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

Presentation to

January 15, 2007

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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

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AGENDA

The Chilean Business Environment

Chile: The Nearshore Platform of Choice

HCL and the Chilean Nearshore Opportunity

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AGENDA

The Chilean Business Environment

Chile: The Nearshore Platform of Choice

HCL and the Chilean Nearshore Opportunity

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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

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CHILE AT A GLANCE

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

Sources: World Bank, EIU, IMF, A.T.Kearney 2006

Vital Statistics (2006)

Time zone alignement

Overnight flights to the U.S.

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CHILE: A GLOBALLY COMPETITIVE, HIGHLY DYNAMIC AND TRANSPARENT BUSINESS ENVIRONMENT

GDP Growth Rate

(CAGR %, 1986-2006)

Australia

Canada

Chile

Costa Rica

Czech Republic

Hungary

I reland

Mexico

Phillipines

Russia

0

1

2

3

4

5

6

7

3.75 4.75

Uruguay

Argentina

Brazil

Chile

Global Competitiveness Index

(WEF 2006)

Circle size

proportional to score

in EIU survey on

Best Place to Do

Business 2006-10

Index 0.0 – 3.3

Index 3.4 – 6.7

Index 6.8 – 10.0

Sources: WEF, TI, World Bank

Color coding indicates corruption levels index

(TI CPI index, 2006)

Integrar con Best place to do business EIU

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CHILE’S FAVOURABLE BUSINESS CLIMATE IS REFLECTED IN MODERATE TAX BURDEN AND FLEXIBLE LABOR LAWS

Source: World Bank (www.worldbank.org) 2006

Brazil Mexico Chile

Number of tax payments

per year

Man hours required

to file taxes

Total tax rate (% of profits)

49

10

23

552

2,600

432 37.1

71.1

26.3

Difficulty of hiring

Rigidity of work hours

Difficulty of firing

Overall index

33

67

33

40

60

20

40

20

0

38

42

24

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Web of trade agreements provides access to 90% of OECD economies

Source: www.ideaincuba.cl/new_inc/CONTENT/bio4.htm

Web of double taxation agreements covers XX% of OECD economies

CHILE IS A GATEWAY TO THE WORLD OFFERING MAJOR ADVANTAGES TO GLOBAL PLAYERS

Canada USA

Mexico

El Salvador

Panama

Uruguay Paraguay Argentina Brazil

Iceland

European Union

Norway

Switzerland Lichtenstein

South Korea

Japan

China

Brunei

New Zealand

Singapore

India

In negotiation

Spain Portugal UK France Netherlands Switzerland Ireland Italy

Norway Denmark Sweden Finland

Poland Croatia Hungary Czech Republic

Russia

South Korea

Malaysia China

New Zealand

South Africa

Cuba

Mexico

Canada USA

Argentina Brazil Ecuador

Peru Venezuela Paraguay

In negotiation

OJO Hay cosas que corregir y completar

Australia

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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

“Most companies don´t know how easy it is to do business in Chile”

Country Manager, Evalueserve

Easy to repatriate capital and dividends• May enter most of the funds invested as a loan• Can repay loan without any obstacles or taxes

OJO Hay cosas que validar

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Personal safety

(homicides /100m hab.)

UNDP Human Development IndexLow High

Miami

Santiago

Buenos Aires

Montevideo

Monterrey

Bogota

Sao Paulo

Rio de Janeiro

60

50

40

30

20

10

0

CHILE OFFERS A UNIQUE QUALITY OF LIFE AT A VERY REASONABLE COST

Source: América Economía Magazine (www.americaeconomia.com), 2006, UNDP (www.undp.org), 2006, Mercer Human Resource Consulting (www.mercer.com), 2005

Tokyo Dearest

Moscow

Stockholm

Madrid

Miami

Boston

Mexico City

Sao Paulo

Santiago

Asunción Cheapest

Mercer Cost of Living Index 2005: Chile among lowest in the world

1

4

18

46

57

70

95

114

128

144

Rank

Personal safety and overall quality

of the environment are big benefits

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IMAGES OF SANTIAGO

OJO Hay cosas que corregir y completar

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IMAGES OF CHILE

No incluida para aligerar

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“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

STRONG GOVERNMENT COMMITMENT TO TURN CHILE INTO A GLOBAL IT SERVICES PLATFORM

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AGENDA

The Chilean Business Environment

Chile: The Nearshore Platform of Choice

HCL and the Chilean Nearshore Opportunity

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A NEARSHORE BASE IN LATIN AMERICA HELPS INDIAN OFFSHORING LEADERS RESOLVE KEY CHALLENGES

U.S.A. India

Growing concerns about over-dependence on India due to geopolitical risks

Mounting restrictions for work permits to Indian nationals for security reasons

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

Chile

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

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A.T. KEARNEY RANKS CHILE AMONG THE 10 MOST ATTRACTIVE COUNTRIES FOR SERVICES OFFSHORING

6

5

4

3

7

2

8

1

0

India

Brazil

Mexico (#17)

Singapore

Philippines Thailand

CzechRep.

Malaysia

China

Canada

Chile

People

Environment

Cost

Source: A.T. Kearney Global Services Location Index (2003, 04, 05), EIU Offshoring Rankings, in CEO Briefing: Corporate Priorities for 2005 (2005)

Gap between India and Chile shrunk 40% between 2003 and 2005

Economist Intelligence Unit also ranks Chile 1st in Latin America among future leaders in global offshoring

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CHILE’S LABOR COSTS ARE COMPETITIVE

Source: Mercer Human Resource Consulting (www.mercer.com), 2006

Annual Compensation in US$ ‘000

Cash compensation Mandatory employee-paid benefits

Data Entry Clerk

Brazil

Chile

Costa Rica

MexicoArgentina

2

4

6

8

10

Argentina

Brazil

Chile

Costa Rica

Mexico

Junior Programmer

10

15

20

5

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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

Source: International Institute for Management Development (www.imd.ch), 2005; The Times World University Rankings (2006)

CHILE OFFERS TOP TALENT FOR OFFSHORE OPERATIONS

IMD’s World Competitiveness

Yearbook ranks Chile high among 60

countries

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

Times World University Rankings: Chile’s

Universities Among Best in Region

1

2

3

4

5

6

7

8

9

10

11

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CHILE’S NETWORK OF HIGHER LEARNING INSTITUTIONS

SPANS THE ENTIRE COUNTRY

COMPLETAR

OJO Hay cosas que corregir y completar

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CHILE’S TELECOM INFRASTRUCTURE IS LEADING EDGE

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

2,5

0.62

7,5

0,1

2,5

5,0

5,6

12,6

12,5

15,0

15,0

2,5

Chile ranks 11th worldwide in mobile phone penetration, with 62 subscribers per 100 inhabitants

100% digital

Chile leads in Latin America with 28 subscribersand XX broadband connections per 100 inhabitants

Optical fiber networks

270 Mbps

Satellite networks

Microwave networks

140 MBps

Mobile networks

Fixed telephony

Internet

Source: Subtel, Chilean Ministry of Transport and Telecommunications

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DOMESTIC DEMAND IS AGAIN EXPANDING RAPIDLY

Source: ACTI AG, 2005

Annual sales ($M)

05009590

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0.0

Hardware Software Services

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%

Larger players may well be strong partners

and SMEs provide access to top talent

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A RECORD OF SUCCESS AS AN OFFSHORE BASESome Representative Examples

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OJO Hay cosas que corregir y completar

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

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OJO Hay cosas que corregir y completar

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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

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AGENDA

The Chilean Business Environment

Chile: The Nearshore Platform of Choice

HCL and the Chilean Nearshore Opportunity

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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

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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

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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

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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

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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

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How can we move

forward?