South America Lures Silicon Valley Tech Startups

kathryn by Kathryn Hawkins on March 7, 2012
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Silicon Valley continues to be a hotbed for technology innovation, but if you want to start a new tech company without spending a fortune on office space and salaries, and you speak decent Spanish, consider heading south — as in, South America. Various nations on the Latin American continent are now actively seeking to attract entrepreneurs.

Here are a few reasons to consider launching your next startup in South America:

It’s cheaper to live and run a business there. Big businesses have long taken advantage of the lower labor costs, cheaper cost of living, and lower corporate tax rates in many South American countries. (Chile’s 18.5 percent rate is one of the world’s lowest.) Depending on your circumstances, you may not need to pay any U.S. tax under the foreign earned-income exclusion. Speak with an accountant who’s experienced with expatriation about your specific situation before making a final decision.

South American countries are actively seeking tech entrepreneurs. Many South American governments recognize the value of innovative startup companies — and are investing resources accordingly. Colombian President Juan Manuel Santos has allocated $30 million USD for investments in tech companies. And the Brazilian government’s Financing Agency for Projects and Studies (FINEP) is investing heavily in startups: Eduardo Sette Camara, manager of its VC program, told Time Magazine in 2010 that 15 percent of the country’s residents are involved in a startup.

Governments may fund your enterprise. Several Latin American countries have launched business incubation programs to attract new talent. For instance, the Chilean government-sponsored Start-Up Chile program offers $40,000 in seed funding (not an equity loan) to select foreign entrepreneurs who agree to operate in the country for at least six months. Junar, an online data dashboard founded by Javier Pajaro and Diego May, was one of the program’s first participants in 2010. Pajaro and May took advantage of the seed funding to hire local staff to help expand Junar’s technology. In December 2010, they closed a $1.2 million funding round, and Junar now has a development office in Chile and a data creation team in Costa Rica, with plans to open a Silicon Valley office soon. Numerous U.S.-based entrepreneurs have also participated: Caltech grad George Cadena entered the program to launch a solar-panel startup called Aeterna Sol. Find details about program enrollment and graduate case studies at the website.

Take the time to research your destination: If you’re able to scout out a South American city that provides access to the technology and infrastructure you need to build your company and the lifestyle you want, making the hop across the border could be a valuable business decision.

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