I have discussed the advantages of nearshoring when compared to the traditional offshore model in a related blog. In this blog I will discuss why AAJ choose Argentina to build our dedicated development center. We need to first look at the factors we evaluated to determine the location. We assessed 20 different factors and graded each location to come up with our top three locations.
The 20 factors for evaluating each location and how Argentina stacked up, were:
- Population | Argentina boasts the third largest population in South America with 41mm citizens. So when compared to Costa Rica, Argentina offered a larger population base to pull from. Columbia is slightly larger that Argentina, but there was no relative advantage.
- GNP growth rate | The GNP for Argentina has been steady for 10 years. Growth has been roughly 1%. Argentina has the second highest GNP in South America and is number 23 in the world. This is ahead of Columbia and far exceeds Costa Rica.
- Economic Stability | Contrary to what you would think, some instability in an economy can be a good thing. It keeps relative prices lower, thus reducing the relative cost of goods and services. Argentina is a good example. Their economy has experienced fluctuations and because of this the relative cost rates have remained lower. However, Argentina is a larger country and so the economic risk is less than with a smaller GNP. Argentina offers stability, but with enough fluctuation that rates are still relatively lower.
- Growth and maturity of the technology industry | Argentina’s nearshore industry started gaining traction around the turn of the century, so it has had time to mature is technology ecosystem. Argentina technology community has been well known for a number of years. There are numerous think tanks and research and development centers. Costa Rica was also very mature, however, Columbia was newer and has not made all the investments required as of yet.
- Creativity and Critical Thinking | While this is a more subjective criteria than others; it was a very important decision criteria in the selection process. We were looking for specific skills sets that matched the demands of our clients. With the explosion of mobility and analytics, UX/UI design has become a true differentiator. We were looking for a location that was artistic and design centric. Argentina was that place. Argentina is a country that supports and fosters creativity. There is large network of UX/UI freelancers. Much of the design work being done in the Silicon Valley is being produced in Argentina. After review of the LATAM locations, Argentina had a sizeable advantage when looking at the design work being produced and the artistic nature of the culture itself. In addition to design, we wanted to find a location that had made large investments into research and think tanks. Argentina has definitely invested in both. AAJ has been fortunate to begin partnerships with several. But more important to the actual facilities and groups, we wanted an environment where asking questions and thinking through solutions was the norm. We did want to build teams that were afraid to question or challenge us. If we gave the team a solution that could be improved, we wanted the team to tell us. While this sounds like common sense, cultural differences can lead to this more than most care to admit. It is hard to stand up to a boss or a client and say they are wrong. So for us, it was important for our operations be located in an area where this type of behavior is both welcomed and rewarded. After researching multiple areas, we believe that Argentina provided this type of environment.
- K12 education system | Argentina has a literacy rate of nearly 98%, which among the highest in LATAM.
- University systems | Argentina boasts the largest proportion of university graduates in Latin America. Incidentally, Rosario is a hub of higher education institutions. The commitment to education is woven into the cultural fabric in Argentina. There are no campuses, nor university life similar to the US. Most students live at home and work while going to school. There are no “freshmen,” “sophomore” etc., to speak of. Graduates get a much more technical and hands-on education when compared to the US. Because most students have to work to go to school (although attendance does not entail tuition fees), most of them start working as interns during the 2nd year of their 6-year university career, and many end up working full-time by the time they graduate.
- Robust infrastructure | Argentina has state of the art telecommunications and fiber optic networks. They are much more advanced than most LATAM countries. They are the regional leaders in technology infrastructure.
- Unemployment and Turnover rates | Unemployment rates for the last 5 years have remained between 7% to 8% in Argentina and Columbia and around 10% for Costa Rica. These rates, and the continued transition to of the economies technology focus, ensures that there will be a solid pipeline of resources readily available.
- Labor rates | Argentina is middle of the road in terms of labor rates in South America, but they have one of the highest output and productivity levels. Argentina has the most cost efficient labor rates when compared to Brazil, Costa Rica and Mexico. Columbia is the only country with a lower overall labor cost rate.
- Political stability | Political instability peaked in 2001 when the country had as many as five presidents in just two weeks. Things improved from 2003 under President Nestor Kirchner, and in 2007, his wife Christina Kirchner was elected as Argentina’s first woman president. After political stability returned in 2003, the country saw average growth of close to 9% for the next few years. Argentina has not had political instability since 2003.
- Fair labor laws | Section 14 of the Argentina Constitution establishes a number of workers’ rights, including dignified and equitable working conditions; limited working hours; paid rest and vacations; fair remuneration; minimum vital and adjustable wage; equal pay for equal work; participation in the profits of enterprises, with control of production and collaboration in the management; protection against arbitrary dismissal; stability of the civil servant; and free and democratic labor union organization.
- English proficiency | As this map shows, Argentina has one of the highest rates for English proficiency in the world.