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This article was published on June 15, 2013

Latin America’s wanna-be Silicon Valleys have to face an inconvenient truth: The need for immigration

Latin America’s wanna-be Silicon Valleys have to face an inconvenient truth: The need for immigration
Matthew Carpenter-Arevalo
Story by

Matthew Carpenter-Arevalo

Matthew Carpenter-Arévalo is a former Google and Twitter manager. His boutique digital agency, Centrico Digital, is based out of Quito, Ecua Matthew Carpenter-Arévalo is a former Google and Twitter manager. His boutique digital agency, Centrico Digital, is based out of Quito, Ecuador. You can find him on twitter as @ecuamatt.

In his landmark 1928 work “Seven Essays of Interpretation of the Peruvian Reality,” the author and marxist philosopher José Carlos Mariátegui argued that Latin America needed to return to the pre-Colombian era destroyed by the Spanish imperialists in order for the continent to achieve true equality.

Despite this rhetoric Mariátegu did not, however, advocate throwing out all of the Spaniards. Instead he argued that Spaniards and their descendents willing to accept the new world order should stay. After all, many brought with them farming knowledge and techniques that would be useful in building an agrarian-based societal order.

As numerous Latin American countries including Argentina, Brazil, Chile, Colombia, Ecuador and Peru to name a few, battle it out to give birth the region’s first latin-flavoured Silicon Valley, the continent is slowly having to deal with what is for many an inconvenient economic truth: the need for immigration. And through this debate many are arriving at the same conclusion as Mariátegui.

Latin America and migration

It is not that Latin America is unfamiliar with immigration: indeed, the last 500 years of Latin American history might be summarized by the dual themes of migration and exploitation.

The first wave of migration to the region came about through the generations of Spanish and Portuguese who came to populate the continent after the Iberian Crowns’ large-scale annexations. They were eventually followed by African victims of the slave trade.

Throughout the 19th and 20th centuries merchants from the Middle East trickled in, followed by a second wave of Europeans this time escaping wars, dictatorships and poverty.

The present day has also brought with it its share of intra-regional migration produced by events such as Colombia’s civil war, Argentina’s numerous economic catastrophes and Central America’s violence and economic stagnation.

Despite grudging acceptance of yesterday’s migration, today’s migration isn’t always popular, as the nationalist sentiments of yesteryear continue to give legitimacy to the preeminence of the nation-state as a stand-alone and sovereign market. In the age of Internet-based consumer products, however, the predominance of the nation-state is a limiting and potentially destructive factor.

Each of the countries mentioned is faced with the same conundrum: on the one hand the native tech communities are simply not big enough to produce the critical mass required to develop fully-fledged technology industries. Similarly, aside from Brazil, Mexico and maybe Argentina, no country has a large enough population to sustain a thriving tech. market on its own.

Operating in the world of mass volume and small margins, any entrepreneur looking to Latin America as the land of opportunity would be wise to focus on the combined market of 600 million people speaking two primary and not dissimilar languages. With internet penetration in the region almost at 50% and continuing to rise, the terrain is ripe for first movers to replicate the colonizers and plant their flag.

The clear solution to this problem would then be for one country or city to create a magnetic force similar to the Silicon Valley where, according to one study by the Kauffman Institute, 52% of tech startups are founded by at least one foreign-born individual.

Indeed, so important is the foreign-born workforce to the continued ability of the San Francisco Bay Area to produce the next generation of consumer-products that the Valley’s big players are lining up behind Mark Zuckerberg to lobby for immigration reform. It turns out that world-class companies require world-class employees, and any Latin American country hoping to imitate the U.S. need not ignore the sticky issue of global talent acquisition and retention.

Chile leading the way

116589265So far only Chile has aggressively pursued a strategy of enriching its tech eco-system by actively seeking to import entrepreneurs from other markets.

The much celebrated government backed incubator/accelerator Start-Up Chile offers $40k of seed capital to entrepreneurs from anywhere in the world so long as the individual is willing to set-up shop in Chile and stay for at least 6 months. As the Start-Up Chile website proudly states, “we believe and invest in people, looking at their ideas first and their passports second.”

The hope is that through such a period entrepreneurs will be convinced to stay, create jobs and help invigorate the eco-system. After all, without a knock-off effect it would be difficult for the Chilean government to justify handing out the hard-earned tax-payer dollars to foreign citizens.

Early signs are encouraging: so far the project has attracted over 600 entrepreneurs from 35 different countries.

One such entrepreneur is Daniel Ponce, the Bolivian founder of CityHero.Es, a civic-minded start-up that seeks to promote offline engagement between citizens and governments.

Daniel was a member of the Start-Up Chile class of 2012 and relocated from his native city of Cochabamba, Bolivia in order to take part in the program. After finishing at Start-Up Chile he returned to Cochabamba hoping that his start-up’s presence would help spark other socially-minded initiatives in the city.

Eventually, however, the opportunity for another round of funding presented itself and the investors, not to mention network and know-how, were all found back in Santiago. Daniel had no choice but to once again cross the Andes to the land of pisco and (lately) protests.

Though Daniel has once again found himself in Chile, many other graduates from the program find themselves moving on. Indeed, only about 25% of Start-Up Chile entrepreneurs stay after one year of entering the program.

The reasons are many: some see penetrating the Chilean market as too difficult and prefer to operate in their comfort zone. Others have already taken steps to execute on their businesses in their home countries, and therefore log the minimum time required before returning.

Still others are the victims of the program’s success. Whether entrepreneurs stay in Chile or not, the program’s global notoriety among tech entrepreneurs has brought with it investors from all over. Some of those investors prefer that the companies they discover in Start-Up Chile accompany them back to places such as Silicon Valley.

In other words, Chile has for many entrepreneurs become a hub rather than a destination.  Whereas some might view such an outcome as a poor return on investment for the Chilean taxpayers, others see the benefits as stretching beyond the creation of employment.

As Horacio Melo, Executive Director of Start-Up Chile, mentioned to me in an email, all foreign entrepreneurs are asked to make a commitment to give back to the host community. The presence of Start-Up Chile Entrepreneurs in workshops, university seminars, acting as mentors, etc., adds much to the development of Chile’s collective and institutional entrepreneurial memory.

“We can’t forget,” Melo wrote, “that centers of innovation often contain very liquid populations. That same constant renewal of talent is what connects and breathes life into different centers of innovation.”

Though as a result of its efforts Santiago may appear to be pulling ahead in developing a thriving tech eco-system, the race is far from over.

Alternative strategies

Given their country’s size and economic clout Brazilian tech. entrepreneurs by and large continue to operate in a very-inward focused manner without much yet feeling the need to focus on their Spanish-speaking cousins. Though it is getting its own Start-Up Chile style program, the Brazilian version will limit foreign participation at 25%.

Despite its troubles, including many of its tech entrepreneurs seeking refuge across the channel in Uruguay to avoid rampant inflation and constraining capital flight taxes, Argentina continues to maintain the largest pool of tech-oriented talented in Spanish-speaking Latin America. Indeed, the Argentine-based MercadoLibre remains the only South American start-up listed on the NASDAQ.

Ecuador meanwhile is planning to replicate the Korean model of investing hundreds of millions in a new knowledge-based city called Ciudad Yachay that will include a state-of-the-art university and tech-focused industrial park.

Finally, never to be outdone by its frenemy Chile, Peru is seeking to replicate Start-Up Chile’s success with its own $20 million USD funded incubator, though its not clear whether or not the fund will invite entrepreneurs from outside Peru to participate.

And Telefónica, meanwhile, the massive telecom company with a strong regional presence, is placing its bets across the region through its incubator program Wayra, accessible from 8 different countries.


The current of tech migration thus continue to flow northwards but, as the game is still in its early stages anything can happen, especially given the good-will and muscle provided by both the public and private sectors.

Just as Yahoo’s recent high-profile acquisition of Tumblr has provided much encouragement to the New York tech scene, Latin America may only be one high-profile exit away from invigorating the region with the dual stimulants of hope and cash.

And if there is one winner it will ultimately have to be the country or city that does the most to attract talent from elsewhere, for as the United States has shown, without a critical mass the density required to produce a wave of innovation will not materialize, regardless of how educated one’s population might be. Even if the long-term goal is to produce native talent, in the case of developing tech eco-systems the chicken must indeed come before the egg.

Since no country has succeeded in replicating Silicon Valley’s creative output no-one can quite say what the winning formula is. What we can say though is that without a doubt one of the ingredients required is a revised understanding of the value of immigrants to a society. And with the Galapagos Islands standing as a constant reminder, changing currents have led to all kinds of evolutionary outcomes hitherto never contemplated or foreseen.

Images: Santiago Airport (credit: AFP/Getty Images), Chile’s flag (credit: Thinkstock)