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Chile


· Total Workforce Size: 7.4 million
· English Proficiency: Very Low
· GNI Per Capita: $9,150
· S&P’s Currency Risk Rating: AA
· Regional Wage Savings Rank: 16 / 19
· Cultural Compatibility Rank: 15 / 19
· Technological Readiness: 11 / 19
· AT Kearney Global Services Location Index: 10 / 50     
· Ease of Doing Business rank: 43 / 183
· Economist’s 2010 Democracy Index: 34 / 167 (Flawed Democracy)
· Transparency International’s Corruption Perception Index: ranked 21st of 178(just under the US at 20th)
· Selected as one of 8 LATAM countries to make the Gartner Top 30 Offshore Services Destinations

The Chilean outsourcing industry continues to thrive for many reasons.  For starters, Chile is among the most politically stable countries in the region.  Sebastian Pinera, Chile’s recently elected right-wing president, shows a continued interest in improving their already strong R&D, committing another 1% of GDP to R&D in the next year. Chile also has private organizations to support the industry.  In fact, it's the first country in Latin America to be offered full membership into OECD, an elite organization of developed nations. The country also benefits from the Innovation Forum, a nonprofit established by Chile's private sector that promotes economic development through competitive innovation in business, education, and government.  Other incentives include fair trade agreements with the US, strong KPO and ITO services, and cities like Viña del Mar, Valparaíso and Concepción, which offer lower living costs than Santiago but similar infrastructure accessibility.

Chile’s labor costs are on par with those in Mexico and Brazil, averaging around $2800 per month for an experienced software programmer or product developer and $1000 per month for a bilingual call center rep.  According to Nicolo Gligo, Executive Director USA for the Chilean Economic Development Agency (CORFO), attractive “infrastructure costs and access to local talent” make long-term investments in Chile very lucrative.  One drawback is that a mere 8% of Chile’s technical graduates speak English, putting Chile a step behind more English-friendly countries like Mexico.  And although it’s a favorable time zone, it is at least a 10 hour flight from the major US cities. 



Students Protest for Education Reform in Chile

On Friday, August 12, Chilean officials ordered an end to protests, stating that "Chile is not going to be governed from the streets".  Fed up with civil disorder in Santiago, authorities are urging student protest leaders to seek out official avenues for education reform.  Protests against Chile's privatized education system have been carrying on for months, with Chilean college and high school students demanding reform to an education system that leaves many in crippling debt upon graduation.  Students have, for the most part, refrained from violence in favor of more creative demonstrations, some of which involved superhero outfits and Lady Gaga costumes.  On June 6, with “pasión por la educación”, thousands participated in a kissing protest, and on June 24, three thousand students organized a flash mob to "Thriller", declaring that "the present [education] system is rotten and dead."  Last week, violence escalated as students demanded airtime on national television and the government ceased authorization of the organized marches.  Riot police have resorted to tear gas and water cannons in an attempt to maintain "business as usual", and 873 arrests were made after the first day of rioting.  
     
The video below gives a solid overview of the events that have transpired:

Back in January 2010, Nearshore Americas named Santiago the safest and least corrupt capital city in Latin America, and Chile is the most politically sound country in the region.  This serves as a reminder of the risk of doing business in Latin America, where unpredictable social and political environments can distract, or worse, endanger employees and operations.

Bogotá Losing Competitiveness in IT Industry



Due to the recent lack of investment in the IT sector, Bogotá is no longer as competitive as other cities in Latin America.  Colombia's ICT minister, Diego Molano, said that the city has dropped from 5th place to 9th in competitveness among Colombian cities alone, and this lack of competitiveness has caused the Bogotá's internet penetration rate to drop to 12.78%.  Colombia as a whole demonstrates a weakness in internet penetration.  To compare, internet penetration is 63.5% in Buenos Aires, Argentina, 48% in Santiago, Chile, and 29% in Lima, Peru.  Molano calls for increased IT investment, which will in turn increase competitveness, create jobs, and reduce poverty.

Ankur Prakash Discusses TCS Latin America

As part of the Thought Leaders in Cloud Computing Series, Ankur Prakash, VP and COO of Tata Consulting Services Latin America, gives insight into the Latin American outsourcing market. To give a background on TCS Latin America, they began operations in Mexico City in 2003, and have since expanded into Ecuador, Colombia, Peru, Chile, Argentina. Brazil, and Uruguay.


Prakash gives his take on the talent in Latin America, the strategy behind seeking first tier cities, and recriuting from the Latin American labor pool.  When asked about the cost advantage of the region, he replied, "As for the Latin American cost advantage, cost arbitrage, I don’t think that any company that works just on cost arbitrage in Latin America can provide any kind of value additional and advantage to local customers."  He also explains that because of the vastly different economies that exist in the region, it is difficult to generalize on cost savings.  Indeed, companies will find most regional generalizations unhelpful when examining Latin America.
Read the full interview here.

Chile Invests in IT Future


IT spending was at $2 billion last year and is projected to increase to $3.4 billion by 2014.  Their IT growth of 5.7% makes them the LATAM leader, ahead of Argentina at 4.7% and Brazil at 4.5%.  Students are choosing tech careers over business careers, with majors in electric engineering, software studies, and computer science.

Chile Wants to Borrow US Entrepreneurs 
for $40,000

In an attempt to build a stronger infrastructure, Chile will offer grants to any entrepreneurs willing to work on a project within their borders.  While this project intends to make Chile “more than just an outsourcing hub”, their movement toward innovation will make Chile a recognizable competitor in the IT outsourcing market.

A.T. Kearney Global Services Location Index

Popular nearshoring destinations are gaining some ground according to AT Kearney’s Global Services Location Index.  After an 18% wage decrease in Mexico, the country made its way to the top of the Latin American countries and ranked 6th overall.  Chile, dropping from number 8 in the 2009 index, ranked 10th this year.  Why did Chile drop?  According to AT Kearney’s website, the rankings are assigned based on many factors including skilled labor, inflation, language capabilities, and infrastructure modernization.  In the case of Chile, their resilience in the wake of a global economic downturn allowed the price of wages to remain stable.  Relative to other outsourcing hubs, this made Chile’s cost of labor less competitive, but in the midst of global political instability, should the Global Services Index penalize a country for keeping their wages stable? 
The internet shut-down in Egypt had disastrous effects for BPO/ ITO centers reliant on a robust internet to succeed, and this turmoil occurred immediately after AT Kearney’s rankings placed Egypt 4th in the Location Index.  Granted this type of problem is truly unpredictable, but how can companies account for political risk when choosing an outsourcing destination? In addition to consulting sources such as AT Kearney, invest in a political risk analysis of countries where critical business and IT processes are being supported. Compare the risks of occurrences, such as the Egypt situation, with the cost-savings and business benefits of using these locations.  Saving 30% from your bottom line won’t provide the same utility if you risk not running your business properly for long periods of time.





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