The list of challengers to U.S. tech supremacy may be getting longer. Many pundits say the greatest threats to the nation's status as a tech superpower are China and India. Those people would do well to look south.
Aside from notable exceptions such as Venezuela, South America is a growth dynamo with a young population and rapidly maturing economies. Much recent growth has come from rich natural resources and a commodity bubble that rained cash on farmers, miners, and drillers alike.
Many of the region's countries want to break their dependence on commodity cycles. And, increasingly, they see tech as a way to create sustained, long-term economic development. Chief among them is Chile. Flush with cash from the recent copper boom, Chile aims to attract Northern entrepreneurs who seek a lower burn rate. Business leaders in Chile are closely studying ways to lure the highly skilled H-1B holders trapped in limbo by antiquated and economically backward U.S. immigration rules. With deep pockets and generous incentives, Chile has advantages that may let it join India as a global R&D center.
Entrepreneurs Are Key
To do that, however, Chile needs to take some important lessons from India and China. In particular, Chile must focus on ways to attract entrepreneurs and cultivate innovation -- not just become a hub of commodity outsourced services such as handling customer  service calls.
Chile's aspirations became more focused after 1996, when it lost to Costa Rica in a bid to become the site of a $300 million semiconductor assembly and testing plant for chipmaker Intel. Stung by the setback, the Chilean business community and government developed a national plan to encourage foreign investment. In 2000, the Chilean Economic Development Agency (CORFO) set about marketing the country's advantages as an IT outsourcing center. The agency offered financial incentives for companies to locate there. By 2006, Chile's outsourcing industry was generating $200 million in revenue and employed 6,700 workers.
Buoyed by these successes, the Chilean government got more ambitious and moved up the IT ladder. While lower-level service providers were still welcome, the focus shifted to higher-value services, including applications development and management, systems integration, and the handling of more sophisticated tasks, such as human resources, finance, and supply chain management -- known in industry circles as business process outsourcing (BPO).
Ramping Up Education
The result? In 2008, Chile's outsourcing industry booked $840 million in revenue, employed more than 20,000 people, and attracted companies like Equifax, JPMorgan Chase, Yahoo!, and Oracle. Ral Rivera, chairman of Chile's Foro Pro Innovacin (Innovation Forum) and one of the original architects of Chile's outsourcing strategy, confidently predicts the country can export $5 billion in services by 2015. (continued...)
© 2009 Business Week Online under contract with MarketWatch. All rights reserved.
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