Nearshore Americas

Uruguay Sourcing Gets Stronger, While IT Woes Become More Apparent

Is Uruguay really the paradise-like destination the country’s trade group, Uruguay XXI, sells it as? The combination of a well educated population, political stability, a solid infrastructure and attractive incentives paints an attractive picture, but other nations in the region, Chile for example, tout the same attributes.

The nation of under 3.4 million people is seemingly squeezed between the much larger countries of Argentina on the west and Brazil on the north, and empties out to the Atlantic Ocean on the southeast. Montevideo, the capital, sits at the tip of the Rio de la Plata, and is home to majority of the population. Although Spanish is the main language, bilingual education is very important in both public and private schools, and it is very common for younger people to speak English.

Education Priority

The limited population makes it difficult for a contact center to scale up much beyond 1,000 seats. This has not deterred companies such as TCS which employs 1,500 agents or Sabre that has a staff of 1,000 providing services in 15 languages. “The quality of universities is excellent here,” said Juan Balpardo, Project Manager at Uruguay XXI, “Many people finish their studies in US and Europe.”

The State provides free education through college and invests 4.5% of the GDP into education

•100% of 15 year-old high school students have finished at least 3 years of English and 2 of computer science

•21% of university students study accounting, finance or business administration

•17% of university students study science and technology

Cost of Doing Business

Wages, Balpardo specified, are lower than in other Latin American countries, like Brazil. According to the 2010-2011 PwC Remuneration Survey, as of March 2011 average salaries in US dollars for General Managers are $12,586; Administration/Finance Managers $7,047; IT Managers $5,785; Sales Managers $7,463 and Human Resource Managers $5,816. Highly specialized or technical positions will be paid more.

Property costs can range from $8.00 USD to $38.00 USD per square meter for office leasing, and $1,500 USD to $3,900 per square meter for purchase, as they are listed in the guide to location and operational costs provided by Uruguay XXI.

Montevideo currently has two technology and service-oriented business parks operating as Free Trade Zones (FTZs), the Aguada Park and Zonamerica; the newly opened World Trade Center is 40% occupied and the Parque de las Ciencias will be opening soon. Companies established in the FTZs are 100% exempt from:

Corporate Income Tax (depending on where they fit into the scheme)

•Wealth Tax

•Import levies

•Any other tax created or to be created in the future*

•Can develop industrial, commercial or service activities

Positive Measures

Uruguay was ranked number 24 out of 178 countries in Transparency International’s 2010 Corruption Perceptions Index, a one point decrease from its 2008 position. However, it ranked 61 in an evaluation of 134 countries in Forbes’ “Best Countries for Business” study, which considered 11 factors. The government has established certain regulations that favor foreign investors with regard to corporate structure and possession of equity. These are good measures that have contributed to the record FDI of $2.35 billion in 2010.

Uruguay is also member of international organizations that promote investments’ security, such as the Multilateral Investment Guarantee Agency (MIGA) and the International Center for Settlement of Investment Disputes (ICSID) with headquarters in the World Bank, and the World Trade Organization (WTO). Agreements that Uruguay has with other regional nations through ALADI and MERCOSUR, shores up its own economy and gives investors potential access to a total a much larger population.

Climbing Crime Rate

According to a report issued by the US Department of State Bureau of Diplomatic Security (OSAC), in “Montevideo, petty street crimes such as pick pocketing, purse snatching, confrontational robbery in secluded areas, and theft from parked automobiles are common, as would be expected in any large city. Montevideo continues to experience an increase in violent crime with a few instances of “express kidnappings” conducted to deprive victims of ATM holdings and to force victims to take perpetrators to their residences for further criminal activity. In late 2010, the Ministry of the Interior publicized statistics that, in Montevideo, there is one home invasion robbery per week, 32 robberies a day, and one theft every 10 minutes.” These crimes are not unique to Uruguay, and most people from larger cities should already be familiar with the precautions they need to take in order to avoid being a victim.

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Need for New Industries

Even though Uruguay will be able to sustain growth in the contact center sector for the next few years, there is the looming possibility that the talent pool will be drained. If the government wants to create alternative to the mainstay industries of textiles, leather apparel, wine, shoes and petroleum, technology is an area that they should strongly consider developing. In an April 2011 interview with El Pais, Federico Cellas Endeavor tech entrepreneur, and creator of Lynkos, criticized the government for:

“The lack of communication and encouragement for young people to study and pursue careers in technology. Hundreds of accountants, lawyers and medical doctors graduate every year, while in the technology area there is zero unemployment. While pursuing their studies, students can find jobs in technology that in turn help them to continue studying. It is a virtuous cycle. They earn good money in an industry with a lot of upward mobility and flexibility, because they can work here or for foreign customers. They can even enroll and study for free- there is nothing stopping them. But young people are not aware of this.”



Kirk Laughlin

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

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