BPO - Call Center Sector - Proexport

Call Center/BPO Industry in Colombia September 2009

Call Center/BPO Industry in Colombia

Competitive Operational Cost

Human Resources

Industry Maturity

Infrastructure

Business Environment

2. Services to investors

Main Drivers Of the services industry Human Resources Business Environment Industry Maturity Infrastructure Competitive Operational Costs

Savings up to 284% in Systems Engineers careers

Savings up to 80% in Internet cost

Savings up to 43% in average building cost

The most competitive salaries in Latin America US$ 2007 (monthly wage) Source: Salary Expert - Human Capital Average building rental costs at competitive prices (US$/m2) Source: Colliers International A+ and A Buildings Average competitive Internet cost per month for 1Mbps (megabytes per second) Source: CISCO Barometer Competitive Operational Costs: The lowest in Latin America Systems Engineering Electronic Engineer Chile 5,574.43 5,674.72 Brazil 3,873.67 3,943.86 Peru 2,944.06 2,997.51 Mexico 2,658.67 2,706.64 Argentina 1.753,40 1,784.93 Colombia 1,452.00 2,064.00 US$ Peru 81 Chile 60 Venezuela 47 Colombia 45 Argentina 45 Brazil 42

The longest working daytime shift in Latin America Competitive Operational Costs: The longest daytime working shift time in Latin America Source: Colombia: Law 50 of 1990 and Law 789 of 2002. Mexico: LeyFederal Law of Labour of 1969. Costa Rica: Law 2 of 1943. Ecuador: Labour Code 2005. Argentina: Law 11.544 of 1933 and 20.744 of 1976. Country Daytime Night Colombia 6 a.m. - 10 p.m. 10 p.m. - 6 a.m. México 6 a.m. - 8 p.m. 8 p.m. – 6 a.m. Costa Rica 5 a.m. – 7 p.m. 7 p.m. – 5 a.m. Ecuador 6 a.m. – 7 p.m. 7 p.m. – 6 a.m. Argentina 6 a.m. – 9 p.m. 9 p.m. – 6 a.m

Competitive Operational Costs: 50 to 60% more competitive than the United States Compared with United States, Colombia is 50-60% more competitive Source: Mckinsey Interviews

Data

Voice

Knowledge

15.53

1.53

9.90

6.40

Labor

Facilities

IT/ Telecom

1.14

SG&A

11.48

Total

15.53

32.90

USA

9.18

India

15.30

1.53

9.90

6.40

1.14

11.40

33.01

10.70

57.37

19.31

Spanish

English

3.1

0.84

2.9

0.95

3.7

0.94

$US/FTE/Hour

24.4

3.2

32.3

Source: Manpower Costs for Call Center Agent - US$ (per month) The lowest Labour Costs in LATAM Competitive Operational Costs: The Lowest Labour Costs Country Basic Wage Added Cost Direct Costs Colombia 300 52% 441 Mexico 320 40% 448 Venezuela 280 88% 451 Brazil 267 84% 492 Uruguay 427 36% 582 Argentina 410 47% 601 Chile 470 56% 733

Competitive Operational Costs: Broad band Cost of E2 is one of the most competitive in the region Cost US$/Year Source: Mckinsey

Total of enrolled students in Colombia (2001 – 2006) Technical ( 2 or 3 years taking courses) Technical ( 4 or 5 years taking courses) Human Resource: over 800.000 enrolled people, ready to work in call centers

Human Resource: over 676,000 technicians and university graduates Number of university graduates in Colombia (2001 - 2006)

In 2006, up to 50% of the undergraduates obtained a bachelor’s degree in Business and Engineering careers

Over 60% of the technicians who graduated in 2006 belong to Engineering and Business programs

Source: Ministry of Education of Colombia Number of university graduates in business related careers (2001 - 2006) University Graduates Technicians 2005 2006 2005 2006 Business Careers 22,450 21,340 7,916 6,545 Engineering and Architecture 25,127 21,119 8,360 7,495 Social Sciences 15,848 15,659 1,178 6,020 Health Sciences 10,270 8,870 594 619 Education Sciences 7,428 7,427 - - Others 8,304 8,045 2,368 1,984 Total Colombia 89,427 82,460 20,416 22,663

Human Resource: Available and Highly Qualified Workers Third place in number of universities registered, among the major Latin America countries in 2007 Source: Consejo Superior de Investigaciones Científicas (CSIC), organization attached to the Ministry of Science and Technology of Spain Source: The World Competitiveness Yearbook 2008 Source: Higher Education Secretariat, Brazil; labor observatory, Mexico; labor observatory, Colombia; ministry of education, Argentina; ministry of education, Chile; ministry of education, Uruguay The highest index in Latin America, according to the IMD World Competitiveness Availability of Qualified Labor (10=Fully available qualified work) Colombia, leader in information technology engineering and business careers graduates Third place in number of university graduates in the sector among the main countries in Latin America in 2007 # of Graduates Administration Careers # of Graduates IT Engineering Brazil 55,181 10,766 Mexico 61,813 13,005 Colombia 21,340 6,824 Argentina 18,640 4,047 Chile 8,353 9,205 Uruguay 1,032 235

Human Resources: Multiple development centers

Colombia has multiple medium size cities with available and qualified labor pool

Cities as Manizales are developing their economic strategy attracting call centers

Source: Mckinsey Total population in large and medium cities

The Service Market in Colombia grew 39.5 % between 2005 and 2007 Industry Maturity: A growing market Service Offshore Market Value in Colombia: US$ 1,013 million in 2007 Source: IDC

Source: IDC Only Colombia and Brazil show a clear growing trend in this sector in the region. IT Industry share in Latin America (2007) Industry Maturity: IT Services share in Colombia is the highest in Latin America LA Argentina Brasil Colombia Chile Perú Venezuela Hardware 27.383 1.988 9.896 1.187 1.683 638 1.880 Software 6.345 405 3.153 211 257 94 254 Services 13.945 725 7.697 1.013 651 231 270 Total IT 47.673 3.118 20.746 2.411 2.591 963 2.404

Growth in outsourcing due to FDI in Call Centers and BPO Industry Maturity services grew by 15% in 2007: Source: ACDCC; Sector Business Idea; Invest in Bogota 2005 2006 2007 Deploy and Support 241,56 275,36 326,23 Outsourcing 227,01 275,64 314,12 Integration and Development 154,64 169,38 228,38 Consulting 85,24 97,32 120,14 Education and Training 17,92 20,94 24,4 Total 726,4 839 1.013,30

Source: ACDCC; Sector Business Idea; Invest in Bogota BPO and Call Center Income has doubled in less than two years US$ Millions 2005-2007 The number of Employees increased by over 100% between 2005 and 2007 Thousands 2005-2008 Exports grew over 200% between 2005 and 2007 US$ Millions 2005-2007 Source: ACDCC; Sector Business Idea; Invest in Bogota Source: ACDCC; Sector Business Idea; Invest in Bogota In only two years, income and employment have doubled, while exports have tripled. Industry Maturity: Positive trends

Source: CCIT Industry Maturity : Main Call Center in Colombia Atento increased it number of agents in 2006 in 200%. Currently employs more than 6.000 poeple in Bogota and Bucaramanga Sitel employs in Bogota, Barranquilla and Cali more than 3000 agents serving more than 30 clients in Latina America and United States Digitex has almost 3000 agents. The company recently opened a new Call Center in Ibague 250 professional selling high end products to Latin America customers 300 bilingual agents giving technical support and sales to Latin America The bank relocated from Barcelona to Bogota 400 services and sell positions Support services to Banco Santander (Spain) from Bogota. Currently employs more than 400 people, and forecast 600 in mid 2009

Source: CCIT Industry Maturity : Main Service’s companies The Spanish multinational supplier of technology for the travel and tourism industry, has opened an operation in Bogota to source the Americas From Bogota, the U.S. firm begins to provide design services for its global customers. Since 1986, the pioneer in the world of outsourcing in Bogota serves a wide range of companies from different sectors. Since 2002, this Mexican multinational IT service provider is present in Bogota with its third largest operation in America. In Bogota this multinational expands its global footprint in response to local customers. Launched recently operation center in Bogota, which plans to increase its presence in Latin America and improve the level of customer satisfaction today. From Bogota, 200 consultants providing IT services to America at the Center for Managed Services largest multinational in this region.

Infrastructure: Major investor in Latin America Source: The World Competitiveness Yearbook 2008 - Internet World Stats 1.56% in Telecommunications investment, as a percentage of the GDP (2008)

US$ 4 billion , will be the investment in telecommunications in 2010. In FDI, Colombia has accumulated U$ 2.5 billion in the past six years.

6 submarine cables , which have enabled an outlet bandwidth of 220 Gbps. It will be upgraded to 7 shortly with CANTV-ETB.

10 times more Internet users in the past seven years.

Third country in terms of Internet users Millions (2007) Submarine cables in Colombia

The total growth of broad band connections in Colombia has undergone a marked dynamism, exceeding global and regional growth. With a 114.1% increase , Colombia was the Latin American country undergoing the highest increase in the total number of connections between December 2005 and December 2006. 3,500,000 is the number of connections estimated by IDC for Colombia in the year 2010. Source: IDC Source: Cisco Barometer Growth in terms of total connections December 2005 - December 2006 Infrastructure: We doubled connections to broad band Broad Band Connections Over 13 million broad band connections are estimated to exist in Latin America Type of Connection Technology Total Connections December 2006 June 2007 Internet lines 4,981.00 6,801.00 ADSL, Modem Cable, Fixed Wireless 617,781.00 827,012.00 Other Connections: Satellite, etc. 5,353.00 5,376.00 Total broad band 628,115.00 839,189.00

Business Environment: Reliability for Industry Stability of the Regulatory Framework (higher score = greater consistency) Data Protection (1 = poor, 5 = good) Source: Office of Mckinsey business technology; Spanish Agency for data protection; WCY Address government policy Colombia stands out for its achievements in regulatory stability, being located among the countries with the highest index of consistency Colombia maintains a good level in terms of data protection, can be found at the same level of countries like Mexico and India

15% corporate tax tariff and allows sales to the local market

No customs duties are levied or paid (VAT and TARIFF) on finished goods, supplies, and raw materials that enter through these zones, whether from the national customs territory or from other countries.

Possibility of exporting services from the free trade zone, both to the national territory and to other countries.

Exports from the free trade zone to other countries benefit from international agreements.

Competitive Free Trade Zone Regime

In 50 years (1958 - 2007) only eleven free trade zones were created

2007 - 2008

37 new Free Trade Zones approved since April 2007

7 Free Trade Zones being processed

Business Environment: Attractive investment incentives ZF Being processed *ZF Approved

VAT Exemption for Services provided abroad

The service exports from Colombia can be exempt of the VAT if they meet the following requirements:

The service is provided from Colombia.

The service is provided to a consumer (company) that has no type of operation within Colombia.

Register the service provision agreement before the Colombian Industry, Commerce and Tourism Ministry.

Business Environment: Attractive investment incentives

This tax benefit allows the investor to import capital goods that will be used to export services, with complete or partial exemption of custom duties and postpone the payment of VAT.

This tax benefit requires that the investor exports 150% of the FOB value of the productive assets imported under the Especial Import – Export Mechanism.

The investor must provide an insurance policy or global bank guaranty o 20% of the FOB value of the productive assets imported under the Plan.

Business Environment: Attractive investment incentives Special Import – Export Mechanism

The services related with research and technology that can apply to the tax benefit are the following:

Computer services and other related

Research and development services

Telecommunication Services

The Division of Especial Programs will approve or reject the “Especial Import – Export Mechanism” tax benefit program within 10 days from the filing of the application and will notify the applicant.

Colombia through the Law 170 of 1994, adopted the Agreement that created the World Trade Organization WTO and with it the General Agreement on Trade in Services (GATS).

Special Import – Export Mechanism Business Environment: Attractive investment incentives

Investments over USD 1,900.000

Investor must pay a premium to the Government equivalent to 1% of the investment made.

* These contracts exclude rules regarding the social security system, the obligation to report and pay taxes levied by the government under a state of emergency, indirect taxes (i.e., the VAT or the tax on banking transactions), prudential regulations of the financial system and the utility rate system. Period Admission Technical report Evaluation and approval of the application Final evaluation Objective Guaranteeing the legislation and administrative interpretation considered as a determining factor for the investment project. Conditions From 3 to 20 years maximum. Investors can subscribe Legal Stability Contracts with the Colombian Government Business Environment: Attractive investment incentives

Tax deduction of 40% of the value of the Fixed Productive Assets acquired.

Tax deduction of the 100% of the Industry and Commerce Tax and the Real State Tax, paid in the corresponding tax year and which have direct relation with the taxpayer.

Tax deduction of the 25% of the financial operations tax withholding, regardless the economic activity of the taxpayer.

Other tax benefits Business Environment: Attractive investment incentives

Success Story CITIBANK “ The talent, preparation and skills for customer service that distinguishes Colombians, have been fundamental for us to feel comfortable to move our customer service and collection operations to Colombia” Sergio de Horna, Citibank President Spain

From Bogotá, Citibank shared services operation provides:

Outbound

Collection

Product sales

Inbound

Product support for clients

Customer service

Provides services to 12 different countries

Overall Citibank's operation employees over 2.000 people

Success Story UNISONO - SANTANDER “ "Colombia is one of the countries with big potential due to it’s economic growth, labor cost and government support to the sector. Now we have an additional motivation: We are special trade zone” Ana Isabel Iglesias, Unisono President Colombia

From Bogotá, Unisono provides services for Banco Santander (Spain) with more than 600 agents who attend corporative and customers from Spain.

Outsourcing of sales and customer service operation

Key qualitative factors in IT Services

Service oriented people

Macroeconomic and political stability better than other countries in Latin America

Neutral accent

WHY COLOMBIA

Cheaper than Mexico

Better service attitude than Argentina

Is not saturated as Costa Rica or Uruguay

Human Resource

Industry Maturity

Infrastructure

Value Proposal Colombia is the best option for Call Center services investors who are looking for service oriented labor pool, cost competitive location, and a strategic location for services supply to Americas and Spain One of the most qualified and service oriented labor pools in LATAM: More than 800.000 enrolled university students Cheapest agents in the region Growing market of US$ 1 billion: almost 42% in the last three years Second lowest E2 cost in LATAM: US$ 35,000/year Free Trade Zone regime, specially designed for IT services companies: 50% off Corporate Tax and sales to the local market

Time Zone Strategic Geographic Location Challengers Up and comers Startups Value Proposal Colombia is the best option for Call Center services investors who are looking for service oriented labor pool, cost competitive location, and a strategic location for services supply to Americas and Spain Flight Times Los Angeles Miami New York Houston Madrid Mexico City Bogotá 8.30 H 3.40 H 6.00 H 5.15 H 10.22 H 4.25 H Lima 8.35 H 5.30 H 7.47 H 6.30 H 11.30 H 5.45 H Buenos Aires 15.00 H 9.15 H 14.50 H 10.30 H 12.15 H 9.25 H México City 4.00 H 3.00 H 4.35 H 6.00 H 10.15 H - Santiago 11.30 H 8.45 H 10.50 H 12.25 H 12.55 H 8.30 H Los Angeles New York Miami Houston México City Santiago de Chile Buenos Aires Madrid -3 hours Same time Same time -1 Hour -1 Hour +2 Hours +2 Hours +6 Hours IT Engineers and Business Graduates ( #) 28,164 Labor Cost (US$/month) 1,452 Internet Cost (US$/year) 35000 Ranking - Doing Business 66 (17) Share IT Services 44% IT Engineers and Business Graduates ( #) 74,818 Labor Cost (US$/month) 2,658 Internet Cost (US$/year) 30000 Ranking - Doing Business 44 (-3) Share IT Services NA IT Engineers and Business Graduates ( #) 22,687 Labor Cost (US$/month) 1,753 Internet Cost (US$/year) NA Ranking - Doing Business 109 (-8) Share IT Services 24% IT Engineers and Business Graduates ( #) 65,947 Labor Cost (US$/month) 3,873 Internet Cost (US$/year) 45000 Ranking - Doing Business 122 (-8) Share IT Services 42% IT Engineers and Business Graduates ( #) 17,558 Labor Cost (US$/month) 5,574 Internet Cost (US$/year) 50400 Ranking - Doing Business 33 (-5) Share IT Services 33%

Call Center/BPO Industry in Colombia

Human Resources

Industry Maturity

Infrastructure

2. Services to investors

Bancoldex as Colombia’s EXIM Bank provides development multi-bank integral solutions.

Working capital.

Investment in fixed or deferred assets

Substitution of debts (except liabilities with partners)

Total or partial purchase of companies related to the foreign trade sector.

Including creation of new companies, acquisition of shares or equity quotas.

Amount : Up to 100% of the investment, always provided if the amount requested does not exceed the total amount of exports and / or projected imports or invoicing during the credit term.