The Latin America opportunity: What are the benefits of nearshoring?

Latin America’s economic growth is at an exciting point, presenting an array of opportunities to those who understand the market.?One of these headline trends is the rise in nearshoring, following an international reconfiguration of supply chains.

So, what does it mean, and what are the benefits to Latin America – and to companies?

• Nearshoring means outsourcing business processes and manufacturing to nearby countries. As the US aims to depend less on Asian supply chains, largely because of tensions with China, this trend looks set to intensify.
• Nearshoring unlocks significant benefits for Latin America. In 2022, the Inter-American Development Bank estimated that nearshoring could add $78 billion a year to Latin American and Caribbean exports of goods and services.
• Historically, the main players involved in Latin American nearshoring have been large industrials companies operating in sectors such as gas, petrochemicals, and automotive.
• However, that profile is changing as mid-sized businesses involved in technology, pharmaceuticals, and customer service take advantage of the trend.

As more industries are beginning to unlock the benefits that nearshoring offers, one sector that we are particularly excited by is digital services. This thriving sector is playing an increasingly important role in Latin America’s economy, with an expected compound annual growth rate of 18% between 2022 and 2026[1].

We have invested in four of the region’s digital service firms – CI&T, Sophos, Neoris, and Encora – and are working closely in partnership with them to help them unlock the opportunities that nearshoring offers.

"This sector is positively impacted by nearshoring and in each one of those companies, we have very capable teams to deliver high-quality services globally, at very good prices to their clients." - Brenno Raiko, Managing Director, S?o Paulo office

At Encora, CEO Venu Raghavan foresaw opportunities to grow its business in key markets when Advent acquired a majority stake in December 2021. Based in Scottsdale, Arizona, the firm has more than 40 offices and innovation labs across the US, as well as in Mexico, Costa Rica, Brazil, Colombia, Peru, and Bolivia.

Our latest report unpacks the rise of nearshoring and other important trends in the region, providing an essential guide on Latin America’s bright future ahead.

Download it now to explore our insights further.

Advent has operated in Latin America since the early 1990s with bases in Mexico City, S?o Paulo, and Bogotá. In this time, we have established a 40-strong team of investment professionals who have proudly contributed to the expansion of many great businesses across the region.

With trends such as nearshoring fueling business growth, we look forward to helping even more companies realize the opportunity this incredible region presents.

[1] International Data Corporation (IDC), Worldwide Digital Transformation Spending Guide, V1 2022 and Sper Market Research | IACT2347