Mirroring its potential with Internet of Things (IoT), Mexico is poised to make significant strides in blockchain development, but the country is falling behind on retaining its valuable talent and innovating beyond what has already been achieved elsewhere.
“There has been a lot of interest in distributed ledger technology, but Mexico started pretty late,” said Jose A Diaz Infante, Managing Director for BFSI & Healthcare at Softtek. “Startups in particular are starting to pick up the tech, focusing mostly on research. So yes, Mexico has started developing its blockchain ecosystem, but if the adoption and development in the US and London is at a seven or eight out of ten, then Mexico is a three or a four.”
Mexico’s Blockchain Talent Ecosystem
In 2016, the global market value of blockchain was estimated at US$0.21 billion, and is projected to grow at a 61.5% CAGR to US$2.3 billion by 2021, according to Frost and Sullivan’s Top Information and Communication Technologies report. North America (Mexico included) is currently the global market leader for blockchain and has the highest market share globally.
Against that backdrop, Diaz Infante stressed that Softtek itself is working of blockchain proofs of concepts in Mexico, enabling the company to bolster the country’s blockchain talent pool by creating it from within – something, he says, is an essential task, because “the talent just isn’t there”.
“People need knowledge of the infrastructure side and how the ledgers are connected, then you look at architects or business analysts to work with the assets within the blockchain, and then you need developers to connect the dots.” he said. “Even so, this talent is difficult to find because many have gone to work for companies in the United States, where blockchain development is more advanced.”
This problem of US “brain drain” is echoed by Tata Consultancy Services (TCS), an issue that the company has its own ways of combatting.
“In Mexico the biggest challenge is local skill as the amount of people who can program and work on the architecture is relatively low,” said Arun Ramachandran, Innovation Evangelist for TCS Latin America. “There are very capable people in Mexico, but most are moving to the US. We want to reverse the tide by giving them the opportunities to grow their knowledge of blockchain at home, taking the technologically versatile people and training them to fully understand how blockchains work.”
In terms of languages, blockchain solutions can be programmed on pretty much any object-oriented platform, so the brain drain issue is not with software engineers, but with architects and people who understand the core concepts of blockchain.
Mexico in the Regional Blockchain Scope
As well as in Mexico, tech giant IBM has been extending its blockchain focus across the broader Latin America region, with additional teams in Argentina, Peru, and Brazil – the latter of which is the new home of a US$5.5 million blockchain solutions center. With this scope, the company has seen similar talent trends emerge in every geo.
“Latin America is one step behind the blockchain hype,” said Martin Hagelstrom, Blockchain Leader Latin America at IBM. “Last year it accelerated, which is both good and bad, as some of the questions being asked by customers have already been answered in other countries. There is a definite lack of skills within the region, with customers looking to implement because of hype, not because of business problems.”
Being the behemoth that it is, IBM has already been a part of blockchain advancements in other countries, so is able to suggest better use cases, explaining to customers what works and what doesn’t work. The blockchain solutions hub is also expected to play a big part in developing talent in the region, something that must be addressed for every emerging technology.
“Mexico in particular has lots of available talent that IBM is able to capture from universities,” said Hagelstrom. “For blockchain, we look for people who have skills in specific industries, or architects that can make the solutions work with that industry, be it in banking, retail or whatever.”
For Ramachanbran, it is too early to say if there is a noticeable difference between the development stages of Latin American countries.
“They are all interested in seeing how it can help them, as opposed to traditional methods,” he said. “However, interest varies across the region, with Brazil, Mexico, and Chile being the most active with blockchain.”
The Blockchain Opportunity
Globally, blockchain startups pulled in US$512 million in VC investments across 92 deals in 2017, jumping from 72 deals and US$311 in the previous year, according to KPMG’s The Pulse of Fintech report. “Numerous challenges remain from a technical standpoint,” states the report. “However, applications such as smart contracts are promising enough that VCs are plowing plenty of dollars into the space.”
These smart contracts are the cornerstone of Mexico’s blockchain opportunity, according to Softtek’s Diaz Infante.
“Government investment in Mexico was improved by the fintech law that was just passed, so Mexico has a chance to step things up on developing blockchain for smart contracts, both public and private,” he said. “The transparency these smart contracts provide will help Mexico overcome corruption and align it with more advanced blockchain developments in places like the US and London.”
Money transfers are also a huge opportunity, as cash remittances from Mexicans in the US totaled US$26.1 billion from January to November 2017, the highest ever recorded according to the central bank of Mexico. With the right blockchain solutions, the remittance fees tacked on by banks and other providers can be vastly reduced and even collected by the first innovators past the post.
For those vendors or providers that recognize this opportunity, and want to start offering blockchain solutions or services, Hagelstrom has some advice: “Start small. Build a small minimum viable product then work with agile or sprint to build out the solutions — you can learn and scale from there.”
While there are still some governance issues to address with the technology – such as a need for industry standards, scaling challenges, unsustainable energy consumption, etc. – blockchain is undeniably a game-changer, likened by some as the next major public utility, like the internet. This is a reality that Mexican IT services companies must latch onto if they are to step up and provide what the tech-hungry US market, and the local market, needs.
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