Argentina: Hotbed of GenII | Global Finance Magazine News ad

Despite the recession and economic turmoil, Argentine technology startups are leading the way in Latin America.

Few financial reports coming out of Argentina sound encouraging; The array of economic disasters that have plagued the South American country for much of the past decade can seem endless. However, Argentina continues to register as a bright spot in two important areas: sustainable entrepreneurship and the adoption of technology and innovation. This includes the current boom in generative artificial intelligence (GenAI), a market niche expected to be worth more than $110 billion by 2026, according to Statista, a German data research firm. According to Statista, Argentina currently ranks fourth in Latin America and fifth in the region in terms of overall regional capacity in the production of artificial intelligence-focused solutions.

“Argentine companies, especially startups, are at a different level of maturity than other Latin American markets,” says Pablo Gottifredi, a technology specialist, entrepreneur and former director of the Justice Department’s systems technology division. “In Brazil and Mexico, the two largest economies in the region, they are still moving forward in addressing primary market needs such as fintech, supply issues, Warp and marketplaces.” In Argentina, by contrast, the first wave of tech startups occurred 15 years before Brazil, “many companies here are already dealing with advances in AI integration and development, but integrating them into their natural flow of operations, rather than as a separate niche.”

According to Gottifredi, most large Argentine technology companies have already implemented the analysis of predictive AI models into their business process. “They were not born as local AI companies, but are using these tools in an advanced form due to their level of maturity. This is different from other, new Latin American markets, where some startups are based on artificial intelligence.”

According to Startupable.com, Argentina currently has 238 tech startups and unicorns, 20 of them AI startups, or about 8%, which is in line with other developed countries and regions. Most local AI startups are still in the pre-seed or seed stage, with several Series A funding rounds in the works. Market data compiled by KPMG and Statista show that over the past five years, across all verticals (and despite government-imposed headwinds and lack of incentives), Argentina's tech sector had roughly an output equivalent to 63% of the heavily subsidized auto industry. .

In the DeepStage segment, which covers technology startups with licensed or patented models, Argentina captures 30% of total investment in Latin America, says Gottifredi, who is also co-founder and CTO of MatchIT.

“It's huge, and that includes a lot of biotech companies,” he says, “but that doesn't mean venture capital is flowing into these companies because of their AI component or the AI ​​tools they use. Rather, investments are made because the business plan is sound, innovative and scalable.”

Educational Advantage

One of the factors favoring Argentina as a hotbed of innovation and entrepreneurship is the quality of its education system. According to the United Nations Development Program (UNDP) for the last 30 years, it has been ranked among the top 30 countries in the world and the best in Latin America. In addition, the country's numerous crises over the past few decades have produced Argentine entrepreneurs who are adaptable to economic uncertainty and know how to read the market.

“Argentina has a small domestic market, and you can’t expect your business to thrive because of misguided government policies,” says Gottifredi, “so it’s natural for local businesses to think globally—or at least in terms of perspective of regional development”. scalability from the very beginning. This contrasts with what you see in large domestic markets such as Brazil, Mexico or even the US, where startups are often born to provide a specific solution demanded by their home markets.”

Against this backdrop, startups such as Bioceres, a biotech crop company, and Satellogic, a manufacturer of Earth observation nanosatellites, are emerging. “AI is deeply ingrained in the technologies used by such companies, as well as local fintechs and retail companies,” says Gottifredi. “This is nothing new, and it would be logical for the next big technological evolution to come from countries thinking outside their borders, such as Argentina.”

Restoring market confidence

While the government's capital control policies have damaged the country's business climate, including venture capital, President Javier Miley's government's announced lifting of many such restrictions could create unique investment opportunities in Argentina despite a lack of confidence in the markets.

“Restoring market confidence may take several years, but it will happen,” predicts Gottifredi. “We've been there before and I'm optimistic that once the political-economic equation is resolved, Argentina will become very relevant in the global tech and startup space.

Now is the time for foreign investors to begin carefully mapping the market, he urges. “Seed and pre-seed tickets are significantly cheaper in Argentina than elsewhere, and among startups in Series A or B funding rounds, you can find companies that already have product-market fit and only need capital to go global.”

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