Latin American software industry sees FDI growth, still trails other geographies

Thursday, May 12, 2011

Latin America's software industry is seeing growth in foreign direct investment (FDI) but lags behind other regions, especially with high technology content, according to a study from the UN Economic Commission for Latin America and the Caribbean (Eclac) on FDI in the region in 2010.

As the software industry has become a driver of economic growth in the region, almost 6% of the industry's projects recorded between 2003 and 2010 landed in Latin America. This compares to Asia-Pacific's receiving 48% of projects, Western Europe with 21% and 10% going to Eastern Europe.

The main Latin American countries receiving projects were Brazil with 36%, Mexico with 23% and Argentina with 16% of the projects, while Chile, Colombia, Costa Rica and Uruguay followed.

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Of the projects hosted in Latin America, the most were from IBM (NYSE: IBM) at 33%, followed by Microsoft (Nasdaq: MSFT) and Indian IT services firm Tata Consultancy Services, each accounting for 16%.

According to the study, the software industry's development in Brazil and Mexico, and to an extent in Argentina, is a result of previous industrialization strategies used to develop manufacturing and some specialization in areas of computing and electronics.

Eclac cited as a regional trend the emergence of a range of companies offering global IT services and trans-Latin American software enterprises such as Mexican IT nearshore services provider Softtek, Chilean IT systems integrator Sonda, Argentine IT solutions and outsourcing services provider Globant and Brazilian software firm Totvs (Bovespa: TOTS3).

As Eastern Europe and Asia-Pacific have done, Eclac said, Latin America can strengthen its position as a global software location with new strategies implemented by transnational companies directed at combining operations in different time zones, cost levels and operational risks.