Chile
Chile is emerging as an important outsourcing nation, with a sourcing workforce of more than 20,000. More than twenty percent of its exports go to the U.S., and another nineteen percent are targeted for Europe. An estimated USD $120 million worth of global services have been invested since 2001. Chile has the second highest research and development sector in the region after Brazil; it received the highest rank in EIU's "IT industry Competitiveness Index 2009." According to the Economist Intelligence Unit (EIU), Chile placed 15th among the future leaders in global offshoring report.
Chile's road to outsourcing started when it lost its bid to Costa Rica for a $300 million semiconductor assembly for Intel. This loss encouraged its business community to attract foreign investment by offering financial incentives, shifting focus to higher-value services, boosting the nation’s outsourcing revenue to $840 million. Chile is closing current gaps by building on its Global Services Cluster through InvestChile program, which establishes its investment platform for foreign companies.
Chile has the most stable government and currency in the Latin America, and its open immigration policies process work permits within a week, allowing global talents to easily enter its borders. It also has a well-developed telecom infrastructure, alluring numerous U.S.- and Europe-based companies including: Zurich Financial Services, Unilever, JPMorgan, Citigroup, Yahoo!, Shell, General Electric, and many others.
Country overview
Chile ranks third in Latin America for the quality of life in a survey conducted by Mercer Human Resources Consulting in 2008. It offers international schools, high quality-low cost housing, and some of the best medical facilities in the region. Chile’s primary language is Spanish - just eight percent of the college-educated population speaks English.
Chile’s economy is dynamic and market-oriented with stable policies, robust financial institutions, and high expansion of foreign trade. It had a reputation for being a role model of economic reform during the early 1990s, and has the most bilateral or regional trade agreements of any nation. It also has taxation agreements that allow businesses to export their services without paying taxes in both countries, and in 2004 Chile signed a free trade agreement with the U.S. Chile has a GDP of USD $199 billion, or $260 billion using its purchasing power parity.
In recent years Chile has been at a standstill due to tight monetary policies and severe drought although annual economic growth later stabilized at 4 percent. Its private and public investments have maintained high level, made possible by strategic financing of its $4 billion stimulus package.
Source: CIA Factbook, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Source: World Bank, 2009
Cost competitiveness
Employee compensation
Chile offers competitive salary rates. IT project management employees earn an average salary of $48,000 or 47% of their US counterparts. BPO resources offer greater savings. Junior BPO resources with less than a year of experience earn just 23% and skilled resources average 27% of US rates. Operations management roles do not offer any savings, and in fact nearly double that of similar positions in the US earning 198% of US salaries.
Real estate
Office occupancy cost in the country is very competitive. It ranks fifth among the countries with the lowest cost in office space, and Chile follows South Africa, Indonesia, Thailand, and the Philippines. According to CBRE and its 2011 office occupancy, top quality real estate rates in urban Santiago run USD $34.66 square foot annually.
Chile offers numerous financial incentives to outsourcing businesses throughout all the stages of its development, particularly pre-investment, project launch, human resources, real estate leases, and fixed assets. Its corporate tax is 17 percent, less than the other European economies in the world. It also offers the privileged tax status and bilateral double taxation agreements.
Taxes
Chile's corporate tax rate is seventeen percent, much lower than competing outsourcing locations. Its indirect tax rate is nineteen percent, and the SMB effective tax is twenty-five.
Source: PayScale, SourcingLine, February 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: PayScale, Sourcingline, March 2010
Source: CB Richard Ellis, Colliers International, SourcingLine, March 2010
Source: KPMG, October 2009
Source: KPMG, October 2009
Source: Doing Business (World Bank), 2010
Real Estate : Office occupancy costs are for Santiago.
Resources and skills
Chile’s workforce is small with an estimated 7.6 million compared to China (780 million), India (478.3 million), the U.S. (154.9 million), and Brazil (103.6 million). In spite of this Chile strategically focuses on quality rather than by bulk, focusing on individual effort such as IT innovation, product development and research.
One of Chile’s primary challenges is to increase its skilled workforce from an estimated 40,000 to a more competitive 100,000 professionals. Chile is gearing towards greater IT specialization in the future, encouraging its students to take up technical degrees in communications, accounting, and information science. Additionally, increased implementation of English education would be a major advantage to Chile’s rise in the global sourcing community.
Outsourcing sector
Chile has one of the smallest IT outsourcing sectors in the world, with exports worth just USD $99 million, compared to China (USD $6 billion), Czech Republic (USD $1.3 billion), or Hungary (USD $1 billion). Its miscellaneous business services such as offshore BPO legal services, research and development, management consulting, and accounting are valued at just USD $770 million combined.
Education
Chile’s educational system, particularly its IT courses, is unique by being more detailed and of longer duration than most Latin American nations. Typically, its educational system includes a 5-year degree in conjunction with a 2-4 year technical degree. Consequently, Chile produces a well-educated population with an adult literacy rating that is higher than the Philippines, China, Brazil, Malaysia, and Mexico. Chile’s universities graduate the most Science and Technology students annually in the region, ranking sixth globally.
Language
Chile has low English fluency but the government intends to change this through programs targeting English language education. Initiatives and incentives, such as the English Opens Doors Program, scholarships for employees who want to study English, and English language grants for IT workers are intended to increase its population's competency with the language.
Source: CIA Factbook, 2009
Source: IMF, 2008
Source: IMF, 2008
Source: UNESCO, 2009
Source: UNESCO, 2009
Source: OECD PISA, 2006
Source: OECD PISA, 2006
Source: OECD PISA, 2006
Source: UNESCO, 2009
Source: UNESCO, NASSCOM, SourcingLine, 2009
Source: UNESCO, 2009
Source: International Telecommunications Union, 2009
Source: International Telecommunications Union, 2009
Business and economic environment
Chile's economic success is a direct result of its willingness to focus its investments in its BPO and ITO industries. Its program InvestChile has given tech-businesses financial incentives and grants to attract foreign investment. The government supports companies by taking them through the process of establishing a businesses, extending this aid by setting up tours, helping find real estate, hiring local workforce personnel and subsidizing efforts to import workers in other parts of the world.
Economic competitiveness and stability
Chile is highly competitive economically, ranking fifth in the world after the U.S., Canada, Malaysia, Israel, and China. Its macroeconomic stability, including government surplus/deficit, inflation, national savings rate, and government debt is very high, scoring a 5.5 index.
Chile's financial sector offers better economic stability when compared other nations in the region Its lending and regulatory strategies have worked well in buffering the effects of the global financial crisis.
Infrastructure
Chile's quality of roads is high, ranking second only to the U.S. It also ranks high in the quality of electric supply.
The infrastructure for sourcing IT services is well developed. Chilean companies are aware of IT outsourcing's benefits, and service providers have kept up with companies’ demands by providing vital solutions that integrate different technologies. These benefits however, are obtained almost exclusively to large enterprises. Small and medium businesses experience greater difficulty obtaining provider services due to cost limited specialized offers.
Corruption
According to Transparency International, Chile ranks second among the top countries with the best corruption perceptions with a 7.2. index. The country also has the most secure contractual agreements in Latin America, despite constant accusations that the ruling coalition is corrupt.
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: The Global Competitiveness Report, 2009
Source: International Telecommunications Union, 2009
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Transparency International, 2009
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: Doing Business (World Bank), 2010
Source: The Global Competitiveness Report, 2009
Source: BSE-IDC Global Software Piracy Study, 2009