Emerging tech

Colombia’s aspirations to become a regional tech hub face obstacles.

In recent years, Colombia has managed to position itself as an emerging hub for technology companies aiming to expand across Latin America and the Caribbean. The country has created an exciting ecosystem which has attracted foreign investment in a flourishing network of investment funds establishing synergies with a growing network of startups but obstacles remain.

Colombia’s former President Ivan Duque had hoped to turn the country into the Silicon Valley of Latin America, and serious progress was made, even during the pandemic. Colombia established a market structure which combines a favourable regulatory framework, institutional governance guidelines, and long-term programmes which have paved the way for the creation of state-of-the art technology startups in its territory. This, coupled with the country’s well-positioned locally developed software programmes in the international market, have given the country the regional lead in technological transformation.

A tech company founder in Bogotá commented, “With the pandemic, Latin American companies rushed to advance their digital transformation processes, which involves not only the use of digital platforms, but also specialised software, artificial intelligence, cybersecurity, etc. – innovation and big data became crucial for survival. Demand for IT specialists has gone through the roof but the supply side isn’t there and it is reducing Colombia’s competitiveness.”

In particular, the Ministry of Education launched the “Scientific Colombia” programme to promote tech-related training and degrees. The programme received USD 30 million in state funds with an additional USD 9 million for eight research projects developed in collaboration with 150 local science and technology institutions. The goal is to introduce 13,000 young graduates with IT and engineering degrees into the Colombian labour market every year – notably, this is a larger figure than regional heavyweights Brazil and Mexico.

However, tech startups in Colombia continue to face major obstacles to their growth, according to a local venture capitalist, “The investment case for Colombian software startups is growing but there are still challenges relative to regional peers. The talent pool is still small, but it is growing rapidly; there is a concentration of capital in Bogotá, but Antioquia and the Atlantic region are emerging; and the legal and tax burden on startups is too heavy.”

“The investment case for Colombian software startups is growing but there are still challenges relative to regional peers.”

Venture capital investor, Colombia

A technology focused lawyer provided some additional colour on the regulatory environment, “Colombia is behind the regional leaders in terms of regulating digital platforms, so there are no clear rules to promote competitiveness in different sectors such as transport, nor is there any regulation of cryptoassets, for example. Pilot studies have been carried out, and the Superintendency is making progress, but there is still a long way to go.”

“Colombia’s financial technology sector is rich with opportunity for early-stage investors, the ecosystem is established and we’re starting to see growth coming through.”

Venture capital investor, Colombia

Despite these challenges, there is opportunity, and our sources focused on financial technology as a particular hot-spot, the venture capitalist explained, “Colombia’s financial technology sector is rich with opportunity for early-stage investors, the ecosystem is established and we’re starting to see growth coming through. The scalability and profitability of these businesses is particularly attractive. Mercado Pago Colombia is a good case study, it has enjoyed strong growth over the past five years to become one of Colombia’s leading digital payments solutions.”

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