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Expanding into Latin America offers startups a lot of potential. However, it also comes with its fair share of administrative tasks that startups might find too overwhelming to manage. We’re talking about complex legal, compliance, and hiring challenges.
The LATAM opportunity for startup expansion
Latin America (LATAM) is quickly emerging as one of the most attractive frontiers for startup expansion. As global markets tighten and competition intensifies, startups are looking beyond saturated regions to scale their operations, tap into new customer bases, and access affordable, high-quality talent. LATAM checks all these boxes and more.
Here’s why LATAM stands out as a strategic choice for global-minded startups:
- Access to skilled talent: Mexico produced over 175,000 STEM graduates back in 2023 and Brazil pumps out over 95,000 STEM graduates per year, making the two countries leaders in talent production. Tech hubs such as São Paulo, Belo Horizonte, and Curitiba (just to name a few) are also home to deep pools of developers, engineers, and digital professions.
- Rising digital ecosystems: The region saw a USD $15.7 billion investment in startups in 2021, a record that underscores the momentum of its digital economy. Platforms like Nubank, Rappi, and Kavak are redefining what LATAM startups can achieve on a global scale.
- Regional scalability: While each country has unique characteristics, many LATAM markets share cultural, linguistic, and business similarities that make cross-border growth more achievable.
- Cost-effective operations: Lower operational and labour costs allow startups to stretch their resources without compromising on quality. For instance, hiring a software developer in LATAM starts at $20 per hour (saving North American and EU businesses up to 50%), whereas rates in the US and UK often begin at $80 per hour for talent with comparable expertise.
- Time zone alignment: LATAM’s proximity to North America makes for easier collaboration and real-time communication for teams working across borders. For example, most LATAM countries operate within GMT-3 to GMT-6, offering near-perfect overlap with US and Canadian working hours.
Barriers startups face when entering LATAM markets
While the LATAM region holds promise, startups often encounter significant hurdles when attempting to establish a local presence. These barriers can slow down momentum, inflate costs, and expose young companies to unintended legal and operational risk. This is especially true if they’re entering without local expertise or infrastructure.
Regulatory and legal complexity
Each LATAM country operates under its own distinct legal framework, with unique labour costs, tax obligations, and employee protection laws. What qualifies as standard employment in one country may breach compliance in another. For example:
- Brazil: Required extensive employee benefits, including a 13th-month salary (also known as the “Christmas bonus”) and mandatory severance payments.
- Mexico: Strict rules on subcontracting and employment classification, with heavy penalties for non-compliance.
Startups without in-country legal counsel or HR infrastructure may face:
- Compliance breaches due to misunderstanding local labour laws
- Financial penalties for incorrect employee classification
- Reputational risk or forced exit due to regulatory violations
High costs and delays in entity setup
Establishing a legal entity in LATAM is neither fast nor inexpensive. It often takes time to register a company, open a local bank account, and obtain tax identification numbers. During this period, startups are unable to hire employees legally, invoice local clients, and begin full operations.
In addition, the cost of incorporation (including legal fees, admin expenses, and minimum capital requirements) can total tens of thousands of US dollars per country. For startups aiming to stay lean, this presents a significant upfront investment. And if the expansion doesn’t succeed, winding down operations can be just complex and expensive.
So, how can you navigate and overcome these hurdles? To minimise risk and maximise your expansion opportunities, you’ll need to enlist the aid of an Employer of Record.
What is an Employer of Record (EoR)?
An Employer of Record (EoR) is a third-party service provider that legally employs talent on behalf of your company in foreign markets, without requiring you to establish a legal entity in a specific region where you want to expand.
While the EoR becomes the official employer in the eyes of local authorities, your startup retains full control over the employee’s day-to-day work, responsibilities, and performance.
This model allows startups to build compliant teams across Latin America quickly and cost-effectively, bypassing the burdens of incorporation, tax registration, and labour law navigation.
In short, an EoR serves as your operational bridge into new markets. They manage legal employment so you can focus on growth, not administrative tasks.
Core services offered by an EoR
Most EoR providers offer a comprehensive suite of back-office services that remove the friction from international hiring, including:
- Payroll management: Processing local payroll (including tax compliance and other mandated government benefits) in compliance with social security regulations.
- HR compliance: Ensuring full adherence to local labour laws, including probation periods, termination rules, and working hour restrictions.
- Employment contracts: Drafting and executing locally compliant agreements tailored to your startup’s needs.
- Benefits administration: Managing statutory and optional benefits, such as health insurance, paid leave, and retirement contributions.
- Employee onboarding: Streamlining documentation, background checks, and local legal requirements for a smooth start.
Strategic advantages of EoR for startup expansion in LATAM
For startups expanding into Latin America, time and flexibility are of the essence. EoR providers offer a strategic edge by enabling fast, compliant entry into new markets. They are able to do this without overcommitting resources or exposing the business to regulatory risk. Beyond compliance, EoRs play a vital role in hiring the right talent and building local trust.
Speed and flexibility
Startups thrive on agility. Traditional expansion models (establishing entities, navigating bureaucracy, and hiring through unfamiliar legal systems) can take months and burn precious capital. An EoR removes these barriers entirely.
With an EoR, companies can accomplish the following:
- Onboard employees in days—not months—thanks to ready-to-use infrastructure, or shifting legal presence.
- Scale teams up or down rapidly in response to market demand, funding rounds, or shifting strategy.
- Reduce expansion risk by testing new markets without permanent legal or financial commitments.
- Avoid long-term liabilities, such as office leases or fixed payroll costs, that can weigh down early-stage ventures.
Talent acquisition and retention at a local level
EoRs don’t just simplify compliance, they enhance your ability to attract and retain top local talent by ensuring your employment offer is competitive, legal, and culturally aligned.
EoRs help startups succeed locally by:
- Delivering competitive benefits packages that meet or exceed local expectations, including healthcare, leave policies, and bonuses.
- Ensuring fully compliant contracts, protecting both employer and the employee.
- Advising on cultural norms and hiring practices, helping you tailor job offers and team management to each market
For any company serious about executing a high-impact startup expansion strategy, EoRs offer not only speed and compliance, but a real competitive advantage in local talent markets.
Protecting intellectual property (IP)
One concern for globally expanding startups (particularly those in software, SaaS, or product development) is safeguarding of intellectual property. When working through an EoR, IP ownership remains with your company, not the EoR or local employees.
EoRs include robust IP assignment clauses and confidentiality agreements in employment contract, ensuring:
- Your startup legally owns all work created by local employees.
- Trade secrets, source code, and proprietary processes are protected under enforceable agreements.
- You remain full control over your innovations, even while operating across multiple jurisdictions.
How startups can launch a smart expansion strategy with an EoR
Expanding into Latin America doesn’t have to be a leap into the unknown. With an EoR, startups can roll out a well-structured, low-risk plan that balances speed with compliance.
Below is a step-by-step framework to guide a smart startup expansion strategy using an EoR partner:
1. Define your hiring need and roles
Start by clarifying what roles are essential to your LATAM expansion. Are you building a customer support team? Hiring engineers? Launching a local sales function?
Consider the following when crafting your specific hiring needs:
- What functions needs to be closer to your LATAM customers or operations
- Whether roles require regional language or cultural fluency
- How much budget you can allocate per hire, factoring in salaries and benefits
2. Select the right LATAM markets
Some LATAM countries offer better infrastructure, while others have larger talent pools or lower employment costs.
Evaluate markets based on:
- Talent availability in your target roles
- Language and cultural fit with your company
- Regulatory environment and labour costs
- Time zone alignment with your core team
Example: Mexico is popular for nearshoring talent for North America, while Colombia and Chile offer strong tech ecosystems with favourable business climates.
3. Partner with a trusted EoR provider
Once you’ve defined your roles and markets, the next step is to choose a reputable EoR partner. Look for providers with:
- Proven experience operating in your selected countries
- Transparent pricing and contract structures
- Strong legal and compliance capabilities
- Local HR support to help navigate employee expectations
A reliable EoR will handle employment contracts, tax registration, benefits, and payroll, freeing your team to focus on business growth.
4. Launch, learn and optimise
With your EoR in place, you can start onboarding employees in days. But don’t stop at launch, use the EoR partnership to continuously refine your expansion approach.
Ongoing steps may include monitoring local team performance and feedback, adjusting compensation or benefits to remain competitive, and testing additional markets or functions as your needs evolve.
Scale smarter with EoR in LATAM
For startups eyeing Latin America, the opportunity is clear, but so are the operational risks. Navigating diverse systems, managing local payroll, and setting up entities across multiple jurisdictions can drain time, capital, and focus from growth efforts.
Partnering with an EoR offers a smarter path. It enables:
- Faster market entry, with new hires onboarded in days rather than months
- Full legal compliance with local employment laws and tax requirements
- Cost control, eliminating the need for upfront investment in legal entities
- Access to top local talent, supported by culturally aligned contracts and benefits
Overall, a modern startup expansion strategy must prioritise agility, risk mitigation, and regional compromise. EoR services empower you to test markets, hire strategically, and scale with confidence without getting bogged down in red tape.
If your team is ready to explore LATAM, now is the time to assess your expansion readiness.
Consider consulting with a trusted regional provider like CXC Global—we are experienced in the art and science of helping startups enter new markets efficiently and compliantly. With us by your side, you can scale smarter and expand faster. Start your journey to scaling in Latin America by contacting us today.
