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Beyond MercadoLibre: Argentina's Tech Sector Could Be Poised For A Breakout

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Beyond MercadoLibre: Argentina's Tech Sector Could Be Poised For A Breakout
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Whether you like Argentina’s center-right-wing President Mauricio Macri or not, one thing cannot be argued: His policies are market friendly.

This is one of the things that motivated Diego Saez Gil to take his "connected luggage" startup and move it from New York to Argentina’s capital city, Buenos Aires, more than doubling his staff in the process. "We started thinking about the talent we needed to scale the company, and at the same time we saw the new government… That was the catalyst to say Argentina seems a really good place to go,” he told Reuters in a phone interview.

Saez Gil is not the first one to pick Argentina. Other companies like Accenture Plc (NYSE: ACN), Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG), JPMorgan Chase & Co. (NYSE: JPM) and Citigroup Inc (NYSE: C) have also established sizable operations in the country, seeking to take advantage of the highly educated population and relatively friendly labor costs.

Related Link: Exclusive: Leading Latin American Economist Shares Insights On Politics, Bonds, Mining & Stocks

While highly criticized by many, Macri’s policies have helped reopen the country’s access to international debt markets, and incentivized entrepreneurship by making it easier to incorporate businesses.

Seeking to reduce Argentina’s economic reliance on commodities, Macri has been aiming at the tech sector as a new source for growth. In fact, his administration expects to get investment in the tech sector to 1.5 percent of the gross domestic product.

“While pleased with the new government's first steps, Saez Gil and other Argentine business owners such as Martin Migoya, co-founder and chief technology officer of services provider Globant, say Argentina still lacks the kind of market liquidity and depth needed to list their shares there,” Dion Rabouin wrote for Reuters.

"Argentina is a good market, but it's not big enough to think about a multinational company just serving Argentina… So by definition, entrepreneurs in Argentina need to think in a global way. That's not very common and we need to foster that,” Migoya added.

Related Link: Fitch: Argentina's Green Energy Program Lowers Project Risks

"We're not expecting the effort in technology from Argentina to come entirely from the public sector," Finance Minister Alfonso Prat-Gay concluded. "It's about deregulation, opening up the conditions for local and foreign players to be involved. So I think it's wrong to just look at the budget and conclude that our priorities are not there."

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Disclosure: Javier Hasse holds no interest in any of the securities or entities mentioned above.

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