The clear blue skies once shining on Colombia’s tech industry have disappeared.
In spite of the optimism generated by a post-COVID acceleration in the sector’s exports and overall revenue, a combination of economic fears for 2023 and the arrival of a President which leans heavily to the left have brought a sense of uneasiness amongst the country’s tech entrepreneurs, both national and foreign.
For Fedesoft –the organization which represents Colombia’s tech industry at a national level– Colombian tech has little to fear. On the contrary; it’s officials trust that the sector will do well enough even under the augured economic pressures and perceived political threats.
“We know our industry is a priority”, assured Diana Guerrero, Director of Fedesoft’s innovation center, known as Cenisoft, in an interview with NSAM. “Our affiliates have a sense of tranquility, but not thanks to us, necessarily. It’s due to the reality that [tech] entrepreneurs know well.”
Estuvimos reunidos con la Ministra TIC, @SandramUrrutia, para
mostrarle por qué Colombia es Origen de Software, a través de cifras, datos de categorización, talento, exportación de la industria y el potencial tan grande de nuestro sector.🚀 @Ministerio_TIC pic.twitter.com/IKNGLEvqvB
— Fedesoft Colombia (@FedesoftCol) October 19, 2022
The data seems to prove Guerrero’s point. Colombia’s software exports amounted to US$258 million between January and August of 2022, a year-over-year jump of 262%, according to Procolombia, the country’s investment promotion agency (IPA). Plus, the industry’s size represents nearly 3% of Colombia’s US$314.5 billion GDP.
Yet, the fog remains, accompanied by the waves of alarm coming from the national and international press, economic analysts and the industry itself.
“Individually, some entrepreneurs do feel uneasy about [president Gustavo Petro’s] tax reform and other topics with no direct relation with our industry,” Guerrero recognized. “Nevertheless, those are personal opinions; they don’t represent specific companies or the whole industry.”
A Tougher Sell
Fedesoft’s been around for a while. The organization has existed as an industry lobby for over 30 years, consolidating under its current name on the brink of the new millennium. All the years have allowed it to build a solid communication infrastructure which reaches to the depths and heights of government, industry and academia.
Such a communications apparatus permits Fedesoft to remain in constant contact with public officials, company decision makers and school directors. That, plus the high hopes that Colombia has for tech, have made the communications game relatively easy.
“For this industry in particular, opening [communication] channels is pretty easy”, said Guerrero. “Everyone within the government, within several sorts of organizations, want to know what our industry is contributing to the country and how they can take advantage to craft policy on a national scale.”
Keeping in contact might be easy, but delivering a message of certainty has grown more difficult for the lobby group.
There’s no shortage of alarming predictions for the global economy in 2023. The World Bank and other international institutions expect Colombia’s GDP to be among the best-performing in the region for 2022, with the bank itself predicting 8% growth. Yet, the outlook for 2023 sees a sharp deceleration that would bring the country’s GDP growth to a pace of 1.3%, according to the World Bank.
To the economic fears one must add the political ones. Colombians elected former Bogota mayor Gustavo Petro as President. Petro is the first openly leftist politician in the country’s history to hold the top office, a fact that has local and foreign investors worried. It doesn’t help that the President envisions big economic and political changes for the country.
Both factors have eroded the high levels of confidence of Colombia’s tech sector, making Fedesoft’s battle an uphill one. Even though there’s no panic in the air, the group has noticed an uptick in uncertainty among investors. Some companies with operations in Colombia have already opted to launch second offices elsewhere, just in case. It’s like they’re advancing a “Plan B”, said Guerrero, without specifying names.
“I wouldn’t say there was panic or fear, but there’s uncertainty. There were companies that decided to open second offices in other countries,” she told NSAM. “They began taking decisions, but based mostly on uncertainty, not outright panic.”
While the economic fears can be eased by industry data witnessed by investors firsthand, the political angle represents a bigger challenge for Fedesoft. The organization breathes with some comfort due to the fact that the changes brought by Petro’s agenda are affecting other sectors (agriculture and mining, especially) mostly.
“There were companies that decided to open second offices in other countries. They began taking decisions, but based mostly on uncertainty, not outright panic”—Diana Guerrero, Cenisoft’s Executive Director
Nevertheless, tech cannot consider itself entirely safe. Petro’s recently approved tax reform, for example, raised alarm with the industry due to a lowering in the ceiling for tax deductions awarded to companies who pay for their employees’ educations. Considering the importance of upskilling for the industry, especially in the face of talent shortages, Fedesoft had to speak out.
According to Fedesoft’s numbers, Colombia’s programmer and software engineer shortage has reached 70,000. By 2025, that number is expected to grow to 165,000.
The bill passed Congress and was signed into law in late 2022.
Listen To the Right People
Like many populist world leaders, Gustavo Petro has a considerably loose communications strategy, especially in social media.
Colombia’s President has garnered his fair share of controversy for comments and tuits apparently made in the heat of the moment. Whether he’s weighing in on matters of Colombian diplomacy, national industrial policy or world events, there’s no shortage of criticism for Petro’s public opinions.
The story has grown relatively common in Latin America, lately. Mexico’s AMLO, Brazil’s former president Jair Bolsonaro and El Salvador’s Nayib Bukele became infamous for their public communications strategies.
“The technical side of this government has shown itself more aligned with industry”—Diana Guerrero, Cenisoft’s Executive Director
Though a loose-cannon Head of State can be a headache for industry lobbies working hard to draw foreign investment, Fedesoft assures that the secret lies in knowing who to listen to.
In Colombia’s case, although Petro is the President, Fedesoft has learned to cultivate a closer relationship with the ministries relevant to the industry. According to Guerrero, such ministries have given the organization –and the industry in general– a “candid reception”, which contrasts sharply with the President’s message for sectors such as mining and oil.
“The technical side of this government has shown itself more aligned with industry,” Guerrero explained.
The political and economic troubles will harden Fedesoft’s self-imposed goals for the next couple years.
Under the guidance of what it has termed as its “Big, Ambitious Goal” (known as MEGA), the organization aims to, by 2025, increase the tech industry’s share of Colombia’s GDP to 5%; affiliate 80% of the nation’s companies (measured in total industry revenue, not number of companies); and position Colombia as a “world class tech provider”.
Although the country’s tech sector is doing good, Fedesoft officials seem to have their doubts about their MEGA goals. The industry’s share of national GDP, for example, is near 3%. In theory, that’s halfway there. Nevertheless, Diana Guerrero herself answered with caution when asked about her outlook for the 5% goal.
“We’ve reached the midpoint, yes, but we don’t know how things will turn out in matters of [economic] growth,” she explained.
The outlook looks challenging for the rest of the goals too. Fedesoft estimates that there are around 14,000 tech providers in the country. Only 600 are affiliated to the organization, though those include some of the top players in the industry.
When it comes to being a world class exporter of tech services, Colombia faces steep competition in the region alone. It is the third biggest tech exporter in Latin America, lagging behind the other two regional giants: Brazil and Mexico. And other countries, like Chile, are not far behind in the race.
In a few words: Fedesoft will have to get even busier. Nevertheless, from what Guerrero told NSAM, it looks as if the organization’s hopes for the industry remain high, even when its players might suffer the spell of the fog every now and then.