Nearshore Americas

COUNTRY PROFILE: Haunted by a Poor Image, Argentina Bids to Become a Key Latin America Outsourcing Player

The Argentina outsourcing sector has been around for some time. Since the late ‘80s cities like Buenos Aires have hosted shared service centers for US firms, and while the country is still not an outsourcing powerhouse, it has recently been making waves in the IT services sector. The government has prioritized the software development and design industries over call centers, leading to a strong IT presence in the country, and many new home-grown providers that are being noticed by everyone from North America to India. But Argentina remains mired in chronic problems like heavy bureaucracy and red tape, arbitrary investment rules, and more recently, wage inflation. Nearshore Americas takes a look at some of these challenges to provide a balanced profile of Argentina as an outsourcing option for your company.


One of the MERCOSUR members along with Brazil, Paraguay and Uruguay, Argentina has a lot to offer in terms of business environment. According to the 2009 A.T. Kearney Global Services Location Index, Argentina ranked 27th in the world and 5th in Latin America as an offshore destination. Foreign investment has been on the climb, and some big names to invest have included Intel, Google, Siemens, LG, Yahoo!, HP, Microsoft and IBM. Many of them cite low wages, and an IT-proficient workforce as factors in their decision.

Some figures on Argentina:

  • Ranked as the most innovative country in Latin America by The Economist Intelligence Unit’s Innovation Index 2009.
  • Exported US$ 770 million in IT professional services, and $ 3.7 billion in business and technical services in 2008.
  • Placed as 5th best outsourcing services location for labour quality and availability, by Deloitte’s Global Shared Services Survey 2009
  • Currency risk rating of B- by Standard and Poor’s, and GDP per capita of US$ 14,200.
  • Ranked 118 out of 183 countries in the World Bank’s Ease of Doing Business Report 2010.


Talent pool

Providers in Argentina that we speak to give the usual story about the cultural fit with customers, the quality of life, the time zone just a few hours ahead of the US, and the business profitability. But these days, that’s the basic standard for a LATAM outsourcing economy. What really makes Argentina stand out is its educated and qualified workforce. “There’s a huge talent pool of over 200,000 people, most of whom are engineers waiting to be challenged by new projects. We have doubled our talent pool in just the last three years”, says Martin Migoya, CEO and co-founder of Globant, one of the up and coming Argentine IT companies mentioned above. The adult literacy rate is 98.6%, and English capability in Argentina is one of the highest in the region, with 81% of the university graduates in IT successfully passing internationally recognized English tests.

Part of the reason may be Argentina’s “early bet on education”, says Alex Robbio, VP Business Development for Belatrix Software Factory, another leading Argentine software developer with an international focus. “Education is completely free for everyone in the country, and the result is a very large, very skilled middle class”.

“Argentina has so many pluses, and we have been growing rapidly. But the government hasn’t been helping too much in terms of marketing our advantages, even though they provide a lot of material support” – Alex Robbio from Belatrix

But Cristian Arguello, Country Manager of Argentina for Cognizant, says that while the talent pool is large, it may be less than the demand. “The challenge for Argentina is scalability. We have seen the demand for IT-specific workers grow exponentially in recent years. More qualified workers need to be provided to businesses by state universities and colleges”, he says. Cognizant recently announced plans to expand services offered from its main Buenos Aires delivery center.

With a population of nearly 41 million (much less than larger rivals Mexico and Brazil), it’s easy to see where Arguello is coming from. But an array of IT-specific education programs and scholarships by both the public and private sector is now aiming to draw more students into university programs in computer science and programming. Many of these initiatives were started only in 2006 and later, and it may be too early to see clear results.

Labor Costs

Due to the crisis and devaluation of the peso in 2002, wages in Argentina have been quite low compared to other LATAM outsourcers. “You can get an average IT staffer for a 30-35% lower wage than in Brazil, and a 20% lower wage than Mexico”, says Arguello. But in recent years as the IT industry has grown in Argentina, so has wage inflation, and inflation in general.

In 2009 inflation was 12-14%, and many economists predict that number to grow in 2010, despite official stats that put the inflation rate much lower. With the government considering salary increases in light of the mass labour protests last year, the unions are calling for contract renewals for workers with wage raises of 20-25%.

But Robbio maintains that while this will put pressure on the software industry, it should not be much of a problem since most IT workers in the country have chosen to remain non-unionized. Even if wages were to rise, Argentina would still compare positively with other countries, he says. So US companies based out of Argentina may find their labour cost advantage over other LATAM outsourcers getting smaller, but for now it is still significant.

Prosperar and Incentives


Under the Software Promotion Law implemented in 2004, Prosperar, Argentina’s investment development agency, offers a number of incentives for IT companies looking to set up in the country. Martin Migoya says that there are three main ones available to software companies:

  • Up to 70% reduction on employers’ social contributions for employees.
  • Tax exemption of 60% on total income tax.
  • Ten year tax stability.

Arguello also mentions city-specific exemptions such as some reimbursements on real estate in Cordoba, and additional tax exemptions in Buenos Aires if a company sets up in the IT district of town.

Argentina’s infrastructure and telecom networks are also very good – they were privatized in the late ‘90s. According to the World Bank, Argentina has the highest fixed-line and mobile density in Latin America, and the highest broadband penetration in the region (along with Chile) at 8.8%. Costs of telecom and connectivity in general are competitive, and all the required infrastructure to set up delivery centers is easily available.

Challenges:  Painting the Town in Red Tape


Changing the rules – Political risk has recently been a problem for Argentina, as mentioned earlier. According to KPMG’s Nearshore Attraction 2009 report, “Argentina has a deserved reputation for arbitrarily changing the rules for companies, which has hurt investment in recent years”. Much of this is due to President Cristina Fernandez’s turbulent relationship with both businesses and labour unions. The economy grew by only 0.9% last year as it tried to bounce back from the recession, and the government faces rising debt obligations. As a result of all this, rules for foreign investment are often vague, and vary from region to region – Some analysts say that the choice of which Argentine city to set up in is more important than the choice to set up in Argentina itself.

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Marketing – The government has also not done a very good job selling the Argentina brand. “People only hear the negatives”, says Alex Robbio from Belatrix. “Argentina has so many pluses, and we have been growing rapidly. But the government hasn’t been helping too much in terms of marketing our advantages, even though they provide a lot of material support”.


Bureaucracy – The strong presence of labour unions is an obstacle for companies considering Argentina, especially in light of the impending wage negotiations. Argentina is bureaucratic and often inefficient, and not an easy place to open a development center. Many US firms simply acquire local companies instead of setting up themselves, or engage in joint venture projects to outsource directly with a low cost commitment.

Some leading software developers in Argentina to check out are Globant, Belatrix Software Factory, and Cubika. As Migoya from Globant says, “Not only do we work with conventional programs like Microsoft and Oracle, but we’re also experts at open source. We understand how the US wants to create commercial software, and we save them a lot of time and money”.

The Future

With nearly 1600 software companies, local and foreign, operating out of Argentina, the country’s IT services industry seems to be growing despite its challenges, and looks set to keep on growing. And the action is not just concentrated in Buenos Aires anymore. “More and more firms have been opening in Tier II cities like Cordoba, Rosario, Mendoza and Mar del Plata”, says Cristian Arguello.  “In five years I think we’ll see many more companies coming to Argentina. It doesn’t seem to be slowing down”.

Kirk Laughlin

Kirk Laughlin is an award-winning editor and subject expert in information technology and offshore BPO/ contact center strategies.


  • Thanks for your comment!

    While its true that Argentina's English proficiency in general is not as high as it should be, the education system has been changed and programs implemented, so that many of the university students do graduate with quite a high English capability, especially in the major cities. That statistic in particular was confirmed by multiple sources.

  • My name is Sebastian Heredia and I would say Mr. George’s article touches upon some of Argentina’s strengths and weaknesses quite accurately.

    I’d like to point out, however, that we should be careful to not over-generalize the scarcity issue. That there may be an under-abundance of IT workers in Argentina does not mean that the country cannot support thriving Knowledge Process Outsourcing (KPO) and Legal Process Outsourcing (LPO) industries which rely more greatly upon sophisticated and high level education than headcount numbers.

    I am a junior associate with Novadios (, a LPO provider with its headquarters in Los Angeles and affiliated operational facilities in the city of Córdoba, Argentina. My company has doubled its talent base in six months and will probably double it again before the end of the year. I would say scalability hasn’t been a problem, since there are more than enough qualified bilingual lawyers to build Argentina into a global LPO hub.

    Best Regards,