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Tucked between Brazil and Argentina, with an extensive coastline on the South Atlantic, the little country of Uruguay is making waves. With only 3.3 million people – half of them residing in the coastal capital, Montevideo – Uruguay has positioned itself to grow its human capital for the long haul.

One of the key investments in human capital comes through the country’s active participation in the One Laptop Per Child (OLPC) program.

“Uruguay each year adds an amount of laptops equal to the number of students entering into primary school,” says Rodrigo Arboleda, chairman and CEO of the One Laptop Per Child Association (OLPCA).

In fact, Uruguay is considered a world leader in OLPC deployments. Last spring the country became the first in the world to receive the rugged, low-power XO-1.75 laptop, which uses the Marvell Armada 610 processor and learning software from Sugar Labs. Even more impressive, two years ago the country reached the unprecedented milestone of having a laptop per child, which it has since maintained.

“Having reached total saturation, Uruguay can concentrate on teacher and student training,” says Arboleda. “The country is now making sure that each child and teacher gets the best use of their laptops and of the educational ecosystem that comes with the XOs.”

Literacy and Language

It is wrong to assume that the OLPCA was delivering into a chasm of educational shortcomings, however. The success of OLPCA is likely linked to related conditions that have made Uruguay a choice destination for IT and Business Process Outsourcing (BPO).

“Uruguay is endowed with an impressive level of human capital when compared with other countries in the region,” says Juan Balparda, project manager for Uruguay XXI, an investment information service within Uruguay’s Institute for Promotion of Investment and Exports (Instituto de Promoción de Inversiones y Exportaciones).

Balparda notes that the country’s literacy rate is very high – 98 percent as of 2010. And labor costs are reasonable. A general manager might make $10,000 to $13,000 a year, with other managers, whether in finance and business, IT systems, production or HR, earning between $5,000 to $8,000 a year.

“Many people here speak more than one language, too,” says Balparda. “That helps for offshoring ITO and BPO.”

Forty-one percent of Uruguayans between 19 and 24, and 31 percent between the ages of 25 and 34, speak English. Overall, 26.5 percent of the country’s population speaks English, with that number rising to 37 percent in Montevideo. The country’s proximity to Brazil also means Portuguese is spoken by many people. And because the majority of Uruguayans are of European descent, they can often fill in the gaps with other languages.

“These cultural proximities give Uruguay advantages when offering services to the United States and Europe,” says Balparda. “That’s important for us, because those are the principal global service markets.”

For example, Sabre Holdings services clients from Uruguay in 15 languages, including Italian, French, German, Swedish and Turkish. The U.S. company operates in Zonamérica, a technology park in Montevideo. Zonamérica is one of three “Free Zones” – the other two being  Aguada Park and WTC Free Zone – that offer foreign companies favorable investment regimes.

Government Backing

Part of the country’s appeal is the fact that it has investment promotion and protection agreements with 26 countries, and treats foreign and domestic investments equally. That’s appealing to big players in software development and consulting, as well as BPO, such as Tata Consultancy Services, IBM, Verifone and Microsoft – to name only a few.

“Uruguay has one of the best investment climates in Latin America,” says Balparda. “Security and transparency are important factors, too.”

There is significant evidence to support Balparda’s observation.  The World Economic Forum’s 2010/2011 Global Competitiveness Report (GCR) ranked Uruguay as having the lowest risk exposure to crime and violence when compared to Argentina, Brazil, Chile, Costa Rica and Mexico. As well, in 2010, Transparency International ranked Uruguay as having the lowest corruption rates in Latin America. That’s good news for young people graduating into the labor market.

“Uruguay is the most important educational laboratory in the world,” says Arboleda. “Countries should watch and study carefully what is being done there. With more than 600,000 laptops deployed, it is an inspiration for others to follow.”

Challenges remain, including rural connectivity and ensuring high utilization rates. But clearly Uruguay is working hard to set the stage for its young graduates, creating an IT-savvy populace that can add to and support the 20,000 who already work in the offshoring service sector.