Foro de Ahorro de Energía Eléctrica, México | Photo credit: Alejandro Castro | Foter.com | CC BY-NC-SA

Latin America is experiencing a full-fledged start-up movement amid rapid growth of an innovation and information economy.  Over the last several years the region’s online population has grown faster than in any other part of the world – with approximately 255 million internet users as of last year.  Half of the top 10 markets worldwide, ranked by time spent on Facebook and other social media, are in Latin America.  Clusters of innovation start-ups, such as those around Monterrey, Mexico, are springing up with astonishing speed.  In 2012 Mexico was among the largest exporters of information technology services in the world.  Google is currently building a data center in Chile, while Amazon Web Services opened a data center in Sao Paolo last December.  But these are not information-era maquiladoras. Instead, Latin American entrepreneurs are combining the availability of open-source innovation tools and the emergence of cloud computing with effective bridge building in Silicon Valley to bring collaboration, expertise, and capital to their home markets.

• Latin America offers multiple advantages for tech start-ups: a low cost of development, an educated and growing talent pool with the necessary technical and entrepreneurial skills, and increasingly available and affordable broadband and internet access.
• In particular, Mexico, Chile, Brazil, Argentina, and Colombia, along with metropolitan areas across the region, are incentivizing the development of a competitive start-up ecosystem – an advantage attracting a growing number of “angel investors.”
• Start-Up Chile, a national program begun in 2010 with 22 start-ups from 14 countries, offers seed capital, grants, tax protection, space, mentoring, and networking to “accelerate” promising ventures.  Its most recent competition drew 1421 applicants from 60 countries, including from Singapore, London, and San Francisco.

The lack of tech innovation and incentives for start-ups has been an Achilles’ heel of Latin American economies for decades.  If the start-up trend continues, the region could make significant, lasting progress toward narrowing the sizable gap between itself and the most dynamic developing countries, mostly in Asia.  Latin America’s start-up movement is both top-down and bottom-up, with a tech-savvy generation of entrepreneurs not afraid to take risks and to leverage government support, as part of a collaborative business model built on multiple ties to Silicon Valley.  A core challenge will be whether these initiatives are scalable, and whether governments can move away from stale policy debates rooted in antiquated paradigms to move their economies toward the frontiers of innovation of the information age.  Old elites with a lock on traditional industries are poorly positioned to obstruct the phenomenon, but if these emerging innovation hubs are to succeed, at some point they are likely to confront  the entrenched and oligopolistic business practices still prevalent in the region’s energy, telecom, and other sectors.