Things have been far from easy for Argentina; the early 2000s is an era where the majority of Argentinians with the country suffering from inflation. It’s crazy to think that in the early parts of the 20th century Argentina was one of the world’s richest countries to unfortunately going back to a developing nation.
Ironically, having such a dysfunctional economy has, in fact, been great for startups. Due to strict economic controls, many in the Latin American country have learned to look for alternatives and find ways of dodging these controls. From an innovation point of view, this has been a huge positive.
Lino Barañao, Argentina’s minister for science, technology and innovation, mentioned in an FT article last year that: “There is a rebel spirit in Argentina,” arguing that this has been instilled by waves of ambitious immigrants from Europe and beyond. This has given rise to a diverse and creative population that has benefited from an excellent public education system, as well as some 40 universities and more than 30 research centres. (FT, September 2016)
The tech market in Argentina is quite small. However, it has installed more of an international mindset compared with the likes of Brazil and Mexico where they just focus on servicing their domestic markets. Despite the tech market being small, four out of the six largest unicorns on the continent hail from Argentina. All four are worth over a billion dollars.
Argentinian Unicorns – who are they?
Globant: Globant develops software products for British and American companies. They aim to improve “digital journeys” – this will help clients engage and communicate better with their customers via using innovative tech such as big data. Their first client was Lastminute.com and three years ago, they were the first company from the region to be listed on the New York Stock Exchange.
MercadoLibre: Founded in the late 90’s,MercadoLibre is like the Latin American equivalent of Ebay. It’s the continent’s most visited e-commerce site and is known in many other Latin countries. It’s also the only e-commerce site from South America to be listed on the Nasdaq. MercadoLibre is one of the biggest companies in Argentina with a market capitalisation of more than $6.5bn. In addition, they match 30 million buyers and sellers per annum, which is about 5 per cent of the Argentinian population. Products range from a variety of goods from cars to computers. MercadoLibre’s chief executive, Marcos Galperín, reckons this number is very small and in years to come, as more South Americans gain access to the internet, sales growth will continue to increase.
Despegar.com: The largest online travel agent in South America, Despegar.com not only operates in Argentina but also in the States and in Spain. So how does the site work? In a nutshell, the site caters to both business and leisure travellers who are looking plane tickets, hotel bookings, etc. Its expansion into the U.S. and Spanish markets respectively gained interest from Expedia, who now have a 16 percent stake in the company. Chief executive and co-founder Roberto Souviron plans to launch a Nasdaq IPO this year.
OLX: The online classified company was originally an idea from a conversation during a hiking trip on Argentina’s Perito Moreno glacier. The company’s initials come from “online exchange” and connects people who are looking at buying/selling second-hand items, plus job and house hunters. The company used an interesting approach. When they started, they targeted foreign markets first, ones that were perceived as having fast growth potential, such as India, Brazil, and Kenya. They returned to the Argentinian market seven years later. The online exchange platform is now used in more than 45 countries worldwide (mostly in emerging economies) and has over 300 million site visitors every month.
Argentina Tech: Still a long way to go
These are a just a few examples of unicorns from a developing country that have embraced economic hardship and have looked at innovative methods in order to champion business.
Since taking over from the Kirchner dynasty, president Mauricio Macri has removed long-standing currency controls, eased reserve and deposit requirements for overseas investors and cut a deal with its foreign creditors (Reuters, October 2016) and a result many expats are thinking about doing business back home now many investors are not put off like they once were.
However, the challenges that remain for the Latin American country, according to many analysts, focus on the fact that it still lacks market liquidity and it is not simply big enough for a multinational just to operate alone in Argentina. Moreover, there are still many challenges ahead, including tax issues and obtaining financing from the banks. On the flipside, with regards to startups, a number of multinationals have, in recent years, outsourced thousands of positions to South America’s third largest economy.
Well-known companies such as JPMorgan & Chase Co. for example, have transferred research, accounting and call centre jobs in English and Spanish to Argentina. Having an abundance of bilingual graduates is definitely an advantage for Argentina’s tech future, as mentioned in a Reuters article, they have made it a hub for “near-shoring”, in which companies outsource to Latin America rather than to distant locations like India and the Philippines. Others have also been attracted to graduates’ engineering skills.