6 Questions – and Answers – about Punta del Este

One of the buzzwords we hear often these days is the need for customers to take a “portfolio” approach to outsourcing, relying on the unique skills of different areas. This implies that in order to compete, various countries should “brand” themselves aggressively so that customers know when and why to turn to them versus their neighbors. Chile is one of the first out of the gate, planting its flag in the captive and shared services market, specializing in high-end knowledge services.

Kirk Laughlin of sister publication Nearshore Americas spoke recently to Esteban Pennycook, investment advisor with CORFO, Chile’s government’s trade promotion agency, about Chile’s plans to create a new category among Latin America sourcing and services destination.

Chile is starting to talk more openly about its future plans to – in essence – establish and live in an entirely new category among Latin America sourcing and services destination. That category is partly reflective of the requirements of a rising tide of multinational firms – from mining to biotech – that are continuing to set up shop in Chile and also aligns well with the steady output of engineering-schooled professionals. But does the country’s relatively small population (around 18 million) and highly-desirable qualities suggest that precious human capital resources will get snapped up before this new category effort fully matures?

That was one of our key questions for Pennycook and other CORFO professionals had responded to Nearshore Americas’ recent critique of CORFO by saying that, contrary to what one might think from reading the article, Chile is actually refueling in the US. As we’ve now learned, CORFO is gearing up to expand its New York City office – with as many as 30 professionals – in order to generate more buzz about what is increasingly looking to be a unique market positioning among other countries in the region. Unlike virtually any other top tier sourcing destination, Chile is not chasing big-ticket consulting/ sourcing heavyweights. Instead, the country sees huge promise is expanding its hold on the captive and shared services market, where specialization and higher-levels of competency are essential.

We Do “Knowledge”

“I cannot talk of Chile as an IT powerhouse,” says Pennycook. “We’re not built that way.” Chile is however a thriving capital for knowledge services and that’s the place where Chile is going to continue to command the high ground. “We know that this is not the typical country in the Americas.” Over the last ten years, CORFO is credited with attracting over US$ 2.4 billion in foreign and national investments and creating about 40,000 ‘offshore’ oriented jobs.

The country has attracted a diverse mix of captive operations, among them traditional names like Oracle and McAfee, and others like Australia’s WorleyParsons, which provides professional services to the energy, resource, and complex process industries. The firm employs over 600 staff members in Santiago.

Chile’s distinctions are likely to become more pronounced as CORFO steps up its thought leadership and promotion. Only one other significant country in the Nearshore market – Costa Rica – has gone to great lengths to position itself as specialized offshore player, and Chile is about eight-times larger than Costa Rica and clearly is miles ahead in terms of broadband availability and services.

Familiar Question

Pennycook acknowledges potential concerns over the scalability of labor, but points out it’s a complex issue and depends largely on the specific skill sets required. For instances he stresses that Chile is ideally suited for customers seeking a combination of high-level skills, such as IT specialization and advanced degrees and training in physics. Captives in Chile now are executing complex risk analysis processes and other tasks tied to human resource and finance and accounting services.

The macro-economic picture continues to look exceptionally strong. Chile is ranked 30th among 139 countries in the world in the 2010-2011 Competitiveness Ranking, and it is the most competitive economy in Latin America. Mexican billionaire Carlos Slim recently illustrated why he believes Chile will become the first truly developed economy in the region, stressing the way forward for Chile will be through continuing to invest in education.