Mexico Leads AI Expansion in Latin America Amid Challenges

Between 2018 and 2024, Mexico experienced a nearly tenfold increase in artificial intelligence (AI) companies, solidifying its position as a digital transformation leader in Latin America, according to a report by Endeavor and Santander.

Mexico has emerged as a powerhouse in the artificial intelligence (AI) sector, outpacing its Latin American neighbors in the rapid expansion of AI companies. According to an entrepreneurship incubator Endeavor and Santander bank report, the number of AI-related companies in Mexico skyrocketed by 965% from 34 in 2018 to 362 in 2024. This explosive growth underscores Mexico’s pivotal role in the region’s digital transformation, placing it ahead of other Latin American nations like Brazil, Chile, Colombia, and Argentina.

The report, La era de la IA en México, highlights how Mexico’s burgeoning AI industry has attracted significant investment and created thousands of jobs, establishing the country as a central hub for AI innovation. The rise of AI in Mexico is not only reshaping its economy but also positioning it as a leader in the global AI landscape.

Fueling Mexico’s AI Ecosystem

One of the critical factors driving Mexico’s AI boom has been the substantial investment influx into the sector. According to the Endeavor and Santander report, AI companies in Mexico attracted nearly $640 million in investments during 2022 and 2023 alone. These investments have played a crucial role in generating over 11,273 jobs within the industry and setting the stage for future growth, with an average expected revenue of more than $1.3 million per company.

Mexico City, in particular, has become a magnet for AI investments, hosting 49% of the country’s AI startups (around 180 companies). Other prominent regions include Jalisco, which accounts for 10% of AI companies, and Nuevo León with 9%. These areas have become focal points for AI-driven innovation, contributing to Mexico’s reputation as a hotbed for cutting-edge technology.

Mexico’s most prominent AI segments include Business Intelligence and analytics, which makes up 32% of the market; Machine Learning, 23%; and Robotic Process Automation (RPA) and robotics, 13%. These sectors transform logistics, manufacturing, retail, financial services, e-commerce, software development, advertising, and information technology.

Challenges and Corrections in the AI Investment Landscape

Despite the impressive growth in Mexico’s AI sector, the industry has faced challenges, particularly in the investment landscape. Vincent Speranza, Managing Director of Endeavor Mexico, noted that 2021 saw an “excess” of investment opportunities fueled by financial markets, with 18 rounds of funding totaling over $728 million. However, the following years experienced a correction, with investments dropping to $152 million in 2023.

Speranza explained that the pandemic-induced economic conditions in 2021 led to an unprecedented surge in venture capital investments, equivalent to a decade’s worth of capital. A necessary adjustment followed this spike as the market recalibrated to more sustainable levels in 2022 and 2023. While investor appetite remains strong, the funding criteria have become more stringent, leading to more complex and financially sound ventures with higher profitability potential.

The report also highlighted a significant barrier to AI adoption in Mexico: the lack of understanding and specific use cases within certain industries. Three out of five companies reported not adopting AI because they didn’t know how to use it or couldn’t find applicable scenarios in their fields. Moreover, six out of ten companies indicated that their workforce was not adequately prepared to work with AI, pointing to a skills gap that needs addressing.

The Future of AI in Mexico

As AI continues to gain traction in Mexico, the perception of its potential remains primarily positive. 58% of companies express favorable views on AI—significantly higher than the 31% reported in the United States. This reflects the growing acceptance and recognition of AI’s transformative power within Mexican society and the business community.

However, several challenges persist. Mexican companies developing AI solutions identified cybersecurity concerns, regulatory compliance issues, and the inaccuracy of AI-generated results as significant obstacles. Additionally, the shortage of specialized talent, particularly AI engineers, software engineers, and data scientists, remains a significant barrier to further growth in the sector.

Laura Cruz, Deputy General Director of Strategy, Innovation, and Customer Experience at Santander Mexico, emphasized the importance of AI for the future of society and the economy. She noted that while the AI industry is thriving, a detailed analysis of the Mexican ecosystem is still needed to ensure that the country continues to lead in AI innovation and digital transformation.

Strengthening AI’s Foundation in Mexico

Mexico’s rise as a leader in AI is a testament to its growing technological capabilities and potential to shape the future of digital transformation in Latin America. However, the path forward requires addressing the challenges that accompany rapid growth. As the report by Endeavor and Santander highlights, there is a pressing need for continued investment in AI education and skills development to bridge the talent gap and ensure that the workforce is equipped to handle the demands of the evolving industry.

Moreover, as AI increasingly integrates into various sectors, ensuring robust cybersecurity measures and regulatory frameworks will be crucial to maintaining trust and fostering innovation. Companies must also focus on developing accurate and reliable AI systems to overcome concerns about the technology’s precision and effectiveness.

As Mexico continues to attract international investment and expand its AI ecosystem, the country is poised to play a central role in the global AI landscape. With the right strategies and support, Mexico can maintain its leadership position in Latin America and become a significant player on the world stage. The success of Mexico’s AI industry will depend on its ability to navigate the challenges ahead and capitalize on the opportunities that come with being at the forefront of digital innovation.

Also read: Mexico’s Economic Future Tied to Increasing Women’s Workforce Participation

While Mexico has made remarkable strides in the AI sector, the journey is far from over. The country’s ability to sustain and build upon its current momentum will determine its future as a global AI leader. By continuing to foster innovation, invest in talent, and address the industry’s challenges, Mexico can secure its place as a powerhouse in artificial intelligence.