Puerto Rican Director of Economic Development Talks Outsourcing

Not all offshore locations for business are outside the U.S. Juan Aguayo of the Puerto Rican Department of Economic Development and Commerce spoke with AVweb's Russ Niles about the benefits of setting up shop in the U.S. territory.

Here are some of the key benefits that Aguayo mentioned:

• Puerto Rico provides cash grants and tax incentives to start up a business.
• Just as if you were operating in the US, PR has similar regulations, IP Protection, and legal requirements. 
• For companies interested in leasing commercial space in Puerto Rico provides funding to revamp office buildings.
• Puerto Rico offers highly trained laborers for engineer and design and parts and manufacturing. Puerto Rico’s School of Engineering Mayaguez is one of the best in the nation, attracting recruiters from companies like NASA and Lockheed Martin.  

Listen to the interview with AVweb here.

Nearshore vs. Offshore

Mexico vs. Brazil

The conventional U.S. wisdom today is that Mexico is a problem, and Brazil is an opportunity.  The reality is that Mexico is less of the bloody, drug ridden mess that the media would lead the US to believe, and Brazil faces some serious issues that shouldn't be dismissed.   For Brazil, underlying economic weaknesses like its huge income gap, high inflation, and a higher crime rate than Mexico (25 per 1000,000 homicide rate to Mexico's 14 to 100,000) threaten to undermine the country's recent economic boom. And too much negative attention surrounding Mexico's crime rates draws attention away from the country's positive economic growth and political reforms.  Shannon O'Neil, Latin American Studies Fellow, gives a fair take on these two popular nearshore destinations.   

Read it here from CFR.

Will Peru's New President Stifle Economic Growth?

On June 5, Ollanta Humala, an ex-army lieutenant with no political background, defeated Keiko Fujimori in the Peruvian presidential race. 

The election makes for an interesting story, and his victory comes partly from strategy and partly from tremendous luck... since the centrist vote split evenly between three candidates, Humala's only competition in the run-off election was Ms. Fujimori.  Some may recall that her father, Alberto Fujimori, set in place the free market reforms that caused Peru's economic boom but also ruled as a corrupt autocrat.  He is now serving 25 years in prison for human rights abuses and corrupt acts committed during his time as president.  Because of this, Humala got votes from citizens that may have been fundamentally opposed to his political stance but couldn't bring themselves to support the Fujimori family.  To appeal to the masses, Humala shifted his policies from left to center and switched his allegiances from Venezuelan nationalist Hugo Chavez to Brazil's former social democrat president Luiz Inacio Lula da Silva.  He even brought in political advisers from Brazil’s ruling Workers’ Party. But in the campaign for the first round of the election, on April 10th, he was still proposing a “nationalist” economic policy and pledged to unpick contracts that have brought private investment in mining, gas and infrastructure.  Needless to say, Peruvians are wondering where their new president's loyalties truly lie.  The uncertainty surrounding the President Elect's policy intentions has created quite a mess for Peru.  The day after the election, Lima's stock market dropped 12.5%, the largest daily fall in the country's history, and the shares of many companies with stock in Peru posted significant losses as well.  Most of the losses were quickly recuperated, but the potential changes to Peru's financial and social policies have people worried that the country's economic boom might be coming to an end.


Read it here at The Economist.

Venezuela Expands its Network Infrastructure with Fiber Optic Cabling

The Call Center industry in Venezeula is taking steps to become more competitive through the expansion of Venezuela's fiber optic cabling network.  Venezuelan mobile telephony operator Digitel is currently working to deploy 200km of fiber optic cabling to expand its network infrastructure, local press reported.  Fiber optic cabling revolutionizes telephone and internet connectivity, increasing the reliability of long distance calls and stabilizing broadband connections.    

With this expansion, the telco's fiber optic network will reach 1,000km, linking capital Caracas with the cities of Valencia, Barquisimeto and Maracaibo.

In the expansion plan's second phase, the operator expects to deploy additional fiber optic to reach 3,000km, according to papers.

Digitel is controlled by telecoms group Telvenco, which acquired 100% of the company in May 2006.

Other mobile operators in the country are Movistar, owned by Spanish telecoms giant Telefónica (NYSE: TEF), and Movilnet, the mobile arm of state-run telecoms operator Cantv.

Read it at Business News Americas.

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 competitiveness 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 competitiveness, create jobs, and reduce poverty.

Read it at Business News Americas.

Feature City: Aguascalientes, Mexico

When thinking about doing business in Mexico, cities like Mexico City, Guadalajara and Monterrey immediately come to mind, but what of Aquascalientes?  The state is home to 60 IT firms, including Hildebrando and Softrek, and has a low crime rate, modern infrastructure, and a growing talent pool. The workforce in the area is skilled and career-oriented, keeping attrition rates low, all for a lower cost than many other areas in Mexico.  The problem?  Lower salaries and a lack of outdoor activities and night life are keeping young people away from the city.  This means that English language services are lacking.

Ann Harts performed a market study of the city, and here's what she found:

·         The city is planned around three beltway loops allowing for ease of transportation and access 

·         Electricity ring around city equals 100% blackout free

·         7 fiber optic rings cover the city, providing 100% coverage

·         A lack of available real estate, but the government has not released any quantifiable data on this issue

·         The city and streets are very clean with a strong police presence

·         One of the lowest (if not the lowest) crime rates in Mexico

·         As of 2007 it is mandatory to teach English in the schools 

·         English reading and writing skills are good, but spoken is average

·         25+ educational institutions (colleges, universities) with 35,000 plus students

·         Eight museums

·         Four live performance theaters

·         Cultural centers

·         55 movie theaters and an Imax screen

Of the focus group respondents:

·         86% have either lived in or recently visited the US

·         100% have internet

·         100% see English as the language of commerce and critical for future success 

·         100% viewed call center work as a career opportunity  

Read it here from Nearshore Americas.

Mexico Trucking Deal to Lift Tariffs on US Products

US and Mexico officials Wednesday resolved a cross-border long haul trucking trucking dispute that will life punitive tariffs on about $2.4 billion in US products. The agreement ends a ban on Mexican trucks entering the US that lasted nearly two decades. Within ten days, Mexico will cut punitive customs duties in half and remove all duties by the end of the summer. 

The agreement will bolster trade across the border for manufacturing and agricultural goods while also increasing safety regulations. Mexico trucks must now carry electronic monitoring systems that track truck routes and hours of service, pass safety reviews, drug tests, and assessments of their English-language and US traffic sign-reading skill.  

Read it here from The Seattle Times

Argentina Set Back over Bond Default

Argentina suffered a setback over its $100 billion bond default in 2001 when the New York State Court of Appeals ruled that the interest from the defaulted bonds will still be owed.  The court also ruled that the interest rates could reasonably be set at 101% annually given the country's default history and need for capital.  


To make matters worse, the UK Supreme Court ruled earlier that Argentina doesn't have debt immunity in Britain and that Argentina's state immunity won't prevent an offshore trade from using British courts to enforce claims over the 2001 default.  The decision reverses a ruling from last year and permits an affiliate of Elliot Associates LP to seivze Argentina's assets in Britain using a $284 million US court judgement.
As shown by the graph below, Argentina's economy bounced back rather quickly from the default, but the country is still paying for the economic disaster a decade later.

Read an article on the UK court ruling here.

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 recruiting 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.