President Mauricio Macri came to power in Argentina in December and has set his sights on revitalizing the economy. The administration has put a particular emphasis on expansion of the ICT sector, adding incentives to bring in spur growth. Amid economic instability that spans the region, the government has set ambitious targets. New ministers and staff deployed to key posts will be key to meeting these goals.
Entrepreneur Carlos Gabriel Pallotti has taken on the role of the undersecretary for technology and Production services in Argentina’s Ministry of Production, Science and Technology. He sat down with Nearshore Americas to discuss his new role and his plans to grow the country’s IT services.
Nearshore Americas: What is the focus of your new post and the government in terms of IT services?
Carlos Pallotti: The new government understands that the knowledge services — including engineering, IT, BPO, and media services — is one of the key points to improve the economy with new revenues and employment. It is a key focus for government. We believe it is possible to create at least 80,000 new jobs and generate an additional $4 billion in order to reach an annual $1 billion in exports.
This is the only sector in the economy that has a special section to work together with the private sector in order to grow the sector. The other sectors, like automotive or mining, have different areas to engage with government but not a specific office like in this case. The president and the key government ministers believe that this is one of the best opportunities that we have in order to grow faster in global markets.
This is a new administration. President Macri won last election and took power on December 10. This government wants to change a lot of what Argentina is doing in terms of the macro-economy and in terms of micro-economy. In macro-economic terms, the focus is on the big numbers of the economy to stabilize the economy and protect it as a competitive country. In terms of the micro-economy, the focus is on the sectors that have a better possibility to grow or to improve the quantity of services provided. Our focus is not just on IT, but also on high value BPO, design, and multimedia, such as film production, animation, and video games.
NSAM: How are you addressing these targets?
Carlos Pallotti: We are working in three or four main areas. The first is in terms of growing the economy faster. We are working with the private sector, especially large national and international companies, in order to create more jobs especially in the top quality of services. Argentina is a country with talented professionals in middle and high-end services. It is not cheaper than other countries in terms of low-end services, but it is very competitive in terms of high-level services.
The second area is to work with the education system to improve the quantity and quality of our students in IT-related fields. We are going to train at least 100,000 coders, programmers, and others with technical skills in the next four years. This is a tremendous target because 100,000 is a very high number for Argentina, but we believe we can do it. We are also working on improving the quality — especially in terms of other skills, such as language skills, not only in English but also French and German — because we need to provide service for Uruguay in different languages, for example. We are also working with the “finishing school” programs to improve the numbers of engineers and other skilled professionals including Ph.D.’s in IT, science, and related areas.
There are over 14 million students in Argentina with a free education system, so the potential is there. We are working at all levels of the educational system. One of our greatest priority focus areas is training in the third level of education, after secondary school and before university. We have six-year universities in Argentina, so it takes six years at university for software engineers to become qualified. But we want to put more attention on training in that two- or three-year period to focus on developing social networks specialties and Java programmers to allow the industry to hire more quickly.
Lastly, we are working in the regional development in order to find and work with different Argentinian cities to create at least five large centers in different parts of Argentina. Today, the industry is concentrated mainly in Buenos Aires and then in Cordoba, but we have several other locations. We need to look at the quantity of people working in each and improve the quality of talent there. In addition to the five large cities, we are also looking 20 or 25 middle or small cities with good universities or educational systems in order to create the opportunity to develop export services. We are selecting the best places and are still taking the decision about which cities will be selected.
NSAM: How are these new locations being selected?
Carlos Pallotti: First of all, it is the availability of talent. What is the educational system like? How many universities and IT programs are there? The second factor is what kind of environment is there. Are there local companies, international companies there? If a city has 2,000 workers in 25 companies they have a greater probability of growing from 2,000 to 10,000 than a city with just 500 workers in that sector. We also look at the tax incentives or regional incentives to create new companies. We look at infrastructure, bandwidth, and transportation.
NSAM: What kind of timeframe is planned to achieve these things?
Carlos Pallotti: Our plan is both four and eight years. The president has a four-year mandate, but we believe the president can achieve a second term, hopefully. The four-year term is the more realistic.
In four years, we intend to add 80,000 technical and professional employees and reach at least $10 billion as total revenue on this activity. Today Argentina exports $6 billion. In eight years, we plan to add 200,000 employees.
NSAM: Are there specific verticals or parts of the sector that you are targeting?
Carlos Pallotti: Argentina excels in the middle and top part of quality of services. Argentina is not cheap, like India, for many reasons. Our workers want to enjoy an “occidental” quality of life, and we like this idea. For this reason, Argentina is a country that can provide a quantity and quality of services that is similar to that provided in the best countries in the world. We are very competitive in these areas, in for example R&D, very technical services, and animation. Argentina has one of the one of the best animation studios, like Pixar or Dreamworks. Mundoloco, which made the movie Underdogs, creates 3D animation with a similar quality to that of big U.S. studios.
Other areas where Argentina is competitive include high-quality legal services, analytics, financial services, development software for critical services, and engineering services for design. We are working to find new investors and companies, and to help global companies to grow faster. There are already global companies here such as IBM, HP, Accenture, PWC, Citibank, and ExxonMobil, and we are working with them to grow and add more people.
NSAM: Are you also pushing for domestic growth?
Carlos Pallotti: The domestic market for Argentina is not so bad in terms of penetration of digital services. Our performance in digital government and other services is pretty good, but we do not need many workers to deal with the domestic workers, and for that reason we can put all our new workers for export market.
We are working together very hard with the private sector to make this growth happen. I came from private sector as an entrepreneur and businessman and former head of one of the most important IT associations in Argentina, so I know the private sector very well. The government is helping the private sector to grow the industry.
NSAM: Overall how are you feeling about Argentina’s positioning in the services sector?
Carlos Pallotti: I am optimistic. If you look at the region, Argentina competes with a number of other Latin American countries like Colombia, Chile, Mexico, Brazil, and Costa Rica. But we also compete with Eastern Europe — against countries like Poland and Czech Republic —and with Asia Pacific more than with other countries in the region. When a large, global corporation decides to move a service sector or shared service from one place to another place in the world, they look first at the region and then at the best country in the region. Argentina competes in the global market.
Brazil is the largest exporter in terms of services in Latin America, they export roughly $24 billion each year, but they are more importer than exporter. But Brazil is in a very difficult moment in terms of the economy and the political environment and for this reason it is not the right moment to install in Brazil and so we are saying why not consider Argentina instead of Brazil.