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It’s been called “Silicon Valley South” and is one of many locations to be nicknamed “the Silicon Valley of Brazil.” Although Curitiba differs from the original Valley in several key ways – less traffic, for instance, and more trees – it does share one essential similarity: a concentration of technology expertise and software development experience.

Curitiba is capital of the state of Paraná, which is home to more than 260 software companies and six software clusters. Those providers embody more than 50 areas of business intelligence and more than 30 areas of IT specialty. Clients of Curitiba include ExxonMobil, HSBC, Nokia, and Wipro. IBM, Dell, and HP were among the first international tech companies to set up operations in Curitiba.

One of those six clusters is particularly focused on taking Brazilian development skills to a global clientele. Curitiba Offshore is home to 14 software companies, providing services from R&D to application development to systems integration and infrastructure management. The Curitiba Technopark connects IT companies with R&D centers and the area’s many universities in an effort to boost collaboration and innovation. And the city’s emphasis on sustainable urban planning has helped it attract an educated group of people looking for a better quality of life.

KPMG referred to Curitiba as one of the world’s most attractive business locations, and Gartner called it one of the world’s leading IT and software destinations. Find out what’s attracting IT providers and IT buyers to this green Brazilian city in the new e-book, Curitiba, Brazil: A Higher Vision for IT Exports. You can download it here.

Choucair: People said software testing is something users do.

Testing firm’s founder overcomes skeptics and machismo with a ‘humanist’ operating  philosophy

By James Bargent

When Maria Clara Choucair founded Choucair Testing in 1999, it was the first software testing company in Colombia and one of only a handful in Latin America. The company started with a workforce of one – Maria Clara Choucair. Thirteen years later, Choucair Testing has 450 employees, branches in Medellin and Bogota and Lima, Peru, and a host of big-name clients.

Maria Clara Choucair first encountered software testing when she worked on a joint venture between software developers Ecosoft and Intuit. “What I learned from the experience,” she says, “is that we Latin Americans are very intelligent but we’re not very methodical.”

When Choucair – who is #10 on the 2011 Nearshore Americas Power 50 Ranking – decided to set up her own company in Colombia, she was met by widespread skepticism. “Testing here didn’t exist,” she says, “they told me I was crazy, they said there was no use for that because the users are the ones who test.”

What gave her the confidence to challenge that prevailing wisdom was her strong belief in the benefits of software testing. “The product was very good for society,” she says.

That type of thinking characterizes Choucair’s approach to both life and business. Choucair Testing, she says, is informed by a “humanist philosophy with ethical roots,” something that has played a key role in the development of the business by establishing trust and confidence with clients. “It’s a business philosophy. I always ask this question: What kind of friend would you like to have? Because for us, a business relationship is like a friendship.”

Despite the global financial turmoil of the last few years, Choucair has continued to grow steadily and has recently expanded into Peru.

Laborwise, Start from Zero

As pioneers of software testing in Colombia, Choucair Testing had to start from zero in developing its human capital; they not only had to fully train their workers, they also had to instill the concept of testing. Choucair’s answer to this was to design technical and personal profiles outlining exactly what level of training and personal characteristics she was looking for in any given role. From there it was a matter of the right training. “We have a method,” she says, “training and tools that help people change their state of mind.”

Today, both software testing and the IT sector in general have grown exponentially in Medellin and in Colombia, and Choucair operates in a much more competitive environment. The Colombian education system has not kept pace with business growth, the founder says, so the company now faces the dual challenges of both training and keeping the best talent. Choucair herself, however, remains philosophical. “We teach them and they go,” she says. “But I think it has also made us more competitive – it is not a bad thing”

Attrition rates are high, but Choucair says “lower than the market average.” She puts this down to creating a working environment where people enjoy their work, have good relationships with their co-workers and management, and see the potential for personal development in the company. The firm tries to achieve this through a range of strategies, from arranging education and training to perks such as meals out. They are also developing personal “projection maps,” plotting an individual’s potential for career progress.

John Jairo Gomez helps them act "more like a corporation."

Intelligence Over Macho

In late 2009, Choucair handed over day-to-day management and business strategizing to her long-time associate and former Choucair customer John Jairo Gomez, allowing her to concentrate on what she loves – software testing. Gomez has brought in a more refined, formal, and disciplined management style, which they both agree was necessary. “Because of the company’s growth,” Gomez says, “we need to behave more like a corporation.”

As a woman, Choucair’s success stands out even more in a country renowned for its culture of machismo. However, sexism has not been an issue for her. “It helps that I work in [a] technical [industry],” she says, “because in a technical market they appreciate your intelligence, your manners, and your way of working.”

The Choucair labor force is evenly split between men and women, while the management team is all women apart from Gomez. According to Choucair, this is not by design. “The only thing I care about is that they are honorable and they do a good job,” she says.

Despite the global financial turmoil of the last few years, Choucair has continued to grow steadily and has recently expanded into Peru. “[Doing business in Peru] is like a university,” Gomez says. “We have learned a lot and we have had a lot of fun doing that job … [it is] a different culture, a different way to do business”

Choucair says her attention, however, remain focused on her home city of Medellin and the IT sector’s ability to help realize the city’s potential. “When I see the comunas [the poverty stricken hillside neighborhoods of Medellin],” she says, “it is my dream to get those people out of there, because we have a lot of opportunities [in IT].”

Choucair Testing currently works in partnership with local educational institutions to help people in the comunas access those opportunities. Even so, Choucair says, more needs to be done. “The universities and the schools have to be faster in capturing these people without resources because this is an opportunity to help get them out of that hole.”

Source: Herald Tribune

Brazilians tired of answering their boss’s after-hours emails may be able to charge overtime based on a law businesses see hurting competitiveness in Latin America’s largest economy.

Using portable communications devices is equivalent to working in the office, according to legislation signed by President Dilma Rousseff last month.

The law is one more obstacle companies say they face in Brazil, where regulations mandating everything from employer- provided breakfasts to union contributions are a daily drag on efficiency bemoaned for decades as the “Custo Brasil,” or Brazil Cost.

It takes less time to set up a business in Nigeria or Mongolia than it does Brazil, according to the World Bank, which ranked it No. 126 out of 183 countries in its 2012 competitiveness study.

“It’s very worrying,” Emerson Casali, head of labor relations at the National Industry Confederation, said in a phone interview from Brasilia. “If enforced, it could have an enormous impact, a large loss of productivity.”

The law coincides with a growing concern in countries ranging from the U.S. to Germany over how to set boundaries between work and leisure in an era of virtual offices and the need for 24/7 communication. Among the companies taking steps to spare workers after-hours e-mails is Volkswagen.

The law has elicited concern because Brazilian law and judges tend to favor employees in disputes related to overtime pay, said Bruno Checchia, a Brasilia-based labor attorney for Pinheiro Neto Advogados. Already the country’s top labor court has agreed to study the law and decide how to enforce it. The Superior Labor Tribunal said it will also consider whether being on call with a mobile device in hand is considered work and subject to compensation.

“The law says working remotely is like clocking in,” Joao Oreste Dalazen, head of the court, said in a statement.

Employers are bracing for trouble. Checchia said he has fielded several calls from clients worried the law could drive their personnel costs up. That would compound the woes of Brazilian manufacturers already struggling with a strong local currency and declining global demand.

While it is too early to know if the law will have any impact on share prices, it “creates uncertainty and could impact business activity,” Joao Mauricio Rosal, chief economist with Raymond James Brasil, said by phone from Sao Paulo.

Employers could try to offset increased overtime pay by freezing or reducing salary increases, Rosal added.

Unions say the law is essential to prevent work from further encroaching on personal time.

“With the advance of technology it’s become a necessity,” Manoel Melo, secretary for labor relations at Central Unica dos Trabalhadores, the nation’s largest union confederation, said by phone from Recife. “This issue is being discussed the world over and Brazil has taken the forefront.”

A survey by Washington-based Wakefield Research for Motorola Mobility Holdings last year showed almost half of Americans say they’ve been woken at night by a call, text message or email from work.

In the United States, where managers and professionals often aren’t paid for overtime, a growing number of companies are reviewing their policies on the use of smart phones, said Eric Pelton, a partner at Kienbaum, Opperwall, Hardy and Pelton.

“There’s a lot of talk right now on how to deal with this issue,” Pelton said by phone from Birmingham, Mich. “If managers handle it smartly, they’ll avoid lawsuits.”

Companies such as Verizon Communications Inc, T-Mobile USA Inc. and Stanley Black & Decker Inc. have already been sued for unpaid overtime related to smart phone use.

“This is likely only the beginning,” Spencer Silverglate, a lawyer at Clarke Silverglate in Miami, said in a telephone interview.

Source: Bloomberg

Colombia’s peso fell for the first time in a week after the central bank said it will resume dollar purchases in a bid to ease a rally in the local currency and shore up exports.

Banco de la Republica will buy a minimum of $20 million a day in auctions for at least three months starting today in a bid to boost international reserves, according to a statement issued Feb. 3 after markets closed. The peso fell 0.2 percent to 1,787.30 per dollar from 1,784.50 on Feb. 3.

The peso has advanced 8.5 percent this year and touched a five-month high on Feb. 3 as central bankers raised thebenchmark interest rate, luring investment to the country’s fixed-income market, to cool growth and keep inflation in check. While the three-month dollar buying program may slow the peso’s gains, it’s unlikely to reverse the currency’s rally, said Juan Nicolas Garcia, a currency trader at HSBC Holdings Plc’s Colombia unit.

“The central bank’s pain threshold seems to be around 1,780,” Garcia said. The peso may weaken toward 1,800 per dollar before reversing course because “increased appetite for risk, the carry trade and Colombia’s solid growth” will fuel demand for pesos, he said.

The carry trade refers to the practice in which investors borrow funds in a country with lower borrowing costs and buy assets where interest rates are higher. Colombia’s benchmark rate is 5 percent, compared with near zero in the U.S.

Regional Efforts

Policy makers in Latin America are stepping up efforts to curb currency gains. Brazil’s central bank bought dollars in the currency forwards market on Feb. 3 for the first time since July to stem an 8.3 percent rally in the real this year.

While developing nations from Brazil to the Philippineshave been cutting borrowing costs to shore up growth amidEurope’s debt crisis, the Colombian central bank has raised rates to prevent the economy from overheating. Colombia’s gross domestic product grew 7.7 percent in the third quarter, the fastest since 2006.

“The pace of appreciation had been picking up and the central bankers were obviously ready to do something about it when that happened,” said Daniel Lozano, an analyst at Serfinco brokerage in Bogota.

Banco de la Republica said in a statement today that it’s scrapping its plan to auction dollar options whenever the peso’s 20-day moving average changes by more than 4 percent.

Unsustainable

Policy makers may buy more than $20 million daily or adopt additional currency measures should the peso strengthen beyond 1,770 per dollar, HSBC’s Garcia predicts.

Central bank President Jose Dario Uribe said in a Feb. 5 interview with newspaper El Tiempo that without recent increases in the nation’s benchmark rate, the pace of economic growth would be unsustainable.

Agriculture Minister Juan Camilo Restrepo said Jan. 31 that the rate increase will attract more foreign portfolio investment to Colombia, fueling currency gains and hurting farm exports. He called for dollar purchases to offset the trend, a sentiment echoed by flower and banana exporters.

Luis Carlos Villegas, the head of Colombia’s biggest business association, known as ANDI, criticized the central bank as being “excessively prudent” by raising rates.

Policy makers said in a statement following the rate increase that bank lending is growing, housing prices are at record highs and investors’ inflation expectations have risen.

Foreign Investment

The peso is also being buoyed by foreign direct investment in crude, mining and energy projects. Mining Minister Mauricio Cardenas said Jan. 26 that Colombia will receive about $10 billion in foreign direct investment in these industries this year, similar to 2011 levels.

The central bank ended a yearlong daily dollar purchase program on Sept. 30 after Europe’s debt crisis led investors to dump emerging market assets. No dollar options to control volatility were auctioned since Banco de la Republica announced Oct. 28 it would sell them.

The yield on the government’s 10 percent peso bonds due July 2024 rose one basis point, or 0.01 percentage point, to 7.37 percent, according to the central bank. The bond’s price fell 0.145 centavo to 120.847 centavos per peso.

Earlier today the yield fell to 7.35 percent after a Feb. 4 government report showed annual inflation slowed to 3.54 percent in January from 3.73 percent the previous month. Policy makers target inflation between 2 percent and 4 percent this year.

The central bank will probably keep raising interest rates to keep inflation in check, Barclays Capital Inc. Latin America analysts Alejandro Arreaza and Alejandro Grisanti wrote in a report today.

“Despite this benign inflation print, we still expect Banrep to continue with its monetary tightening,” Arreaza and Grisanti wrote. “We expect inflation to accelerate in coming months, driven by higher food prices and the demand pressures that are likely to start to push up core inflation.”

Santiago: Sustained vertical drive.

By Dan Berthiaume

Latin American nations make up about one-quarter of the 2012 list of Top 100 outsourcing locations compiled by global outsourcing research/advisory firm Tholons, and that is no accident. As Manuel Ravago, president for research at Tholons, explains, Latin America is an up-and-comer in the world of BPO. And more agile smaller countries might make the most of that.

“We view Latin America as the next important outsourcing destination globally,” says Ravago. “The world will soon realize Latin America can do more than speak Spanish.”

Latin America possesses several factors that give it an edge over more traditional BPO locations such as China and India, according to Ravago. “First of all, Latin America has Nearshore value due to things like time zone and general proximity, which India and China can’t compete with,” he says. “From an operational perspective those things can make a huge difference.”

Ravago also cites Latin America’s linguistic advantages, but not just in terms of Spanish. “There are a lot of other languages in Latin America,” he says. “There are pockets of many other populations, like Italian and German speakers.”

Furthermore, Ravago says outsourcing certain business processes to Latin America can help US firms better serve the rapidly expanding domestic Hispanic market, which represents the country’s fastest-growing minority group. “If a company is looking to offer Hispanic consumers customer support, can India provide it?” asks Ravago. “No. Can Latin America provide it? Yes.”

In addition, Ravago says China is still relatively focused on serving its domestic BPO market, with “nearshore” for China meaning other Asian nations such as South Korea and Japan. “Those are not markets Latin America has to compete with,” he states.

Latin American BPO Attracts India

According to Ravago, the BPO potential of Latin America is bright enough to attract the interest of many major Indian BPO providers. “A lot of Indian companies want to break into the US Hispanic market, and Latin America is a stepping stone,” he says.

There have already been a number of Indian BPO delivery centers established in Latin America, says Ravago. “They will see the wealth of skills available and move into higher-value services. The number of delivery centers and investments is set to expand in the near term.”

Costa Rica, Colombia: Strong Potential

Tholons’ report on the top Latin American global outsouring locations cites Costa Rica and Colombia in particular as showing strong growth potential. According to Tholons, Costa Rica will benefit from its skilled labor force as the global BPO market moves toward vertical-specific, high value services. Costa Rica is also trying to attract more investments in its creative services outsourcing industry.

Meanwhile, Colombia has enacted a program known as “Transformacion Productivia” which acknowledges IT-BPO as a key growth activity. This effort includes a widescale focus on more effective training and capacity-building programs for its KPO and ITO segments.

Tholons also calls out Santiago, Chile, in particular for a sustained drive to hone expertise in vertical-specific processes.

Brazil, Mexico, Argentina: Internal Risks

According to the Tholons report, three of the most established Latin American BPO provider nations – Brazil, Mexico, and Argentina, need to address internal social, economic and political risks, including inflation, to “regain lost momentum.” If these countries do not counteract internal risks, Tholons warns smaller “upstart” Latin American destinations such as Peru may capitalize on their lost market opportunity.

Ravago added further commentary on Brazil, noting that as an emerging market it offers economic opportunities on par with India and China, but saying Brazilian BPO providers must adopt a less provincial outlook. “A lot of Brazilian BPO providers are ‘eccentric in their outlook; they are not looking for Nearshore or offshore opportunities,” said Ravago.

Peru, Puerto Rico, Brazil, and Colombia drive forward with big projects

By Clayton Browne

Latin America has long been considered a laggard in terms of global infrastructure development, but that perception should be changing. Countries such as Brazil, Mexico, Chile, Peru, and Puerto Rico have all begun major long-term infrastructure projects ranging from roads to dams to telecommunications towers to airports. Infrastructure development in the areas of energy, transportation and telecommunications have seen the greatest recent growth, with estimates ranging as high as $450 billion, to be spent on infrastructure in the area between 2011 and 2015.

Up until 2009, Latin American infrastructure spending was on a rapid growth track and there were dozens of major projects planned in almost every country in the hemisphere. The global recession has put a little damper on the pace of the growth, and a number of projects have been delayed or revised, but overall the impact of the recession on infrastructure expenditures does not seem to have been as bad as feared. Several countries such as Brazil and Chile have just announced new projects and updated schedules for planned and ongoing projects in 2012 and beyond.

Public Sector vs Public-Private Initiatives

Large-scale private-public partnerships for infrastructure development have been rare in Latin America until relatively recently due to a combination of cultural and business factors. There is a deep suspicion of private involvement in large public infrastructure projects in many places in Central and South America due to the fact that graft and misappropriation of public funds has been endemic in many such projects in the past. And in some countries such as Venezuela, there is outright hostility toward private enterprises being involved at almost any level in government projects.

The other side of the coin is that historically many public sector infrastructure projects in Latin American countries have also been inefficient graft-plagued projects where a few politicians or their friends and family greatly enriched themselves at the public expense.

But all of this is changing as the 21st century gets under way, and many countries like Brazil, Chile, Puerto Rico, and Peru have crafted innovative new regulations to encourage public-private partnerships (PPPs) for infrastructural development. A few have even created quasi-governmental agencies to encourage PPPs, such as the Puerto Rico Public-Private Partnerships Authority.

That said, there are still a good number of ongoing and planned Latin American infrastructure projects such as airports that are deemed to be of sovereign interest, and are being developed solely with public funds.

Energy Infrastructure Supplanting Telecom

The development of telecommunications infrastructure has been a high priority throughout Latin America since the late 1990s, and there were more projects and more money spent on telecommunications infrastructure in Lain American countries than any other category for almost a decade. The trend continued until 2009, when investment in telecommunications declined by 37% compared to 2008, and no major new projects were undertaken.

The energy sector has seen rapid growth in the last few years in many Latin American nations, with energy infrastructure investment jumping by 127% with 43 new projects from 2008 to 2009. Brazil has been especially active in the energy sector since 2008 with two new hydroelectric plants and half a dozen major electrical transmission-related projects.

Major Projects in Selected Countries

Brazil

Brazil was one of the leading per capita infrastructure dollars to GDP spenders in the world in the 1970s and early 80s, but infrastructure expenditures dropped off significantly for the next decade or so after that. But Brazil has recently kicked off a massive campaign of new infrastructure projects of all types, dubbed the Growth Acceleration Plan. Many of these projects are being developed through the Brazilian National Development bank (BNDES), and BNDES estimates that Brazil will spend a minimum of $145 billion in the three-year period from 2010-2012. While the fact that Brazil is becoming the largest economic engine in Latin America is clearly behind most of the current surge in infrastructural development, a good bit of it is certainly related to the fact that Brazil is hosting the 2014 World Cup and the 2016 Summer Olympics.

Ongoing/Near-Future Infrastructure Projects

• Recently completed a three-year, $30 billion roads and highways improvement project.

• Almost 50 stadium, road, airport and train-related infrastructure projects slated to be finished on time for the 2014 World Cup.

• A high-speed train linking Rio de Janeiro and São Paolo due to be completed by the 2016 Olympics.

Colombia

Colombia has taken great strides in both sociopolitical and infrastructural development in the last decade or so, but it was very much needed and a great deal that remains to be done. Colombia’s current National Development Plan estimates spending $17 billion between 2010-2014 to develop the highway and railroad system, with up to half of the money coming from private funds.

Ongoing/Near-Future Infrastructure Projects

• Nearing completion of the multi-year, three-phase Ruta del Sol, a major highway project designed to connect the interior of Colombia with the Pacific Coast.

• The Central Railroad System, a project linking the two regional hub cities of Honda and Chiriguana, is under construction.

• Development of a new program to encourage the investment of private capital in infrastructure investment projects that helps link up the various parties involved, including the headquarters of the Superintendent Notary and Registrar.

Peru

Peru began a major infrastructural development push in the late 90s and continues to make steady improvements in infrastructure in the first decade of the 21st century. In Fact, the 2010 Infrascope, an index created the Economic Intelligence Unit (EIU) ranking countries by political, legal and economic policies encouraging infrastructural development, ranks Peru as the third best country in all of Latin America (behind Chile and Brazil).

Ongoing/Near-Future Infrastructure Projects

• Peru currently has over $8 billion in public infrastructure projects planned or in construction

• Several regional projects to develop areas selected in coordination with the petrochemical industry

• Long-term plan to develop the island of San Lorenzo, located 4 km off of the coast of Lima, into a “satellite city on the sea, with special areas for production or recreation with the latest technologies.”

Puerto Rico

The last couple of decades of the 20th century saw Puerto Rico make great strides to catching up to most of the rest of the U.S. in terms of public infrastructure in terms of electricity productions, roads, hospitals and so forth. However, the school system and low-income housing lagged behind and were the most pressing infrastructural needs of the island nation. Fortunately, the American Reinvestment and Recovery Act of 2009 provided a $7.2 billion stimulus funding to Puerto Rico.

According to José Basora, the Executive Director of the Puerto Rico Infrastructure Financing Authority, “The government decided to put most of the stimulus money to work in a variety of new infrastructure-related projects, and to date we have spent over 88% of the funds allotted.”

Ongoing/Near-Future Infrastructure Projects

• The Schools for the 21st Century Program has built or remodeled 103 schools throughout Puerto Rico for a total cost of $756 million. This program has improved the education facilities of over 45,000 students and 3500 teachers.

• Ongoing public and public-private weatherization and energy conservation programs that have resulted in major home or building energy-efficiency upgrades for over 15,000 homes of senior citizens and low-income families as well as 600 government and private buildings.

• PPP projects developed through the Puerto Rico Public-Private Partnerships Authority include a recent $120 million education and training initiative to which Intel contributed $12 million as seed money.

Source: Business Week

Billionaire Carlos Slim was out of context and off the mark in his criticism of a study finding a lack of competition in Mexico’s phone industry, the Organization for Economic Cooperation and Development said.

Slim told reporters yesterday that the group’s report, released earlier this week, seemed to use data “pulled out of thin air.” The 72-year-old, who controls Mexico’s largest wireless and landline-phone companies, denied the study’s claims that Mexican carriers overcharged consumers $13.4 billion a year for phone and Internet services from 2005 to 2009.

Mexico’s government, which commissioned the study, is using it to validate efforts to create more competition in telecommunications. The findings support the government’s plan to auction off fiber-optic lines owned by the state power company and contracts to push high-speed Internet into communities where it’s not available, Communications and Transportation Minister Dionisio Perez-Jacome said this week.

“The OECD stands by its report in full,” the group said today in an e-mailed statement.

In addition to $13.4 billion a year in overcharges, the study concluded that Mexican phone companies missed out on $12.4 billion in sales a year because their prices weren’t low enough. Adding up those figures, the OECD said Mexico’s phone market had an “opportunity cost” of $25.8 billion a year.

Purchasing Power Parity

Slim dismissed that $25.8 billion figure, saying that the OECD was implying that the industry, which generates sales of $30 billion a year, should give up most of its revenue.

Instead, the OECD said, its report showed that if companies had offered lower prices, the decrease in sales would have been almost completely offset by an increase in new subscriptions.

Slim also criticized the use of a method called “purchasing power parity” used by the OECD to compare prices in different countries. He gave reporters copies of a separate OECD document that said the method wasn’t appropriate “to undertake price level comparisons at low levels of aggregation.”

The statisticians that developed the method endorse the way the OECD used it in the Mexico study, the group said today. Using simple price comparisons based on foreign exchange, the method Slim endorsed to show that Mexico’s prices are lower than in most other OECD member countries, is too vulnerable to currency swings, the OECD said.

Lower Broadband Adoption

Slim also took issue with the OECD’s conclusion that Mexico’s rate of broadband adoption, at 10.5 high-speed Internet subscribers per 100 habitants in 2010, was near the bottom of the rankings of its 34 member countries. It would have been more fair to divide those rates by the per-capita gross domestic product of each country, a measure which would make Mexico compare much more favorably, Slim said.

The report took GDP into account in its calculations of how lower prices would affect subscriptions, the OECD said today.

The OECD met with Slim’s America Movil SAB and with other carriers last year, the group said. Representatives of all 34 member countries reviewed the study in an October 2011 meeting in which America Movil had a representative present, the OECD said. Afterward, America Movil submitted comments on the study that were “given serious consideration” as the report was being finished, the OECD said.

An official at America Movil’s Telefonos de Mexico SAB fixed-line unit didn’t have an immediate comment today.

By Patrick Haller

When making sourcing decisions, a lot of attention is paid to the pricing structure and qualifications of service providers, while their actual location is sometimes a secondary  consideration. However, when assessing a destination, it’s important to realize that what might be favorable today can morph into a nightmare scenario tomorrow. Don’t be caught unaware and unprepared for the ever-changing dynamics of  the Nearshore.

The best-shoring process goes beyond looking at the usual criteria like cost effectiveness, employee attrition and service capabilities, and examines issues such as the hidden aspects of hiring and firing, how non-performance claims are managed, a country’s political stability, propensity for natural disasters, nationalization of businesses, and concerns about infrastructure. It’s dangerous to give these critical factors short shrift when concentrating on which provider offers the best financial deal.

International management consulting firm A.T. Kearney advises that “the best-shoring evaluation process selects the most favorable location by applying a comprehensive set of criteria, which include not only current cost effectiveness and scenario analyses, but also an assessment of service and quality levels, as well as the question of warranty.”

“There are several items that are driving the trends towards best sourcing of solutions,” said Ed Fitzpatrick, director of Managed Services at Charles River Development, during a podcast about IT development, “The key thing is the competitive nature of the industry. Especially coming off the last couple of years in the worldwide financial situation, it’s about proving competitiveness, lowering costs, driving operational efficiencies, getting more value out of their investments in technology and systems, better aligning costs and values, and of course, reducing the strain on limited internal IT resources.”

Looking deeper than immediate cost savings, buyers should take into consideration driving factors, such as:

• Available Talent – How big is the current qualified labor pool? Will the operation be able to scale-up over the next five to ten years? Who are the competitors for the same talent? What are the strengths and weaknesses? Are wages expected to increase from year-to-year? Do the labor laws favor workers or employers?  For example, even though Brazil has the largest population in South America, can the country offer better software developers than Colombia? Can Colombia compete on the wage scale with Chile? Will Chile produce enough qualified candidates for contact center work over the long-term than Argentina? Will wage inflation and restrictive labor laws in Argentina have an adverse effect on the ability to continue operations there? Which nation is known for a strong work ethic as compared to the others?  When it comes to hiring and firing, every aspect of the country’s employment law should be examined carefully.

• Soundness of Infrastructure – Just because a country was known for having solid infrastructure in the past does not mean it will be true in the future. For instance, Chile was thought of us being relatively sound in this regard, but recently President Piñera warned executives that Chile would face an energy crisis during his administration due to an estimated annual demand increase of up to 7%. Other nations too might face energy crises, or an inability to keep up with the need for improved telecommunications technology and internet access. Safe roads and highways, efficient and adequate transportation systems, accessibility to international airports are also major considerations. El Dorado, the main international airport in Colombia’s capital city, Bogota, is being completely rebuilt in order to accommodate the heavily increased passenger traffic. However, observers have noted that by time the new facility is completely operational it will already be inadequate. Therefore, plans are under consideration to build a second airport.

• Natural Disasters – No country on earth is safeguarded from nature’s wrath. However, some are more prone to disasters than others. As charted by PreventionWeb, Chile is more prone to earthquakes than flooding, Colombia can suffer from flooding and earthquakes, Argentina is also susceptible to flooding whereas drought is the biggest threat to Brazil. Whatever the hazard, be sure redundant systems are in place and assess how quickly business can resume.

• Claims for Non-performance – Even though the contract might contain very specific clauses relating to non-performance issues, what jurisdiction will the contract be enforced in? If in the provider’s home country is there a enough of a history of similar cases in order to establish a precedence, and if so, who have they favored? If not, how would such a case be handled?

• Political Risk – Are foreign business entities welcome to operate freely within the selected country? Does the country have a history of nationalizing private enterprises, or are there indications to suggest this will start happening? Can the government close down an operation that is deemed contrary to their philosophy? Will a foreign entity, or a company hired by a foreign entity, be abruptly shut down? These are very real concerns, especially in Latin America where the political dynamics change rapidly in some nations. Closely examine the policies of countries such as Venezuela and Argentina who have been shown to be volatile environments, whereas Chile and Colombia stand as recent examples of political stability.

• Immigration Policies – Providers might need to hire employees from other countries, even on a temporary basis, in order to ensure they have the right individual in the right position. Also, companies that have shared services or captives most likely will want at least some high-level personnel from established business centers to oversee their operations. What countries are more welcoming to foreign workers? Where are the least restrictive immigration policies? Can foreign employees be arrested or deported without cause? Be sure to research these policies in-depth and gain an understanding of a particular country’s record, and pay attention to the “writing on the wall.”

Do not underestimate the importance of digging into these fundamental aspects of sourcing. Remember that the relationship is not only with your provider, but also with their country.

São Paulo: Making Manhattan look cheap.

By Filipe Pacheco

High costs are one of the prices international companies must pay for doing business in Brazil– especially when it comes to the services industry. Now one of the most plugged-in financial institutions in the world, the International Monetary Fund, has released numbers that demonstrate what many suspected anyway: The cost of living in Brazil in 2011 rose to slightly higher than that of the United States.

Considering a list of 150 emerging economies, Brazil is basically the only one that had an expected GDP forecast for last year based on purchasing-power-parity (PPP) lower than the real GDP – which means the prices converted to American dollars are higher than in the United States.

The IMF estimates that the Brazilian GDP was US$2.51 trillion, which makes the country the 6th biggest economy in the world. Emerging economies typically have a higher PPP GDP than their real GDP, which means that, even though they might produce less than the United States, the same amount of money can buy more within their boundaries.

Brazil is essentially the only exception. Here, you can buy less than in the United States with the same amount of money. The other BRIC countries – Russia, China, and India – are all cheaper in the same comparison. Just four other emerging economies had results similar to those of Brazil, according to the IMF, but the comparison is not quite fair. They are St. Vincent & The Grenadines, a small archipelago in the Caribbean; Zimbabwe, with a hyperinflation economy that has destroyed the national currency; and the oil-rich regions of Kuwait and the United Arab Emirates.

What brings the prices higher in Brazil is the cost of services, since they cannot be imported. If national industry comes up with high prices for goods or machinery, for example, there is the possibility that competing goods or machinery can be imported, even though there are taxes that fall upon them. Those prices have become considerably lower recently, due to a depressed economic situation in the rich countries and China producing lots and lots of everything.

The Real Problem

Added to that is the value of the Brazilian real – today traded at about R$1.80 to every US$1. That price is affected by the exportation of commodities – Brazil is among the biggest exporters of iron ore in the world, for example – and the large inflow of foreign money that enters the country to take advantage of the high interest rates that still prevail here and the good prospects for the local economy. Another reason pointed to as an explanation for the high cost of living is a problem that is also considered a barrier for the IT industry as well: the high rate of taxes.

“This inversion shows that things here do not fit the normal pattern, because the currency rate is completely out of synch with historical activity, with a huge valuation in the past few years,” Armando Castelar, economist at Fundação Getúlio Vargas, one of the most recognized economic institutes in the country, told the newspaper O Estado de S.Paulo.

“Either Brazil gets cheaper and improves its productivity or we will become a services economy at an early stage,” argues Júlio Sérgio Gomes de Almeida, director of the Institute of Studies for Industrial Development (or Instituto de Estudos para o Desenvolvimento Industrial). He warns there is a risk of Brazil becoming an expensive country based only on a services industry, and without a strong industrial base.

Office Space Deluxe

Research done this month by the consulting company Cushman & Wakefield South America has shown that renting a business office in Itaim Bibi, in São Paulo, or in the charming neighborhood of Leblon, in Rio, is often more expansive than in fancy commercial areas of Manhattan or Washington DC.

In Leblon, the price for a square meter of commercial rental space is US$69.4 a month, while in Midtown Manhattan, a square meter may cost around US$63. In São Paulo, in the business regions of Avenida Faria Lima, Jardins, Avenida Paulista, or Chácara Santo Antônio, the average price for a square meter is about US$60.

In the past year, Brazilian office-space prices have risen 22.6% in comparison to the same period of 2010, according to Cushman & Wakefield. Even though the prices are high, the vacancy level is quite low – in Itaim, only 0.9% of the offices are vacant.

When it comes to services, a few other examples can give you a good sense of how expensive some things can be in the big Brazilian cities. Going to work out at a Rebook Center gym in São Paulo costs R$690 (US$385) per month with an annual membership, while in New York, the average price for the same chain is around R$382 ($US210).

Going to the movies costs, per person, R$28 (US$16), while in a good movie theater in New York, that would be R$24 (US$12). A cheeseburger with soda at the local unit of PJ Clark’s is around R$37 (US$21), while in the States that would be about R$32 (US$18). On your way back home, a ride from Avenida Paulista, in the heart of the city, to the International Airport at Guarulhos may cost R$108 (US$60), one dollar more than going from Manhattan to JFK – R$107 ($59). The numbers are drawn from research done by O Estado de S.Paulo.

“São Paulo scares me more and more each time I am here,” Raphael Quintella, who has lived in New York for five years, told the newspaper. “Going to a good restaurant in the city costs me more than going to one of the same level in New York. That is applicable to a good Japanese restaurant or to a churrascaria [typical Brazilian barbecue house].”

Jamaica’s growing reputation as a top Caribbean destination for investment in Information and Communication Technology (ICT) and other key growth sectors is set to take centre stage on March 1-2, 2012, as the island lays out the red carpet for investors seeking opportunities in the region’s largest English-speaking economy.

The Jamaica Investment Forum 2012, which will be staged at the new Montego Bay Convention Centre, will focus on the business opportunities that exist in ICT, as well as other priority areas such as Tourism, Manufacturing and major privatization and development projects.

The Prime Minister of Jamaica, the Most Hon. Portia Simpson Miller, will head a high profile slate of local and international speakers at the Forum, which is being organized by JAMPRO, the country’s investment promotion agency, in partnership with the Inter-American Development Bank (IDB) and the Compete Caribbean Programme. The opening of the event will feature presentations from Anthony Hylton, the Minister of Industry, Investment and Commerce, and a high-level representative from the IDB.

The sectoral session on ICT will focus on opportunities in Business Process Outsourcing (BPO) and IT Export Services (ITES) and will feature a mix of information and testimonials from expert panellists and existing investors. Among the confirmed speakers for this session are Connie Harvey, EVP, COO, Commercial Solutions, ACS, A Xerox Company; Dr. Harsh Muthal, CEO Tholons Inc.; Ambassador Patrick Casserly, Special Envoy for ICT; and Helena Lawson Brooks, SVP- Specialty Operations, Convergys Corporation. Phillip Vandervoort, Head of Business and Marketing Operations, Microsoft, is scheduled to deliver a presentation during the investment climate plenary.

Participants will have the opportunity to see first-hand some of the select investment projects on specially arranged JAMPRO site visits and private meetings. Prime Minister Simpson Miller will also host a welcome reception at which participants will be able to meet members of the Jamaican Government and senior leaders in the private and public sectors. A special “Jamaica Night” reception will cap off a comprehensive social programme that will offer participants, diverse opportunities for leisure, tours and sightseeing.

Jamaica is home to four of the world’s top 10 outsourcing companies, and currently has over 11,000 full-time agents in the offshore business process outsourcing (BPO) sector. With nearshore access to the United States, a neutral English accent, low attrition rates and high labour force availability among secondary and university graduates, Jamaica continues to offer a very strong value proposition for BPO investors.

Most recently, Jamaica landed a major investment from Convergys Corporation, one of the largest agent-assisted customer service companies in the world. The company is projected to employ nearly 1,000 persons when its first call centre slated for Montego Bay becomes fully staffed in 2012.

The Jamaica Investment Forum will provide potential investors with insightful information pertaining to the Government of Jamaica’s investment policies and incentive regimes; and networking opportunities among existing investors and leaders in the local business community. The Forum has received strong backing from the local business community. Among the many local sponsors are: FLOW/Columbus Communications, LIME, Digicel, Jamaica Public Service Company, and the Bank of Nova Scotia.