Back to BlogScaling tech teams in Latin America: What founders need to know
Software founders are operating in a tighter funding market. Since 2022, rounds have taken longer to close. Early cheques have been smaller. Teams must stretch their cash and time. You need to deliver features faster with a lean team while proving real and growing customer demand.
To keep costs in check without losing speed, many now build distributed teams, with Latin America (LATAM) standing out for its talent, time-zone fit, and remote-ready culture.
Cross-border hiring, however, brings real risks—misclassification, payroll mistakes, and security gaps can wipe out savings and slow down delivery if not done properly. However, implementing a compliant and straightforward operating model from day one keeps founders out of trouble.
This article explains why LATAM is attractive, what can go wrong when hiring developers directly, and how to scale responsibly. You’ll get practical steps to build culture, protect IP and data, manage payments, and recognise when a freelance role has technically become employment (even if you didn’t do it on purpose).
The aim is to help you move fast without legal, operational, or cultural missteps—and to show where an Employer of Record (EoR) and trusted partners can reduce risk.
Why LATAM is a hotspot for tech talent
As mentioned earlier, fast-growing software companies are turning to Latin America (LATAM) to build engineering and product teams. If you’re unsure why, this section covers what you need to know. Additionally, before you choose cities or contracts, it’s worth seeing why the region has become a first-choice option.
Competitive advantages of LATAM
Before founders decide where to get talent, they think about these four: talent quality, cost, real-time collaboration, and speed to ramp. Latin America (LATAM) performs well across all four factors, which is why it’s now a first-choice market for distributed software teams. Here’s what that means in practice.
- Lower costs without compromising capability. You’ll generally pay less than in the US or Western Europe. Yet, you can still hire senior engineers who design solutions, lead sprints, and deliver features end-to-end. That means you can add capacity without blowing the budget.
- STEM pipelines and self-improvers. Universities in Mexico, Brazil, Argentina, Colombia, and Chile feed a steady stream of computer science and engineering graduates. Many individuals have also learned English, contributed to open-source, or worked with global teams already. Bootcamps and community groups supplement formal education, which matters when you need practical and job-ready skills.
- Time zone alignment.Overlapping working hours reduces friction. Stand-ups, code reviews, and product workshops can happen live, not at midnight somewhere. For US-based companies, most of LATAM sits within one to four hours. For Europe, there’s still a functional overlap for daily syncs.
- Cultural fit for product work. Engineers in LATAM hubs already use modern ways of working: Git for code, automated tests and releases, cloud platforms, and short sprints. They communicate clearly, raise issues early, and make decisions with product and design. Most take ownership of outcomes—not just tasks—so features move from idea to release faster.
Key countries to consider
While LATAM is a strong option for building engineering and product teams, each country has its own talent depth, costs, language profile, and rules. Here’s a brief guide to the main hubs and what to consider.
Mexico
Why it’s strong: Large talent pool, good English in major cities, and excellent time zone alignment with the US. Mexico City, Guadalajara, and Monterrey host mature tech communities.
Watch-outs:Outsourcing and labour rules are stricter than they appear at first glance, and enforcement has increased. If you engage long-term, full-time contributors as “freelancers,” you may end up creating an employment relationship in practice and risk penalties. Build with compliance in mind from day one.
Brazil
Why it’s strong: Massive scale and breadth of skills, including senior back-end, data, and mobile engineers. São Paulo, Rio de Janeiro, Belo Horizonte, and Porto Alegre are rich talent centres.
Watch-outs:Labour courts in Brazil take worker protections seriously. If someone works under your direction and schedule, a contractor label will not shield you. Taxes and benefits are complex; payroll mistakes become costly fast.
Colombia
Why it’s strong: Strong English in tech hubs like Bogotá and Medellín, competitive rates, and an active startup ecosystem.
Watch-outs: If you tell a contractor when to work, make them work only for you, and manage them like staff, the law is likely to treat them as an employee. Calling them a “freelancer” in the contract won’t protect you.
Argentina
Why it’s strong:Deep bench of senior engineers and designers, great product sense, and strong open-source participation.
Watch-outs: High inflation and currency rules make pay tricky. Decide up front whether to pay in USD or pesos, set a clear conversion rule, use a reliable local payout method, and pay on time. Show the conversion rate and any fees so there are no surprises.
Consider other countries like Chile, Peru, and Uruguay, which have smaller but reliable pockets of talent and stable business environments. Pilot in one location, validate fit, then expand—matching your needs to each country’s strengths while planning for local rules.
Legal and logistical challenges of hiring developers directly
LATAM is a strong place to hire, but how you hire matters. Many teams start with freelancers to move fast and avoid setting up entities, but as seen in the watch-outs earlier, once a “freelancer” works full-time under your direction, the law may treat them as an employee. That brings plenty of risks that can multiply across several countries.
Let’s take a closer look.
Misclassification Risks
Misclassification happens when a worker is treated as an independent contractor but, in practice, functions like an employee. It’s judged by how the work runs, not what the contract says. If you set daily hours, require exclusivity, issue a company kit, run performance reviews, or slot them into your teams long term, you’re likely in employee territory.
- Back pay and benefits: Authorities may order you to make up unpaid holidays, bonuses, social contributions, and severance, often across several years.
- Fines and penalties: You may face penalties for avoiding payroll obligations, plus liabilities for underpaid taxes.
- Reputational and operational damage: Disputes drain leadership time and can stall hiring. Word travels fast in tight tech communities.
It’s not only a legal problem; it can slow product delivery, too. If you have to unwind non-compliant setups, you risk losing knowledge and momentum. Investors also check classification during due diligence, so issues here can delay a round or affect valuation.
Tax, payroll, and statutory compliance
Even when the contract model is correct, admin errors can bite. Watch for the following:
- Tax and social charges: Each country has its own rules on what must be withheld, when, and by whom. If you under-withhold or pay the wrong agency, you may face audits, penalties, and back payments. If you over-withhold or misapply rules, you risk losing the trust of your team.
- Mandatory benefits and holidays: Paid holidays, 13th-month or year-end bonuses, and other statutory benefits vary by country. Don’t assume “contractor” status lets you skip everything, as missing required items can lead to claims and fines. Even where benefits aren’t mandatory, they’re often expected, and cutting them hurts retention.
- Payroll timing and accuracy:Paying late or unevenly leads to complaints and people leaving. Teams work best when pay is on time and clearly shown on the payslip. Additionally, if you’re paying in several countries, spreadsheets and one-off transfers break down because each country has different bank cut-offs, holidays, currencies, and tax rules—small manual errors quickly lead to missed paydays and extra fees.
Building a cohesive remote team culture
Compliance is only half the job. Even if you successfully comply with the legalities, a remote team can still miss targets if its operations are unclear. Scaling isn’t just headcount—you need shared habits for communication, decisions, and handovers across time zones. The points below show how to set simple rules that keep delivery steady and relationships strong across borders.
Communication and reliability
Remote teams are reliable when expectations are clear and check-ins are regular. If you’re seeing communication gaps with LATAM freelancers, use the steps below to set simple rules and keep work moving.
- Set simple team rules. Agree on meeting times, reply windows for urgent vs non-urgent messages, and where decisions live (tickets or docs). That way, no one guesses what to do next, and you avoid needless chasing.
- Write first. Use short design notes, task templates, and a release checklist. Shared facts up front cut back-and-forth and prevent avoidable mistakes.
- Make handovers tight. For time-zone gaps, post a daily “Done / Blocked / Next” note. Work keeps moving while others are offline, and blockers don’t linger unnoticed.
- Track delivery, not screen time. Watch how long tasks take, how quickly reviews happen, and how often changes are rolled back. These signals surface slowdowns early and help keep quality high.
- Keep language plain. Use clear English, skip idioms, and add a screenshot or brief clip when helpful. This helps people get your message the first time, avoiding confusion and extra work.
Data security and IP protection
When building a remote team culture, security habits are just as important as communication and trust. Your team needs simple daily habits for protecting your work. You need to know who owns the work, where to store code and designs, and who can see or copy them. These clear practices keep customers safe and prevent last-minute problems that slow down projects across countries.
Do the following to ensure strong security:
- Have contracts that hold up. Use NDAs (non-disclosure agreements—promises to keep company info private) and IP assignment (intellectual property terms that make the work belong to your company). Set plain rules on device use, file handling, and any open-source work.
- Limit access. Give people only the tools and data they need. Review permissions monthly and remove access the same day they leave. This cuts leaks and mistakes.
- Strong sign-in. Use company accounts with two-step sign-in (a password plus a one-time code). Additionally, never share logins to prevent easy account takeovers.
- Secure network and devices. Require encrypted laptops, up-to-date software, and basic antivirus. Use a VPN (virtual private network—a secure tunnel for internet traffic) for internal systems. This keeps data safe on home or public Wi-Fi.
- Protect code and data. Keep work in approved repos and drives with version history. Don’t use real customer data when testing. Store passwords and keys in a password manager or secure tool, instead of writing them directly in your code files or documents. This prevents accidental sharing of sensitive information.
- Always do clean off-boarding. When team members quit or get fired, immediately revoke their access, collect or wipe their devices, and confirm they’ve handed over all code and files. Use a short checklist to make sure nothing is missed.
Retaining top talent in a competitive market
You’ve got your team working well; now you need to keep your best people. Remember that in a busy freelance market, good developers have lots of options and can switch jobs fast. Here are the key things that actually keep people around.
- Pay on time, every time. As mentioned above, people can lose trust the second you mess up their pay. Tell them exactly when they’ll get paid, explain any currency conversion and fees, and stick to it—no surprises.
- Give them stability during the ongoing work. If someone’s going to be around long-term, set them up properly (like employment through an Employer of Record) so benefits, holidays, and protections are clear. People stay when the basics feel secure.
- Show them how they can grow. Even in small teams, let people take ownership of different things, pair them with mentors, and tie reviews and raises to clear goals. When people see they’re growing, they won’t want to leave.
- Help new hires get started right. Assign someone to help them out and give them clear goals for their first 30 days (learn the basics), 60 days (handle real tasks), and 90 days (work independently). When new people succeed early, they don’t quit right away.
- Protect their time and sanity. Set clear priorities, bunch meetings together, and don’t ping people at night or weekends unless it’s truly urgent. Burnout drives people away—a steady pace keeps them happy.
The importance of vetting and background checks
Keeping people starts even before you hire them, as you need to pick people you can actually trust. After all, when you hire the wrong people, they either quit quickly or you have to fire them, which wastes time and money. Good vetting helps you find people who will stick around and do great work.
Here’s what to focus on:
- Check their skills and experience. Do proper technical interviews and give them real tasks to work on. Look at their code samples and any open-source work they’ve done. Talk to people who have worked with them before.
- Verify who they are and if they can work legally. Make sure they are who they say they are, that they legally work for you, and that they have any certifications your projects need.
- Check their security habits. Make sure their devices are secure, they’re willing to follow your security rules, and they’re comfortable with safe ways of working.
- Try them out on real work. Give short, paid trial projects on actual tasks to see how they work with others and take initiative. Be fair about it and make the goals clear.
This doesn’t just help you hire better people—it shows your whole team that you only accept quality and trustworthy workers.
How to scale responsibly and effectively
Once you’ve built solid practices for keeping your best people, the next challenge is growing your team without disrupting your existing processes. Scaling a team quickly is one thing; doing it without breaking laws or slowing delivery is another. The key is to grow in a way that keeps your hiring, pay, and day-to-day work steady as more people join.
Partnering with an Employer of Record (EoR)
An EoR is a company that officially employs your workers in their home country while you manage their day-to-day work. They handle all the legal employment requirements—payroll, taxes, benefits, contracts—so you don’t have to become an expert in every country’s labour laws.
An EoR is your safest option to stay compliant with local laws. Use an EoR when you’re hiring someone long-term and full-time, when you need to offer proper benefits to compete for good talent, or when local rules make contractor arrangements too risky. For genuine short-term project work with clear deliverables, contracting might still work, but ensure you set it up properly.
Leveraging talent management platforms
Managing a distributed team requires tools that make your life easier, not more complicated. Modern platforms help you hire, onboard, and pay people with fewer mistakes and less paperwork.
- Look for platforms that handle the whole hiring process with structured scoring systems and coding tests that work for your tech stack.
- For onboarding, you want automatic contract generation using local templates, digital signatures, and document collection that gathers everything you need, such as IDs, tax forms, and banking details, without chasing people for paperwork. The platform should also handle time tracking, leave requests, and performance reviews in one place.
- The real value comes from integration. Your hiring platform should connect to your payroll system, communication tools, and other software to eliminate the need for manual data entry.
- Good platforms also give you dashboards that flag problems early—expiring contracts, missing documents, or unusual spending patterns—which helps you stay organised and avoid surprises as you grow.
Payment strategies and currency management
To ensure timely payments and manage currency risks, focus on method, timing, and clear communication.
- Choose payment methods based on speed, cost, and reliability for each country. Bank transfers work well for employees paid through an EoR, while digital payment platforms often suit contractors better.
- Offer currency options when practical. Some workers prefer USD for stability, others need local currency for their obligations. In markets with currency controls, local currency may be your only choice.
- Set up predictable payment schedules and stick to them religiously. Publish exact pay dates, plan for local holidays and banking delays, and build in cut-off times for timesheets and approvals. Be completely transparent about fees and deductions: show gross pay, what gets taken out, and the final amount. If you have significant payroll in volatile currencies, consider simple hedging tools to protect against significant swings.
Recognising when a freelancer relationship becomes employment
Many teams start with contractors for speed, but roles can evolve over time. Watch for these warning signs that a freelancer relationship has shifted toward de facto employment:
- Control over time and methods: You set daily hours, approve time off, and dictate how the work is done, not just what gets delivered.
- Integration into the hierarchy: The person attends internal performance reviews, manages their staff, and uses company email like any other employee.
- Exclusivity and permanence: The engagement is open-ended, the contractor works only for you, and there’s no real project deliverable—just ongoing duties.
- Provisioned tools and benefits: You supply equipment, cover recurring expenses like internet, and offer benefits or allowances similar to employees.
When these signals appear, review the working arrangement immediately. Shift the person to proper employment via an EoR where appropriate. It’s better to correct course proactively than defend a misclassification case later.
It’s time to make LATAM your next powerhouse
Scaling a tech team in Latin America is a smart move when done strategically. You get access to skilled engineers in aligned time zones at competitive rates. But you also enter a complex web of laws and expectations that don’t forgive guesswork. Success comes down to a few key choices: classify roles correctly, pay accurately and on time, protect your data, and build a culture that supports quality work across borders.
Founders who treat LATAM as a long-term talent strategy win more often than those chasing short-term cost savings. They plan by country, choose the right employment model for each role, and set up clean processes that scale. Most importantly, they build retention through respect: fair pay, clear growth paths, and boundaries that prevent burnout.
If you want to avoid legal, operational, and cultural missteps while moving at startup speed, an Employer of Record like us at CXC can remove much of the risk and admin burden. We combine in-country expertise across 100+ jurisdictions with compliant employment, payroll, and benefits, so you can focus on building great products.
Talk to CXC to review your current plans, identify risks, and design a practical path to scale your engineering teams faster, safer, and with confidence.
