Five endowments show up again and again in the interviews and the data: STEM graduates, lithium, clean electricity, mobile penetration, and a venture market that already knows how to clear consumer rounds. The binding constraints are institutional, not geological.

The Technical Talent Pool

Any tech ecosystem starts with talent, and the region has it. Governments across Latin America have put money into STEM education, and the universities that came out of it are producing more founders.

Educational Attainment:

Brazil produces approximately 100,000 engineering graduates annually, ranking among the top countries globally for engineering education.1

Mexico graduates over 110,000 engineers and technicians each year, accounting for 20% of its annual graduates.2

Argentina adds to the regional pool through its universities. The University of Buenos Aires has an international reputation for its technical graduates.

Government Initiatives:

Brazil's Science Without Borders program sent over 100,000 STEM students abroad on scholarships, and they brought those skills home.3

Mexico's PROSOFT initiative offers financial incentives to companies investing in IT development, which builds domestic talent.4

Brazil hosts over 12,000 tech startups, making it the largest startup ecosystem in Latin America.5

Mexico City is home to a growing number of tech parks and incubators, such as Startup Mexico, which supports numerous startups annually.

Buenos Aires has been recognized as one of the top startup ecosystems globally, and within Latin America.6

That talent feeds domestic companies and pulls global firms into opening research and development centres in the region.

What the Natural Resources Are Good For

The region's natural resources matter most to clean technology. Lithium reserves sit under the energy storage much of deep tech depends on, and the biodiversity is raw material for biotechnology. Together they give the region a shot at a greener deep tech sector than most.

Lithium Reserves:

The "Lithium Triangle" (Argentina, Bolivia, Chile) contains an estimated 58% of the world's lithium resources.7

Bolivia is the world's-largest lithium producer, contributing 24.42% of global production.8

Argentina is rapidly increasing its production, with investments totaling over $2 billion in lithium mining projects.9

Renewable Energy Potential:

Brazil derives nearly 90% of its electricity from renewable sources, primarily hydropower.10

Chile aims to produce 70% of its energy from renewables by 2030, investing heavily in solar and wind projects.11

Biodiversity for Biotechnology:

The Amazon rainforest, spanning several Latin American countries, is a hotspot for biodiversity, offering vast potential for biotechnological research in pharmaceuticals and sustainable agriculture.

Those resources are drawing foreign investment into energy storage, electric vehicles and related technologies.

Digital Transformation and High Connectivity Rates

Digital adoption in the region has been fast, and most people are already used to technology-first services.

Internet and Mobile Penetration:

Internet coverage and usage in Latin America stands at approximately 83%, with countries like Costa Rica, Argentina and Chile exceeding 85%.12

Smartphone Adoption: The region has over 400 million smartphone users, with penetration expected to reach 78% by 2025.13

Fintech Revolution:

Latin America’s fintech ecosystem has seen over a four-fold increase over the course of the last six years.14

Brazil's Nubank, the world's largest digital bank by the number of customers, has over 100 million users and a valuation exceeding $45 billion.15

EdTech Expansion:

The EdTech market in Latin America is projected to reach $3 billion by 2023, growing at a CAGR of 15%.16

Platzi and Descomplica reach millions of students across the region.

E-commerce Growth:

E-commerce sales revenue in Latin America is predicted to reach over $125 billion in 2027.17

MercadoLibre, Latin America's leading e-commerce platform, reported net revenues of $5.1 billion, up 42% YoY.18

That gives AI applications and fintech products a large, already-connected market to scale into.

Geopolitical Advantages and Nearshoring Opportunities

Latin America's strategic location and evolving trade relationships present significant advantages. In particular, with Trump’s recent victory, the expectation is the United States will continue to nearshore its production, which would ultimately benefit Latin America. We may also see deregulation across the tech sector, which would bring more investment into the Americas.

Proximity to Major Markets:

The region's geographical closeness to North America reduces logistical complexities and costs for companies.

Similar time zones facilitate real-time communication and collaboration with U.S. and Canadian companies.

Trade Agreements:

USMCA has enhanced intellectual property protections and digital trade provisions, benefiting tech companies (Office of the United States Trade Representative).

The Pacific Alliance (Chile, Colombia, Mexico, Peru) promotes economic integration, aiming to eliminate a substantial amount of tariffs among member countries.19

Nearshoring Trends:

Companies are shifting supply chains to Latin America to mitigate risks exposed by the COVID-19 pandemic and geopolitical tensions elsewhere.

Mexico has seen a surge in manufacturing investments, with foreign direct investment (FDI) in the sector reaching $12 billion in 2021.20

Government Support:

Colombia's Orange Economy initiative focuses on creative and tech industries, contributing 3.4% to the country's GDP.21

Chile has established over 15 tech parks to attract foreign companies.22

Together these make the region a more plausible destination for companies expanding or relocating.

Venture Capital and the Startup Ecosystems

Latin America has been one of the fastest-growing regions for incoming venture investment, helped by a run of exits that gave investors something to point at.

Record-Breaking Venture Capital:

Venture capital investments in Latin America reached $19.5 billion in 2021, a threefold increase from the previous year - ranking it the fastest-growing region for venture funding.2324

SoftBank's Latin America Fund II launched with $3 billion, following the success of its initial $5 billion fund.25

Notable Investments:

Rappi, a Colombian delivery app, raised $1 billion in a funding round led by SoftBank.

Creditas, a Brazilian fintech company, secured $260 million in Series F funding, reaching a valuation of $4.8 billion.

Local Venture Firms:

Kaszek Ventures has invested in over 90 companies, raising more than $1 billion across its funds.

Monashees focuses on early-stage startups, with a portfolio that includes 99, acquired by Didi Chuxing, and Loggi.

Government Programs:

Startup Chile has supported over 2,000 startups, generating over $1.4 billion in economic activity.

Brazil's InovAtiva Brasil offers acceleration programs to over 400 startups annually, providing mentorship and investor connections.

This money and these programmes are what the local ecosystems run on.

The Obstacles

The region also has problems that have to be dealt with. Below are some of them, with examples of where each has actually blocked something.

Political Instability:

Changes in government and policy shifts can create uncertainty. For example, regulatory changes in Mexico's energy sector have raised concerns among investors.26

Corruption and Governance:

Transparency International's Corruption Perceptions Index ranks several Latin American countries below the global average.27

Initiatives like Brazil's Operation Car Wash have shown commitment to combating corruption.28

Infrastructure Gaps:

The World Economic Forum notes that Latin America needs to invest 5% of its GDP annually in infrastructure to meet its needs, but current investment is around 2.8%.29

Market Fragmentation:

Diverse regulations and standards across countries can hinder regional expansion for businesses.

Opportunities to Overcome Challenges:

Regulatory Reforms:

Countries are implementing policies to improve the business environment. For instance, Peru's digital government initiatives aim to streamline administrative processes. Other countries including Costa Rica are adopting Estonia’s e-governance X-Road platform.30

Public-Private Partnerships (PPPs):

PPPs are being used to improve infrastructure and services. Colombia has over $25 billion in PPP projects.31

Regional Integration Efforts:

Organizations like the Inter-American Development Bank (IDB) support projects that enhance regional connectivity and standardization.

Dealing with these is what would make the region easier to invest in.

Where This Is Going

Latin America's trajectory suggests a growing influence on the global stage, we have already seen governments across the region turn heavily towards relying on deep tech as a key economic and social driver of success throughout the region.

AI and Machine Learning:

Chile's Center for Mathematical Modeling is advancing AI research, focusing on applications in astronomy and natural disaster prediction (CMM).32

Brazil is investing in AI ethics and governance, participating in global dialogues to shape responsible AI use.33

Biotechnology and Healthcare:

Argentina's biotech sector is developing GM crops and biopharmaceuticals, contributing to global food security and healthcare.34

Costa Rica is becoming a hub for medical device manufacturing, exporting over $7.6 billion annually.35

Sustainable Development:

The Amazon Fourth Industrial Revolution Center in Brazil works on using technology for sustainable development in the Amazon region.36

Peru uses blockchain for supply chain transparency in mining.37

The next post covers the leading deep tech companies coming out of Latin America, the verticals they work in, and what other builders can take from them.

About the Latin American Dynamism Project

Deep tech in Latin America is worth the attention of investors, founders and policymakers outside the region too. They can take part by:

Investing in high-growth potential markets with significant returns.

Collaborating on research and development initiatives.

Supporting sustainable and ethical technological advancements.

The Latin American Dynamism Project (LADP) publishes research on all of this. Working with us gives you:

In-depth research reports.

Networking opportunities with key industry players.

Updates on policy changes and market trends.

Visit the LADP website to find out more, and take our survey if you want to contribute to the research.

The flagship report now covers this ground in full: Accelerating Deep Tech in Latin America. Download the PDF here, or browse the open findings.