The city of Córdoba is one of Argentina’s most promising rising stars. Already the technological center of the country, and placing fifth on Nearshore Americas’ Ranking of the Leading IT Cities in Latin America, Córdoba has a good chance at becoming an important software hub across the region. But is the emerging city ready and able to support large scale investment from foreign firms, or will it fall prey to Argentina’s endemic issues of bureaucracy and inefficient governance?
Traditionally flying under the radar of the regular set of LatAm outsourcing choices, Córdoba, capital of the state of Córdoba, has over the years quietly attracted an impressive list of multinationals. As early as 2000, the city’s advantages prompted Motorola to build a $40 million software development, VOIP and multimedia center – at that time one of only 14 such facilities in the world.
Automotive companies like Volkswagen, Renault and Fiat all have had manufacturing operations here for years, while Lockheed Martin has an aerospace plant. HP Enterprise Services also operates one of their BestShore R&D centers out of Córdoba. For IT outsourcing in particular, Santex América has a presence, while Apex, a Sykes company, runs a customer support and back office contact center in the city with over 3500 employees.
But the real coup for Córdoba was in 2006 when chip maker Intel agreed to build a $1.5 million software research facility on the city’s National Technology University campus, employing around 450 workers. Intel Chairman at the time Craig Barrett attributed his decision to “the cluster of technical institutes, mature local businesses, and an attractive incentives package enshrined in the province’s industrial promotion law”. In spite of Intel’s relatively low investment, signing such a big name was a landmark for Córdoba – this was only Intel’s third center outside the US. Córdoba suddenly found itself fielding investment offers from all sides.
Some facts about Córdoba:
- Second largest city in Argentina after Buenos Aires, with population of 1.5 million.
- Highest per capita software university graduates in all of Latin America, with approximately 28,000 IT graduates each year.
- IT labor pool size of 34,000 and BPO labor pool size of 37,000 according to consulting firm Neo Advisory.
- Hosts 6 major public and private universities, including the National University of Córdoba, the oldest university in Argentina and second-largest in the country.
- Time zone is one hour ahead of New York.
- The city’s GDP is approximately US$ 15 billion, and makes up more than half of the GDP for the province.
IT companies are constantly in a love-hate relationship with Argentina’s Kirchner government, and those in Córdoba are no exception. Political risk is a real issue in Argentina, which has a reputation for arbitrarily changing the rules for foreign investment.
Córdoba’s emergence as an ITO destination is due to concerted effort by the provincial government. José Manuel de la Sota, governor from 1999-2007, coordinated many of the high profile deals mentioned above. According to BusinessWeek, “Shortly into his administration, de la Sota cut provincial tax rates on businesses by 30%, tightened spending, and announced a package of tax breaks and province-funded upgrades to transport and communications links to assist incoming investors”. And it’s paying off – Córdoba’s economy consistently outperforms the rest of Argentina. Current governor Juan Schiaretti is continuing the trend of improving the business-friendly climate.
Incentives offered to IT companies in Argentina are seen as poor compared to other LatAm countries – which is why Córdoba stands out. The city goes beyond the national framework to create incentive packages that are more attractive. Córdoba was the first province to declare software development an industrial activity, and now IT firms receive incentives under the Provincial Industrial Development Act, including monetary grants for new jobs generated, lower costs of electricity and telecom access, rental subsidies, etc. Large enterprises are exempt from all provincial taxes for 20 years, while SMB’s are exempt for 10 years.
Córdoba will also occasionally tailor incentives to meet the needs of investors, as with Intel when the city agreed to a 7.5% cash subsidy toward salary costs for eight years. It’s this ‘above and beyond’ attitude that is gaining Córdoba a larger IT market share. Prosperar, Argentina’s investment promo agency was not available for comment.
Can the Talent Pool Be Sustained?
With 11% of the city’s population in university or post-graduate education, Córdoba has a talented labor pool that companies can draw on. A joint initiative between IT firms, universities of Córdoba and the government has also been created called ITC (Insituto Tecnológico Córdoba). ITC launched a Competency Training Program that is currently training 1200 workers in high-end IT services. Córdoba is also ramping up English proficiency with a new training program led by call centers and the Faculty of Languages in the National University of Córdoba.
With the large number of IT graduates available, there should be no scalability problems. But companies are complaining now of the big players crowding out the market in Córdoba. A spokesperson from Sykes comments – “When we first set up here in 2003, we were the only company. Now Atento and Teleperformance also run centers here, and we have to compete for qualified human resources. It’s not as easy as it used to be”. Some companies in other Argentine cities also give Córdoba a wide berth. “Córdoba got very competitive very quickly”, says Alex Robbio, VP Business Development at Belatrix Software Factory, based in Mendoza. “There were large companies there already, and more were approaching from Buenos Aires. It was crowded and that’s one of the reasons we didn’t locate there”.
IT companies are constantly in a love-hate relationship with Argentina’s Kirchner government, and those in Córdoba are no exception. Political risk is a real issue in Argentina, which has a reputation for arbitrarily changing the rules for foreign investment. But if you’re considering Córdoba, you’ll be happy to know that the investment framework and tax incentives offered by the city have been written into local law, precisely to give companies more legal certainty. Provinces in Argentina enjoy considerable autonomy from the federal government, and governor Shiaretti has used that independence in the past to support foreign investment sectors in Córdoba.
In terms of costs, wages for contact center workers are around 25% cheaper than in Buenos Aires. For software programmers, there is reportedly no difference. “Wages for IT workers are more or less comparable with Buenos Aires, so there’s no advantage in terms of cost”, says Robbio.
IT Brain Weave
Córdoba is still defining itself in terms of its global relevance to IT. Key outsourced services have traditionally been contact centers and back office operations, and it’s only in recent years that the city has shifted gears into ITO. What’s needed now is a strong focus on expanding resources in the city, both the labor pool and available infrastructure, and then marketing those resources to high tech US firms. According to Neo Advisory, “Although Córdoba is in the early stages of the global sourcing market place, the city has requisite potential to become one of the most attractive outsourcing destinations in Latin America in the near future.”