshore Outsourcing Tech Hub

Uruguay might not come immediately to mind when thinking about the best country to nearshore, yet its recent growth, overall 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 the country the nickname “The Silicon Valley of South America” and why outsourcing to Uruguay might just be the right move.

Uruguay in times of COVID-19

Since the first confirmed COVID-19 case, the world has struggled to get rid of this pandemic, which as of August 19th, had infected more than 212 million people and killed roughly over 4.43 million.

Uruguay is one of the few countries in the world able to contain the disease, reporting only 1,044 cases since the beginning of the outbreak,  and just over 30 deaths. On March 13th, the first 4 cases of COVID were confirmed and on the very same day, Uruguay declared it a national health emergency and proceeded to:

• close its borders
• cancel any flights in or out of the country
• suspend classes
• suspend public and religious events

Health safety measures were quickly passed in Congress and signed by the President and applied in no time. Mandatory lockdowns were never implemented and doctors would check on potential new cases by visiting the patient’s home and applying the test there.

After a steep rise in cases throughout the first six months of 2021, as well as an extensive vaccination campaign, Uruguay is now reporting less than 100 new cases per day (August, 2021) and more than 70% of its population already has already received both doses of either Sinovac (China), Pfizer (USA) or AstraZeneca (UK).

Uruguay also became the first country in the Americas to be selected by Google and Apple to try their new coronavirus contact-tracing app, which notifies the user whenever he or she is at risk of having the virus due to close contact with a confirmed patient of COVID-19.

The app, Coronavirus.uy also guides users on how to identify the symptoms of the disease and the right way to proceed in case he or she may be infected, provides up-to-date information on the number of daily cases, deaths and recoveries, and schedules users for their vaccine shots.

‍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).

Technology in Uruguay didn’t start advancing recently. It’s actually quite an old endeavour. In fact, Uruguay became the first country in the region to introduce computer science degrees, during the 1960s (just two years after MIT did!).

The first successful tech company in Uruguay was Scanntech, a retail and payments software provider, founded in 1991, and backed by Sequoia Capital.

Investments

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 is 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%.

When it comes to technology and software in Uruguay, there are several indicators that make this country an ideal destination for outsourcing, 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, which 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.

‍Technology in Uruguay

Montevideo, the capital city, is the epicenter of Uruguay’s software development industry. Currently, approximately 550 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 the World Trade Center complex, LATU Technological Park (Technological Laboratory of Uruguay).

However, some companies have opted for starting their operations in other cities, such as Abstracta, currently located in Salto, helping to create new IT-related opportunities and stimulate the local economy.

Most successful companies

There are several very successful Uruguayan companies, including PedidosYa, AstroPay, Bankingly, BGlobal Solutions, Bantotal, GeneXus, GlamST, ICA, Infocorp, Info Casas, IronHide, MVDtrading, Buxis, Paganza, Quanam, Feng Office and Top Systems.

Additionally, 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.

In September, 2020, dLocal became Uruguay’s first tech unicorn, in April 2021 it increased its value to 5 billion dollars, and finally in June, 2021, it went public in Wall Street’s Nasdaq. Since then, the company’s value has increased to 15 billion and its shares have grown 145.2% (as of July 1st, 2021).

Apart from the tech unicorn in Uruguay, dLocal, GeneXus has also been extremely praised internationally due to the development of Coronavirus UY, bringing even more attention to the country and its achievements.

Outsourcing to Uruguay has grown exponentially over the last decade. Important foreign multinationals in the IT industry have 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.

In 2020, Google purchased 74 acres of land in Canelones’ Science Park, located 28 miles north of Montevideo, and intends to build its second Data Center in Latin America, and is expected to invest approximately 100 million dollars.

In fact, according to Clutch,  10 out of the top 30 custom software developers in LATAM already have offices in Uruguay, which is no small feat.

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‍COVID-19: Uruguay turned to tech to successfully contain the virus

Since the first confirmed COVID-19 case worldwide back in December, the world has struggled to handle this unprecedented pandemic.

Uruguay is one of the few countries worldwide that has been 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 software companies in the private sector to launch Coronavirus.uy, an app that guides users on how to identify symptoms and the right way to proceed and alert health authorities in case they suspect they’ve been infected.

A few weeks after, the initiative caught the eye of tech moguls, Google and Apple. Uruguay became the first country in the Americas chosen to try their new contact-tracing technology in its app, which notifies a user whenever they might be at risk of having the virus due to coming into close contact with a confirmed patient.

Thanks to its success in flattening the curve, slowly yet steadily the country has started re-opening its schools, restaurants and stores and allowing flights to and from Europe.‍‍

‍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.

Connectivity

When it comes to connectivity, Uruguay is definitely 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.

According to Budde Com’s most recent Uruguay broadband market report, “Uruguay tops all other countries in the region by a considerable margin, and this has facilitated growth in fixed-line broadband adoption”. In fact, as of June 2020, fibre connections account for 77% of all broadband connections in the country, both fixed and fixed-wireless.

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 the unemployment rate is virtually zero.

Although Uruguayan programmers have a range of skills, a recent survey by Stack Overflow reveals that most of them have a preference for JavaScript, which is considered the most in-demand IT skill in the market, as stated by DevSkiller’s Top IT skills report 2020.

Additionally, according to Coursera´s Global Skills Report 2020, Uruguay is considered “emerging” in Technology, with several competitive skills such as cloud computing (51%), computer programming (63%) and even achieving a “cutting edge” status in mobile development (82%).

When it comes to Data Science, Uruguay is considered a “competitive” country and #2 in LATAM with a “cutting edge status” in data analysis (90%) and statistical programming (82%), as well as competitive status in machine learning (53%).

In terms of Business, corporate accounting in Uruguay has achieved competitive status (64%), as has Finance (60%).

‍Local Universities with Bachelor of Science and Master’s Degrees

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
• computing

The number of IT degrees and postgraduate studies available in the country has significantly increased in the last few years, and it has also expanded away from Montevideo, mainly due to the Technological University (UTEC).

Private colleges have also 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.

English Proficiency

According to the EF English Proficiency Index, Uruguay ranks #9 out of 19 LATAM countries, with an average of 8.7 years of schooling in English.

Furthermore, according to recent data from the Test of English as a Foreign Language (TOEFL), Uruguay has the highest level of proficiency in the test 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).

‍Consider Uruguay for Nearshoring

In addition to all the virtues mentioned before, there are other aspects that make outsourcing to Uruguay very enticing:

• 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 software exports.
• It ranked #15 in the world and #1 in LATAM in the The Economist’s Intelligence Unit world “Democracy Index 2020”, located before countries such as the United Kingdom (#16), Austria (#18), Spain (#22) and France (#24).
• It ranked #1 in LATAM and #21 in the world by Transparency International’s “Corruption Perceptions Index 2020”. The country is located under the “complete transparency” category, followed by Chile (#25).

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”.