Back to BlogWhy Latin America is emerging as the smartest nearshoring hub for U.S. companies
Businesses in the United States are on a continuous search for cost-effective and sustainable scaling strategies. Nearshoring isn’t just a trend; it’s actually a strategic move. For U.S. companies, Latin America is not only a possible choice—it’s the smartest choice.
With a growing tech industry, overlapping time zones, relevant and updated skill sets, Latin America is shining as a nearshoring hub.
What is nearshoring and why is it gaining traction?
Global supply chains continue to face increased pressure, pushing more U.S. companies to turn to nearshoring as a solution and a business model.
Nearshoring should not be confused with offshoring or reshoring:
- Offshoring is moving operations to distant countries (often in Asia) to cut costs. This is mostly applicable for mass production.
- Reshoring is bringing outsourced functions back to the home country.
- Nearshoring strikes a middle ground, offering cost savings similar to offshoring but with closer geographic, cultural, and time zone alignment. It’s a strategy where companies relocate operations to nearby countries to reduce risk and improve efficiency.
With its proximity, skilled workforce, competitive pricing, and growing economic ties with the U.S., Latin America is quickly emerging as the smartest nearshoring hub for companies seeking agility without compromise.
Strategic advantages of nearshoring to Latin America
With nearshoring gaining momentum, Latin America is standing out as a region that offers more than just geographic convenience. For U.S. companies seeking agile, scalable, and cost-effective partnerships, the region brings together an ideal mix of operational, cultural, and economic benefits.
1. Proximity and time zone alignment
Latin America enjoys a clear logistical and operational edge. Since the region has shared or closely aligned time zones with the U.S., this helps facilitate real-time collaboration and streamlined agile workflows. Cities like Bogota and Mexico City operate within 0-3 hours of the USA time zones, enabling smooth daily standups, instant feedback, and faster decision-making.
2. Cultural compatibility and collaboration
Latin America shares close cultural affinities with the U.S., which helps reduce friction and build seamless partnerships. With widespread English proficiency (notable in Argentina, Costa Rica, Colombia), teams can communicate easily, reducing instances of misunderstanding and miscommunication.
3. Access to skilled, bilingual talent
Latin America produces a large and technically adept talent pool. It’s estimated that Mexico graduates over 130,000 engineers annually. Mexico and Brazil combined produce over 600,000 software engineering graduates annually. Additionally, major hubs like Costa Rica, Colombia, Argentina, and Brazil are increasingly turning out professionals trained in STEM disciplines, fluent in English, and experienced in modern technologies like AI and DevOps.
4. Competitive labour and operational costs
Nearshoring to Latin America can deliver significant savings on labour vs. U.S.-based teams due to overall lower labour costs. Savings extend beyond salaries, with lower operational expenses, favourable exchange rates, and reduced travel costs further enhancing ROI.
Regional spotlight: Key LATAM nearshoring hubs
Let’s highlight the leading Latin America nearshoring destinations, each with its own unique advantages. Whether you’re considering manufacturing, IT, or service-centred operations, understanding country-specific strengths will guide your company in making smart expansion choices.
Mexico
- Geographic and trade advantage: Shares a border with the U.S. and benefits from USMCA (United States-Mexico-Canada Agreement), ensuring smoother logistics and tariff-free access
- Robust industrial ecosystem: Has specialised clusters in autos, aerospace (Queretaro aerospace hub), and electronics. The region’s IT services (“Silicon Valley of Latin America”: Guadalajara) also rank among the world’s top electronics exporters.
- Large, bilingual talent pool: Produces over 130,000 engineering and technical graduates annually
- Cost-effective operations: Labour rates and operational costs are significantly lower than in the U.S.
- Resilient and growing infrastructure: Foreign direct investment from the United States alone reached a stock of approximately USD 207 billion in 2022.
Colombia and Brazil
Colombia:
- Second-largest English-speaking workforce in LATAM (approximately 2 million speakers), making it a popular site for BPO, fintech, and tech services.
- Competitive labour costs paired with increasing government support and urban connectivity make Colombia a rising nearshore destination.
Brazil:
- The region’s largest economy with a massive talent pool in tech hubs like Sao Paulo and Rio.
- The IT sector has seen an almost 24% increase in job opportunities since 2020, and a remarkable 12.3% growth after 2021—resulting in $1.6 billion GDP, the largest in Latin America and the Caribbean area.
- While wages and complexity are higher, Brazil offers scale and access to huge domestic markets.
Argentina and Costa Rica
Argentina:
- Exceptionally well-educated and creative workforce, with high English proficiency and expertise in STEM fields.
- Cost-effective operations supported by tax incentives and special economic zones aimed at foreign investment.
- Cultural affinity with North America and a strong remote-working culture centred in Buenos Aires and Cordoba.
Costa Rica:
- A stable, business-friendly environment with high political and legal certainty.
- Skilled IT workforce (around 45,000 tech specialists) in major IT hubs like San Jose, Heredia, Alajuela, and Cartago
- The workforce has high English fluency, with nearshore-grade education infrastructure.
- Operational costs are below U.S. levels, with excellent time-zone alignment and government-backed tech parks and tax incentives.
Nearshoring as a solution to critical business challenges
Shifting operations to Latin America can specifically address the major challenges faced by U.S. companies, ranging from soaring costs in Asia to compliance headaches in distant markets.
Escalating costs and complexity in Asia
Offshoring to Asian hubs may seem cost-effective at first, but there are many hidden expenses that often erode the savings (such as high turnover, travel costs, and logistical complexity).
For example: India’s shortage of “A-team” personnel for overnight shifts drives up labour costs, while very long-haul flights can exceed U.S. $10,000 each. By contrast, nearshoring to Latin America offers similar cost reductions without these hidden burdens, delivering more transparent, streamlined operations.
Delayed delivery due to time zone gaps
Time zone mismatches in Asia (10-13 hours apart) slow response times and delay project milestones. A recent study found delivery delays for distant sourcing rose by 21 days between 2018-2024, resulting in a 7.3% drop in output and a 1.8% price increase. In contrast, Latin America’s nearshoring locations enable real-time collaborations, rapid turnaround, and smoother workflows.
Hiring and retention struggles in the U.S.
The tight U.S. talent market is driving up wages and increasing turnover, especially in tech roles. Nearshoring to Latin America provides access to motivated, well-trained professionals with lower salary expectations, with countries like Colombia and Argentina offering strong STEM talent, bilingualism, and much more stable recruitment pipelines.
Compliance risks in foreign markets
Operating in distant markets can expose companies to unfamiliar regulatory environments, IP theft, and data protection issues. Latin American nations tend to be legally aligned with U.S. and EU standards, making compliance safer and simpler. Nearshoring, however, reduces legal surprises, misclassification risks, and data-privacy challenges.
How Employer of Record solutions enable fast, compliant entry into LATAM
Expanding into Latin America can be daunting, especially when navigating foreign labour laws, payroll systems, tax regulations, and contracts can quickly derail even the most enthusiastic growth plans. This is where Employer of Record (EoR) solutions come in. Let’s walk through what EoRs do and as well as the benefits they provide.
What is an EoR and what does it do?
An EoR is a licensed local entity that officially employs staff on behalf of a foreign company. Instead of setting up a branch or subsidiary, the U.S. firm contracts with the EoR, who handles:
- Employment contracts, local labour regulations, and statutory benefits
- Payroll, withholding taxes, social contributions and reporting
- Termination, labour disputes, and HR advice
This means companies can hire talent in LATAM without establishing legal entities or deep local infrastructure.
Simplifying compliance and payroll management
If a business decides to partner with an EoR in Latin America, it will ensure full compliance with local labour, tax, and benefits laws. EoRs process payroll, statutory deductions, and benefits automatically, reducing legal risk and administrative burden. For firms expanding across LATAM, EoRs remove complexity as staff can be onboarded under local contracts without worrying about classification or local filings.
Speed to market: Onboard in days, not months
One of the hallmarks of EoR services is speed. With the groundwork already in place, companies can typically begin hiring within days, compared to the months required to set up their own subsidiary. This allows rapid deployment of sales, engineering or support teams exactly when and where they’re needed.
Case example: How CXC helped a U.S. firm expand in LATAM
A U.S.-based startup in the tech sector leveraged CXC Global’s EoR solution to fast-track its entry into multiple Latin American markets. Without having set up legal entities, the company was able to:
- Rapidly hire and onboard remote developers and product talent in Mexico
- Ensure full compliance with local employment laws in Mexico
- Scale operations smoothly with CXC handling payroll, tax, and statutory obligations
This flexible EoR model enabled the firm to tap into high-quality talent while focusing entirely on product growth. Overall, it helped cut expansion timelines from months to weeks.
Nearshoring to LATAM as a smart growth strategy
As businesses navigate rising costs, labour shortages, and global supply chain pressures, nearshoring to Latin America presents a forward-looking solution. LATAM offers strategic advantages that are hard to ignore.
Of course, making the strategic move to invest in nearshoring to LATAM is just one piece of the puzzle. Actually making it happen is another—and this piece often comes with challenges and obstacles, especially for U.S. companies doing it for the first time.
Overall, U.S. companies can fast-track entry, stay fully compliant, and scale with confidence (without the burden of entity setup or regulatory risk) by partnering with trusted EoR service providers. Partnering with an Employer of Record (EOR) not only makes this possible but it also makes the process smooth and seamless. U.S. companies can focus on strategic moves while EoRs focus on the administrative tasks and all the nuts and bolts behind the scenes. CXC has over thirty years of experience and expertise helping U.S. companies scale in various regions worldwide. We are passionate about helping businesses grow with ease.
Contact us today and start your nearshoring strategy right for smart and sustainable growth!
About CXC
At CXC, we want to help you grow your business with flexible, contingent talent. But we also understand that managing a contingent workforce can be complicated, costly and time-consuming. Through our MSP solution, we can help you to fulfil all of your contingent hiring needs, including temp employees, independent contractors and SOW workers. And if your needs change? No problem. Our flexible solution is designed to scale up and down to match our clients’ requirements.
