Over the course of the last 7 months we have seen two effects. The first is that the USD devalued sharply compared to all mayor currencies like the Euro and the Yen. And the second effect is that the Chinese Yuan and the Indian Rupee appreciated their currencies against the USD. However, not so for the Argentine Peso. The Argentine Peso has followed the road downward with the USD and even devalued a bit over July to keep its competitive edge.
Please see the following overview:
The combined effect makes outsourcing locations like India, China and Eastern European countries less competitive and outsourcing to Argentina more competitive. The wage rate gap between India and Argentina is thereby closing. When you add that Argentina is in the same time zone as the USA and that it has equal cultural bearings then you can make the calculation yourself. South America, specifically Argentina, increased in attractiveness.
We then look at the average wage rate differential between Argentina and India over 2006. When you deduct 11 % (8 % appreciation Rupee + 3 % depreciation of the Peso) from the 27 % ITO wage differential over 2006 you come to a differential of 16 % over 2007. We see that the gap between Argentina and India is closing.
When we consider the future we see that the Indian economy is seriously overheating which puts even more pressure on the Indian government to appreciate the Rupee against the USD. The government of the United States is also putting a lot of pressure on the Chinese government to appreciate the Yuan against the USD to narrow the current account deficit the USA has with China. Both situations are good news for Argentina that is actually getting more competitive in the face of appreciations of the currencies of competing outsource locations. The Argentine government has given a firm commitment to keep the Peso cheap compared to the USD.
About Connaxis
Connaxis is an Outsourcing Consultancy and Service Delivery Company based in Buenos Aires, Argentina. Our services include Captive Centers and Managed Solutions. One of the activities of the Connaxis Service Delivery Center is its Internet Solution. The Internet Solution offers Web Design; Programming; Internet Marketing; Translations and Multi Lingual Support Services. Connaxis helps companies stay competitive and operates as an extension of the client organization.
For more information on Connaxis
http://www.connaxis.com/outsource-argentina │+54 11 4807 6908
Peter van Grinsven
Peter.van.grinsven@connaxis.com│ Managing Director
