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Turning Chile Into The Nearshore Platform of Choice For Indian ITS Companies Presentation to

Turning Chile Into The Nearshore Platform of Choice For Indian ITS Companies Presentation to January 15, 2007. OUR OBJECTIVES FOR THIS MEETING. Learn firsthand about HCL Quickly summarize for you Chile’s advantages as a place to do business

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Turning Chile Into The Nearshore Platform of Choice For Indian ITS Companies Presentation to

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  1. Turning Chile Into The Nearshore Platform of Choice For Indian ITS Companies Presentation to January 15, 2007

  2. OUR OBJECTIVES FOR THIS MEETING • Learn firsthand about HCL • Quickly summarize for you Chile’s advantages as a place to do business • Explain why Chile stands out as a offshoring platform in its region • Share some interesting news • Discuss how we can move forward –the real reason for us being here

  3. AGENDA • The Chilean Business Environment • Chile: The Nearshore Platform of Choice • HCL and the Chilean Nearshore Opportunity

  4. AGENDA • The Chilean Business Environment • Chile: The Nearshore Platform of Choice • HCL and the Chilean Nearshore Opportunity

  5. CHILE'S BUSINESS ENVIRONMENT STANDS OUT IN LATIN AMERICA AND BEYOND • The most stable and competitive economy in Latin America • Ranked 1st by WEF in World Competitiveness Index 2005 • Ranked as Best Place to do Business by Economist Intelligence Unit 2005 • 4th among emerging countries and 19th in global ranking • Lowest country risk in the region • Strong, transparent institutions and regulatory framework are an example for the region • Ranked 1st by Transparency International in Corruption Perception Index • tied with U.S. in 20th place in global rankings • followed by Uruguay (28th) and Costa Rica (55th) • Ranked 1st by World Bank among Latin countries in “Ease of Doing Business” • and 28th worldwide • Positioned as a gateway to the world • Free trade agreements with strong intellectual property protection • Low tax burden and extensive network of double taxation treaties • Favorable foreign investment regime (DL 600) in force since 1974

  6. CHILE AT A GLANCE Vital Statistics (2006) • Population: 16.3 M • GDP: US$ 145 B • GDP per capita: US$ 8.9K • Annual inflation: 2.6% • Unemployment: 8% • Adult literacy rate: 96% • Corporate tax: 17% • Tariffs • General 6% • Hardware 0% • 95% of imports pay no tax • FTAs Time zone alignement Overnightflights to the U.S. Sources: World Bank, EIU, IMF, A.T.Kearney 2006

  7. CHILE: A GLOBALLY COMPETITIVE, HIGHLY DYNAMIC AND TRANSPARENT BUSINESS ENVIRONMENT • GDP Growth Rate • (CAGR %, 1986-2006) Chile • Circle size proportional to score in EIU survey on Best Place to Do Business 2006-10 Uruguay Argentina Brazil • Color coding indicates corruption levels index (TI CPI index, 2006) • Global Competitiveness Index (WEF 2006) • Index 0.0 – 3.3 • Index 3.4 – 6.7 • Index 6.8 – 10.0 • Integrar con Best place to do business EIU Sources: WEF, TI, World Bank

  8. CHILE’S FAVOURABLE BUSINESS CLIMATE IS REFLECTED IN MODERATE TAX BURDEN AND FLEXIBLE LABOR LAWS • 2,600 • 67 • 60 • 42 • 40 • 40 • 38 • 33 • 33 • 24 • 71.1 • 20 • 20 • 552 • 49 • 432 • 37.1 • 26.3 • 23 • 10 • 0 • Number of tax payments per year • Man hours required to file taxes • Total tax rate • (% of profits) • Difficulty of hiring • Rigidity of work hours • Difficulty of firing • Overall index • Mexico • Brazil • Chile Source: World Bank (www.worldbank.org) 2006

  9. Spain Portugal UK France Netherlands Switzerland Ireland Italy Norway Denmark Sweden Finland Poland Croatia Hungary Czech Republic Russia Canada USA South Korea Mexico Malaysia China Cuba South Africa New Zealand Argentina Brazil Ecuador Peru Venezuela Paraguay CHILE IS A GATEWAY TO THE WORLD OFFERING MAJOR ADVANTAGES TO GLOBAL PLAYERS Web of trade agreements provides access to 90% of OECD economies Web of double taxation agreements covers XX% of OECD economies Switzerland Lichtenstein Iceland Norway Canada USA South Korea Japan European Union Mexico China El Salvador Brunei India Panama Singapore Australia Uruguay Paraguay Argentina Brazil New Zealand In negotiation In negotiation • OJO Hay cosas que corregir y completar Source: www.ideaincuba.cl/new_inc/CONTENT/bio4.htm

  10. A “FOREIGN INVESTOR FRIENDLY” ENVIRONMENT • Legal framework guarantees foreign investors a full bill of rights • Inhibits government from adversely changing legal environment • Over USD 75 B invested under DL 600 regime • 89% of that since 1990 • Chile second after Singapore in 2005 FDI inflows as % GDP ?? • Simple to set up and run a business • No joint venture requirements • foreign companies may have 100%-owned subsidiaries • Minimal bureaucracy and no bribes involved • It takes less than a month to start a business • - no Latin American country does it faster • Easy to repatriate capital and dividends • May enter most of the funds invested as a loan • Can repay loan without any obstacles or taxes • “Most companies don´t know how easy it is to do business in Chile” • Country Manager, Evalueserve • OJO Hay cosas que validar

  11. CHILE OFFERS A UNIQUE QUALITY OF LIFE AT A VERY REASONABLE COST • Personal safety and overall quality of the environment are big benefits • Mercer Cost of Living Index 2005: • Chile among lowest in the world • Rank Personal safety (homicides /100m hab.) 0 • Santiago • Monterrey • 1 • 4 • 18 • 46 • 57 • 70 • 95 • 114 • 128 • 144 • Tokyo Dearest • Moscow • Stockholm • Madrid • Miami • Boston • Mexico City • Sao Paulo • Santiago • Asunción Cheapest • Montevideo • Buenos Aires • Miami 10 • Bogota 20 • Sao Paulo 30 40 • Rio de Janeiro 50 60 Low High • UNDP Human Development Index Source: América Economía Magazine (www.americaeconomia.com), 2006, UNDP (www.undp.org), 2006, Mercer Human Resource Consulting (www.mercer.com), 2005

  12. IMAGES OF SANTIAGO • OJO Hay cosas que corregir y completar

  13. IMAGES OF CHILE • No incluida para aligerar

  14. STRONG GOVERNMENT COMMITMENT TO TURN CHILE INTO A GLOBAL IT SERVICES PLATFORM “Increasing productivity also means innovation… I want this to be a country that not only exports copper, but also mining software; not only fruit, but also techniques to pack and preserve foods; not only salmon, but also vaccines to prevent diseases in fish. The public sector will increase its spending on research and development by 50%. Our goal is for our country to spend more than 1% of GDP on research and development by its Bicentennial in 2010. We will increase our efforts to make Chile a platform for the export of services.” Michelle Bachelet, President of Chile, State of the Nation Address 2006

  15. AGENDA • The Chilean Business Environment • Chile: The Nearshore Platform of Choice • HCL and the Chilean Nearshore Opportunity

  16. A NEARSHORE BASE IN LATIN AMERICA HELPS INDIAN OFFSHORING LEADERS RESOLVE KEY CHALLENGES Rising labor costs and attrition rates due to breakneck pace of IT industry growth create need for alternate talent pools Increased customer interaction required in higher value-added IT services that Indian offshoring firms are targeting Growing concerns about over-dependence on India due to geopolitical risks Mounting restrictions for work permits to Indian nationals for security reasons • U.S.A. • India • Chile Ample access to IT professionals at costs soon comparable to India’s Chile is on same time zone as Eastern U.S. during much of the year and 3 hours away from the U.K. during remaining months Easy overnight flights to the U.S and direct flights to Europe Chile has declared the development of nearshore facilities a national priority

  17. A.T. KEARNEY RANKS CHILE AMONG THE 10 MOST ATTRACTIVE COUNTRIES FOR SERVICES OFFSHORING 8 Gap between India and Chile shrunk 40% between 2003 and 2005 7 6 5 Cost 4 3 Environment 2 1 0 People India Czech Rep. Malaysia Singapore Canada Mexico (#17) Chile China Philippines Thailand Brazil Economist Intelligence Unit also ranks Chile 1st in Latin America among future leaders in global offshoring Source: A.T. Kearney Global Services Location Index (2003, 04, 05), EIU Offshoring Rankings, in CEO Briefing: Corporate Priorities for 2005 (2005)

  18. Data Entry Clerk Junior Programmer 10 20 8 15 6 10 4 5 2 Argentina Argentina Chile Mexico Chile Mexico Brazil Costa Rica Brazil Costa Rica CHILE’S LABOR COSTS ARE COMPETITIVE Annual Compensation in US$ ‘000 Mandatory employee-paid benefits Cash compensation Source: Mercer Human Resource Consulting (www.mercer.com), 2006

  19. CHILE OFFERS TOP TALENT FOR OFFSHORE OPERATIONS • IMD’s World Competitiveness Yearbook ranks Chile high among 60 countries • Times World University Rankings: Chile’s Universities Among Best in Region • Availability of finance skills 1st • Absence of Brain Drain 2nd • Attitudes toward globalization 2nd • Credibility of managers 2nd • Availability of qualified engineers 3rd • Labor market conditions 7th • Education in finance 8th • Information Technology skills 11th • Standards of university education 11th • Overall Position 19th • 1 • 2 • 3 • 4 • 5 • 6 • 7 • 8 • 9 • 10 • 11 • Autonomous University of México • Catholic University of Chile • University of Buenos Aires • University of Chile • University of Sao Paulo • Universidad Austral • Federal University of Rio de Janeiro • Catholic University of Peru • State University of Campinas • Torcuato di Tella University • Adolfo Ibañez University Source: International Institute for Management Development (www.imd.ch), 2005; The Times World University Rankings (2006)

  20. CHILE’S NETWORK OF HIGHER LEARNING INSTITUTIONS SPANS THE ENTIRE COUNTRYCOMPLETAR • OJO Hay cosas que corregir y completar

  21. CHILE’S TELECOM INFRASTRUCTURE IS LEADING EDGE 2,5 2,5 Optical fiber networks Mobile networks Chile ranks 11th worldwide in mobile phone penetration, with 62 subscribers per 100 inhabitants 100% digital Chile leads in Latin America with 28 subscribers and XX broadband connections per 100 inhabitants EMERGIA Submarine Arica to Valparaíso Land-based Valparaíso to Argentina 40 Gbps (1,92 Tbps) GLOBAL CROSSING Submarine Lurín to Valparaíso Land-based Valparaíso to Santiago-Argentina 40 Gbps (1,28 Tbps) SILICA NETWORKS Santiago to Argentina: 2,5 Gb 5,0 Fixed telephony 0.62 5,6 Internet Satellite networks 12,6 0,1 270 Mbps 12,5 Microwave networks 140 MBps 15,0 7,5 15,0 2,5 Source: Subtel, Chilean Ministry of Transport and Telecommunications

  22. 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 90 95 00 05 DOMESTIC DEMAND IS AGAIN EXPANDING RAPIDLY Annual sales ($M) • Larger players may well be strong partners and SMEs provide access to top talent • 500+ IT companies active in Chile • Over 75,000 people employed • Size distribution (# employees) • 50 or more 12% • 10 to 49 44% • Less than 10 44% Hardware Software Services Source: ACTI AG, 2005

  23. A RECORD OF SUCCESS AS AN OFFSHORE BASE Some Representative Examples

  24. Banco Santander established a regional offshore center for IT services in 200X • Focus on software development and maintenance • Serving 10 BSCH banks in 10 countries • Invested some US$ 8M to get it up and running • Experience proved highly successful • Chilean GM led the process • Quickly achieved high productivity and quality standards • CMMi 5 by 2005 • Costs 60% lower than in Europe • Developing into a major player Chile’s IT industry • Over 500 employees • 2005 exports of US$ 60M • OJO Hay cosas que corregir y completar

  25. OJO Hay cosas que corregir y completar

  26. Our Long Term Agenda • To turn Chile into the “nearshore platform of choice” within Latin America • Best academic center for IT professionals within the region • Most attractive place for Latin IT professionals to live and work • as well as non-Latin offshoring professionals • A highly cosmopolitant, vibrant offshoring hub • A strong web of partnerships between global and Chilean firms • To generate 100,000 offshoring jobs within 5 years • Te reach US$ 5,000 million in offshoring ITS/BPO/KPO exports by 2012

  27. AGENDA • The Chilean Business Environment • Chile: The Nearshore Platform of Choice • HCL and the Chilean Nearshore Opportunity

  28. MANY WIN:WIN OPPORTUNITIES FOR CHILE AND HCL • HCL nearshore facility in Chile serving U.S. and Latin American clients • HCL product development partnerships with Chilean companies • New products/services/capabilities to feed your offshore clients • HCL commercial partnerships • New clients developed in partnership with Chile’s companies • across all of Latin America • Easier access to both the U.S. and the EU markets • Staying at parity or better with HCL’s leading competitors in building a global business model

  29. CHILE’S GOVERNMENT IS PREPARED TO HELP YOU SET UP YOUR NEARSHORE OPERATIONS • Single point of contact within public sector for Indian ITS firms  CORFO • Full range of information and investment support services • Well developed set of incentive programs for offshoring operations • pre-investment studies • support during early project stages • personnel training • fixed assets and long term leases • investments in R&D • Three specific CORFO support programs to help offshoring firms in Chile • Support for immigration of foreign IT professionals • visas, rellocation expenses, tax credits • Internationally competitive incentives for industry-specific expenses • recruiting, training and purchase of specialized assets • Ad hoc regulatory relief and enhancements • facilitation of customs procedures and data security guarantees

  30. CIVIL SOCIETY AT LARGE ALSO READY TO SUPPORT YOUR ACTIVITIES IN CHILE • ACTI as your industry association in Chile • Negotiating collaboration agreement with NASSCOM • CPC as the umbrella business organization in Chile • Actively pursuing initiatives to turn Chile into an offshoring platfom • Leading universities ready to develop tailored programs • Catholic University is designing a new undergraduate engineering program • and wants your input • Adolfo Ibañez University´s new Engineering School keen to collaborate • Network of regional universities can train the required professionals • University of Chile´s Engineering School may champion the effort • Technical institutes eager to meet your specific needs, including • INACAP tailored technical training programs (eg. with Caterpillar) • DUOC’s successful English-language courses • Pro Innovation Forum is a major champion of your industry and stands behind you

  31. CHILE IS RESPONDING TO SPECIFIC REQUIREMENTS EXPRESSED BY INDIAN OFFSHORING FIRMS • New visa regime for Indian businessmen • Exemption from limits on the hiring of foreign nationals • Program to support immigration of IT professionals from other countries • 1400 L-1 visas available for Chilean professionals to work in the U.S. under Chile / USA Free Trade Agreement • 90% currently go unused • Free trade zone in Northern Chile interested in offshoring tenants • Offshoring one of the major thrusts in new public/private Digital Agenda 2.0

  32. SUGGESTED NEXT STEPS • Reflect on any issues raised by HCL and take appropriate action if required • Support your in-depth country assessment process • Follow-up meetings in Santiago or abroad • HCL can apply to the relevant incentive programs from CORFO

  33. How can we move forward?

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