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Delta Airlines

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A03-04-0011

Delta Air Lines: The Latin America
Contact Center Decision

PY

In early September 2000, Mary Smith, Delta Air Lines’ Regional Director of Reservations for Latin
America and the Caribbean, glanced over her notes one more time. Delta had decided to consolidate all of its reservations offices in Latin America into a single Latin America Contact Center. Now it was up to her to recommend a country location for this $3–4 million investment. Gail Childs, her immediate supervisor and General Manager for International Reservations, would want her report soon in order to get the final go-ahead from Delta’s CEO. Although a number of countries were possible options, Mary reviewed again the pros and cons for Mexico, Chile, and Argentina.

CO

The Internationalization of Customer Service

NO

T

By 2000, telephone customer service was growing rapidly throughout the world. Many companies chose to outsource their telephone customer service operations to outside call centers; others kept such operations in-house. Other than locating call centers, also known as contact centers, within a region to be closer to customers, the principal reason for U.S. companies to move telephone customer service outside of the United States was to reduce costs. Because labor costs constituted between 60–80% of a call center’s operating expenses,1 airlines, computer firms, credit card companies, and others that used telephone customer service extensively were moving these operations overseas at a rapid pace. In Latin
America, the rate of growth for such services was over 25% a year.2 While India was a popular low-cost destination for U.S. companies needing English-speaking call center staff, establishing a call center in
Latin America made sense for companies seeking to establish contact centers for customers in that region, or for companies wanting to serve the rapidly growing U.S. Hispanic market.3

DO

As companies sought to move their customer service operations offshore, governments in developing countries sought to attract these investments as a way to diversify their economies and create employment opportunities for their people.4 Much of this investment was in shared services. This referred to the consolidation of identical services performed in different offices or branches or one company, such as sales and technical support, accounting, human resources (e.g., payroll), billing, etc., into one location. The trend was for companies with multiple offices in different countries to consolidate these services in one regional office as a way to reduce costs and provide consistency in customer service. This sort of consolidation of services could take different forms. For example, as in the case of
Delta Air Lines, a company might have all of its reservation calls from customers in a given region

1

“Latin America Company: Call Centres Gain in Popularity,” EIU Regional Economic News, The Economist
Intelligence Unit, June 4, 2003.
2
Andrew Thompson, “Answering the Call,” Latin Trade, January 1, 2003.
3
Brendon B. Read, “Locating Call Centers Closer to Home,” Call Center Magazine, September, 2002.
4
By 2003, the customer service industry worldwide was producing revenue of over USD $200 billion per year, and Latin America alone had over 100,000 call center workers (see Thompson, “Answering the Call”).
Copyright © 2004 Thunderbird, The Garvin School of International Management. All rights reserved. This case was prepared by Professor Roy C. Nelson for the purpose of classroom discussion only, and not to indicate either effective or ineffective management.

channeled through one call center. Over time—although Delta Air Lines itself had no plan to do this— the same company might consolidate its internal operations, such as payroll services from multiple offices, into one regional office.
Some countries even offered special training subsidies for workers, or other incentives in order to lure shared services and call center investment. Nevertheless, the main factors companies considered when making this type of investment were the quality of the telecommunications infrastructure, labor costs, local labor laws, language capabilities, and any problems with regional dialects or accents. They also considered other factors that were relevant whenever companies invested abroad: political and economic stability and the security of their employees.

The Need for the Latin America Contact Center

CO

PY

Delta already had a number of reservations centers in Latin America. The company had acquired its
Mexico office in 1987, after it took over Western Airlines’ Mexico operations in a merger. This had been
Delta’s only office for reservations and sales in Latin America until 1998, when the company began to open reservation centers in other Latin American countries. In 1998, Delta began a rapid expansion in
Latin America, opening offices in Brazil, Venezuela, Panama, El Salvador, Guatemala, Costa Rica, and
Peru.

NO

T

Delta had a number of reasons for consolidating its reservations services in Latin America. The main reason was that doing this would improve Delta’s service to Latin American customers. By having one central reservations center for the whole region, Delta would be able to make use of the latest technology, standardize its operations across the region, and keep the reservations operation open for longer hours. In addition, because of economies of scale, this center would eventually be able to help
Delta save on its operational costs. In 1998, after Delta had expanded quickly into Latin America, the structure of the operations in each country was simply to have 5–7 agents handling reservations in the back offices of local airline ticket agencies. There were nine small offices of this type handling the reservations, each with the Spanish accent local to that country. If Delta had upgraded each of these offices, some estimated that it might cost as much as $2–3 million each!5 Clearly, it made much more sense to open a consolidated reservations center, which would cost no more than $3–4 million.

DO

With such savings, Delta could ensure that the new contact center6 would implement the latest technology. Having one center would also provide consistency of service to Delta’s customers throughout the region. Additionally, it would facilitate the company’s ability to expand and contract its Latin
America operations more easily to meet market demand. This last factor was becoming increasingly important. The number of calls the reservations centers in the Latin America region handled had increased dramatically, rising at a rate of about 25% a year to over one million calls a year by 2000.7

Delta’s Requirements for a Latin America Contact Center Site
The site selection team had considered a number of factors. Clearly, the quality of the telecommunications infrastructure was highly important, since the call center would be receiving 13,500 incoming calls and making over 2,000 outgoing calls every week.8 Any country the team chose would need to have a reliable, efficient, low-cost telecommunications system. Specifically, the country’s telephone system would, preferably, be capable of doing all this over a hard-wire system rather than via satellite. Otherwise, solar flares or dust storms could interfere with the quality of the service.

5

Author’s telephone interview with Mary Smith, Regional Director, Airport Customer Service for Mexico and
Central America (her current position), Delta Air Lines, Atlanta, Georgia, December 5, 2003.
6
Delta avoided the term “call center,” since more than simply “calling” was going on in the operation.
7
Kim Hansen, “Latin America Contact Center,” presentation, November 16, 2001.
8
Hansen, “Latin America Contact Center.”
2

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Because labor made up 60–80% of the overall operating costs for a call center, labor costs were clearly a key factor in choosing a location. Given how competitive the airline industry was, Delta needed to find any way that it could to reduce costs.9 One way to do this was to consolidate the reservation sales centers in a country with low labor costs.
The cost of labor went beyond just base salary. Each country required that the employer pay an additional percentage of that salary toward the workers’ retirement fund, health insurance, and other benefits, such as bonuses. Countries varied considerably, not only on base salaries, but on these extra costs as well.

PY

Although labor costs were crucially important, the availability of a qualified labor force was also essential. Most of these employees would be standard reservations agents, but some would fulfill the more specialized tasks of customer service desk agents, dealing with special requests from passengers; group desk agents handling group traveling at special rates; and master control room agents and reservations and sales service supervisors overseeing the operation of these other workers. All employees would need to speak English as well as Spanish, and would have to complete a six-week training course successfully. NO

T

CO

With regard to the language requirements, obviously it was important that agents would have the ability to speak clearly, in an accent that callers from a wide range of Spanish-speaking countries, with their varied accents and local colloquialisms, would be able to understand. Hiring well-educated personnel would help to ensure that the Spanish (as well as the English) the agents spoke would meet this requirement. Despite this necessary standardization, the Contact Center’s management would have reservations agents become specialists in certain regions, so that they would know more about the unique vernacular and special needs of clients from that region. This was a standard part of call center training. In India, for example, call centers handling U.S. customers trained employees to speak with a
U.S. accent and taught them about U.S. culture.10 In London, Mary had found it fairly easy to hire people from specific countries to be the specialists for that country. For example, if she needed a Greek, it was not that difficult to find one, given the labor mobility within the EU.11 In Latin America, however, similar integration had not yet occurred, and it might be necessary to send agents who concentrated on specific regions to visit those countries, so that they would have an even better understanding of their clients. Clearly, in order to bring the level of service up to the level Delta intended, wellqualified, capable employees would be a must.

DO

In addition to costs and qualifications, the degree of flexibility of the country’s labor laws was another factor to consider. For a call center that might eventually be open 24 hours a day, 7 days a week, this was a serious issue. For example, what were the rules about overtime? Were there regulations that would make it difficult to lay off workers during periods of slow growth?
Because workers would be coming to the call center during all hours, security was another relevant issue. Employees would need to get in and out of the workplace safely, and feel secure in working there.
Although not the foremost concern, also important in choosing a country location was availability of government support. Such support might come not only in the form of grants and incentives, but also simply in terms of a willingness to provide assistance in dealing with various government agencies.
Additional issues Delta considered were factors important in any company’s decision about locating a facility in another country, such as tariffs (an important factor when it came time to import equipment) and political and economic stability.
9

Although the executives at the September 2000 meeting could not know this, the precipitous decline in air travel that occurred one year later, after the events of September 11, 2001, made the need to do this even greater. 10
“Words of Support,” Country Monitor, Volume 10, Issue 6, February 18, 2002, p. 5.
11
Author’s telephone interview with Mary Smith, December 5, 2003.
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3

The Site Selection Process
By the time Mary was writing her report to make her final recommendation, she and Eddie Wilson, a technical specialist, had visited all the likely countries and had winnowed down the list of potential locations for the Center. For example, they had considered El Salvador and Guatemala, which certainly had low costs. But they had decided that the telecommunications infrastructure in those countries was simply too undeveloped to sustain the Contact Center’s operations. The group had earlier ruled out
Venezuela, which seemed to be too unstable politically. In addition, Venezuela’s telecommunications industry was still a state-owned monopoly called Compañía Anónima Nacional Teléfonos de Venezuela
(CANTV). At the time, CANTV’s regulations on the routing of incoming and outgoing calls were simply too restrictive.

CO

PY

Other potential options were Mexico, Chile, and Argentina.12 Mexico City, Mexico, was the site of Delta’s first reservation sales office, and continued to be its largest reservation sales office in Latin
America. Although Delta did not yet have offices in Chile or Argentina (in fact, in 2000 it still did not even fly to these countries), it was also actively considering Santiago, Chile, and Buenos Aires, Argentina as potential sites for the Contact Center. For each of these options, there were many relevant factors, both positive and negative, to consider.

Mexico
Positive Aspects

NO

T

• Already Established Presence. Western Airlines had established a sales and operations office in Mexico in 1957. Delta took over this office when it acquired Western Airlines in 1987. Over the years, Delta had built up highly effective relationships with workers, local businesses, and government officials in
Mexico. The Mexico office had a solid base of employees with excellent work skills. All of that would be lost if the office had to be shut down in order to consolidate the Contact Center in some other country. Mary knew that if Delta moved elsewhere, it would be at least six months before a new staff would be productive.

DO

• Economic Stability. Mexico had experienced a massive devaluation of its currency in 1994. After a year’s recession, however, the economy had recovered, and prospects for future economic stability looked very good. Beginning in the 1980s, Mexico had undergone sweeping market reforms that by
1999 transformed the country into one of the most market-oriented economies in Latin America.
After the 1994 devaluation crisis, reforms in the banking sector and sound fiscal management made the economic fundamentals of the Mexican economy very strong. Mexico’s membership in the North
American Free Trade Agreement (NAFTA) only enhanced the predictability and stability of its macroeconomic policies.
• Availability of Qualified Labor Force. With over 25 million people in the greater metropolitan area of Mexico City, and a number of excellent universities and technical schools, large numbers of wellqualified prospective employees were readily available.
• Language Capabilities. Mexican Spanish was clear and distinct, and readily understood outside of
Mexico.
Negative Aspects
• Telecommunications Infrastructure. Mexico had privatized its state-owned telecommunications company, Teléfonos de Mexico (Telmex), in 1990. The privatization process had guaranteed national

12

4

Brazil had its separate operation.
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majority control of the country’s telecommunications industry. The Mexican partner held a 51% ownership stake, and international operating firms as a whole controlled the remaining 49%.13 By
1999, the telecommunications infrastructure had improved, competition had increased, and prices had fallen considerably. Nevertheless, Mexico continued to rank only in the middle range in overall rankings of the competitiveness of Latin America’s telecom markets.14 Also, it was clear that Mexico’s telecommunications infrastructure would have some difficulty supporting all the calls that Delta would be making at an expanded contact center. For example, a call from Guatemala could not be routed directly to Mexico; it first had to go to Miami, and then to Mexico.

CO

PY

• Labor Costs. Labor costs had been low in Mexico when Western Airlines opened its sales and operations office in the 1950s. However, because of the unionization of the frontline work force and overall economic growth in the country, salary levels had already begun to rise when Delta acquired
Western Airlines’ Mexico operations in 1987. Despite a downturn during the 1994 devaluation crisis and the recession that followed in 1995, salaries continued to rise gradually over time. In addition to this, companies in Mexico were required to pay extra benefits, including paid vacation time (after one year of employment), that, when combined, added up to about 30% to 35% of employees’ base salaries.15 Delta provided even more than this. As a result of labor negotiations and in order to remain competitive in attracting staff, it paid benefits that added up to approximately 90% of the employees’ base salaries.16

DO

NO

T

• Labor Laws. Although Delta’s frontline employees in Mexico were represented by a union, the company had good relations with its workers. As in most countries, Mexico had a Federal Labor Law with requirements that would have to be met. In addition, Delta established competitive benefits and work rules in order to attract and retain qualified employees. While the labor laws allowed a 48-hour work week over a six-day period, Delta employees only worked 40 hours per week over a five-day period.17 For overtime, companies were required to pay workers twice their normal wage (three times if the overtime exceeded nine hours in one week), with a 25% premium for working on Sundays.
Companies were also required to give workers paid vacations after one year’s service, a mandatory bonus of 25% of normal pay during the vacation period, and a mandatory Christmas bonus equal to at least 15 days’ pay. Additionally, most companies were required to participate in profit-sharing.
This obligated them to give workers 10% of the company’s pre-tax profits. Regarding termination, unless the company fired a worker for cause (dishonesty, disrespect, absenteeism, etc.), companies that laid off workers had to give them three months’ pay, plus an additional 20 days’ pay for every year they had been employed at the firm.18
• Tariffs. The North American Free Trade Agreement (NAFTA), which encompassed Mexico, the
U.S., and Canada, went into effect in 1994. This meant that anything manufactured in any of these countries could be exported at zero tariffs to any of the other countries in the trade pact. Nevertheless, by 2000 a number of exceptions remained. One of these was Mexico’s 100% tariffs, even for fellow NAFTA members, on imported computer equipment. This was a problem, because one reason for establishing a central call center was to provide better service with upgraded technology. But this high tariff would present an obstacle to Delta’s ability to import Automatic Call Distributors
(ACDs), advanced computer equipment needed for the most modern and technologically advanced contact centers.

13

Sandra Reed, “Privatization of Latin American Telecommunications Firms,” ‘Lectric Law Library, , accessed: August 17, 2003.
14
See Figure 1 for rankings in 2002.
15
Political Risk Services, “Mexico Country Conditions,” November 1, 2002, p. 54.
16
Information provided to author via fax from Lynne M. Matute, General Manager, International Rewards and Compensation, Delta Air Lines, Atlanta, Georgia, April 15, 2004.
17
Information provided via fax from Lynne M. Matute, April 15, 2004.
18
The Economist Intelligence Unit, “Country Commerce: Mexico,” 2000, p. 41.
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5

Argentina
Positive Aspects

PY

• Market-Oriented Economic Policies. Under the leadership of President Menem (elected to two terms, 1989–95 and 1995–1999), Argentina’s economy was transformed in the 1990s. Moving away from the protectionist and populist policies of the past, Menem succeeded in implementing widespread market reforms. He privatized state-owned enterprises (including ENTEL), cut government subsidies to inefficient industries, and reduced tariff barriers. He formed an important free trade pact, the Mercosur customs union, with Argentina’s principal trading partners, Brazil, Uruguay, and
Paraguay (Chile and Bolivia were associate members). Most significantly, in 1991 Menem’s Harvardtrained Economy Minister, Domingo Cavallo, devised and implemented the Convertibility Plan, which fixed the peso 1:1 to the U.S. dollar. This succeeded in bringing Argentina’s inflation rate down from over 2500% per year to well under 10% per year.

CO

As a result of all of these developments during the 1990s, Argentina attracted billions of dollars in foreign direct investment. Investors were excited at the prospect of getting into such a large, prosperous, and sophisticated market, which previously had been too closed and unstable for many of them even to consider. The Mercosur trade pact enhanced Argentina’s attractiveness considerably for many investors because anything manufactured within Mercosur could be exported to any of the other
Mercosur countries duty free (with some exceptions).19

T

• Availability of Qualified Employees. As a country of 37 million with a large, well-educated middle class, Argentina had an abundance of well-qualified personnel. Delta would have no difficulty finding employees who spoke English. And the proposed sites in Buenos Aires were in safe and secure parts of the city.

NO

Negative Aspects

DO

• Telecommunications Infrastructure. Argentina privatized its state-owned telecommunications company, Empresa Nacional de Telecomunicaciones de Argentina (ENTEL Argentina) in 1991. As part of the privatization agreement, ENTEL was divided into two companies, 60% of which was sold to two international consortia, one operating telecommunications services in the northern part of the country, and the other handling services in the southern part. The remaining 40% of the stock of these companies was sold to workers and the general public. As part of the deal, the government allowed the two private consortia to have a monopoly on services in their respective parts of the country until 2000, when the sector was opened fully to competition.
As a result of the large influx of capital and technology that this foreign investment created, by 2000
Argentina’s telecommunications infrastructure was among the best in Latin America.20 Of course, in
2000, costs in this sector were still considerably higher in Argentina than they were elsewhere in the region.21 Nevertheless, Argentina was still not capable of routing all of Delta’s calls via hard wire; it would be using satellite technology for at least a portion of them.
• Overvalued Exchange Rate. A serious issue in Argentina in 2000 was the overvalued exchange rate.
Argentina’s Convertibility Plan had pegged the country’s exchange rate to the U.S. dollar at a rigidly fixed 1:1 ratio since 1991. As the dollar had appreciated in the booming 1990s in the U.S., so had the
Argentine peso—but without a commensurate increase in the underlying competitiveness of the
19
Of course, in order to qualify for duty-free status, a product had to meet certain rules of origin requirements, such as being at least 60% manufactured within the Mercosur countries.
20
See Figure 1 for an indication of where Argentina’s telecommunications industry stood relative to other countries’ telecom sectors in the early 2000s.
21
See Figure 2 on comparative costs for a long-distance telephone call in the year 2000.

6

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Argentine economy. As a result, Argentina was experiencing large trade deficits, which forced the government to borrow heavily in order to finance them. This situation only grew worse after Brazil,
Argentina’s principal trading partner, experienced a massive devaluation of its currency in January
1999.
• Labor (and other) Costs. Because of the overvalued exchange rate, Argentina’s costs were very high, and labor costs were no exception.22

PY

• Labor Laws. A legacy of the highly populist Peron era, the Argentine Labor Code was notoriously rigid. In May 2000, the Argentine Congress passed labor reform attempting to ease some aspects of this labor code. For example, the trial period for employees was extended to 180 days. During that time, employers could lay off workers without advance notice and no severance pay would be required. After that period, severance payments of one-eighteenth of the monthly salary for each month of service were mandatory, unless the company fired the employee for cause (fraud, violent insubordination, or another serious misdemeanor).23 However, Argentina’s strong labor unions continued actively to oppose such attempts to reform these policies, and full implementation seemed unlikely in the short term.24

NO

T

CO

Also, other generous, but at times somewhat cumbersome, labor policies were still in place. For instance, night shifts could not be longer than seven hours. The working week was 45 hours, and overtime was 50% above the base pay for work on weekdays and Saturdays, or double the base pay for work after 1 p.m. on Saturdays, Sundays, and holidays. Companies had to pay an annual bonus of one month’s salary, in two installments, in June and December to all employees with more than six months’ service. They also had to give employees paid vacations of 14–35 days annually, and paid sick leave of three to six months, depending upon the length of their service with the firm. Women received three months paid maternity leave. Mothers could extend this leave for another three months without pay if they chose to do so, and could not be fired for one year after having a baby.25
• Tariffs. As a member of Mercado Comun del Sur (Mercosur), the South American customs union that included Brazil, Argentina, Paraguay, and Uruguay (with Chile and Bolivia as associate members), Argentina had to adhere to the Common External Tariff (CET) for Mercosur members. This would present a barrier to importing equipment that Delta would need.

DO

Chile
Positive Aspects

• Telecommunications Infrastructure. In 1988, Chile was the first country in Latin America to privatize its state-owned telecommunications industry. It sold Compañía de Teléfonos de Chile (CTC), which handled national telephone service, to Telefónica de España, and it sold Empresa Nacional de
Telecomunicaciones de Chile (ENTEL Chile), which handled long distance telephone service, to an
Italian firm. The government opened the sector to full competition relatively quickly—by the early
1990s—and foreign investment in this sector faced few restrictions. By 2000, there were six operating companies competing in the relatively small Chilean telecom market. As a result, Chile had a well-developed, highly competitive telecommunications industry, with among the lowest costs in
Latin America.26 It was also capable of handling all of the proposed Contact Center’s calls via hard wire, rather than satellite.
22

See Figure 3 for comparative labor costs.
The Economist Intelligence Unit, “Country Commerce Report: Argentina,” June 2000, p. 31.
24
Political Risk Services, “Argentina Country Conditions,” October 1, 2002, p. 44.
25
The Economist Intelligence Unit, “Country Commerce Report: Argentina,” p. 34.
26
See Figure 1.
23

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7

• Economic Stability. Chile’s economy was known for its stability. In the 1970s, Chilean economists trained at the University of Chicago (the so-called “Chicago Boys”) had instituted comprehensive market reforms during the dictatorship of Pinochet (1973–89) that were still in effect. These reforms, which included privatization of state-owned enterprises, reduction in tariff barriers, and cuts in government subsidies, had been painful and difficult for the population initially. By 2000, however, these policies had resulted in a stable, growing economy that was widely considered to be a great success among Latin American nations. Indeed, the Chilean model for economic policymaking was highly influential in leading other Latin American nations to adopt similar market-oriented reforms, with varying degrees of success, throughout the 1990s.
• Labor Costs. Chile’s competitive economy resulted in labor costs that were lower than those in many other Latin American countries.27

NO

T

CO

PY

• Labor Laws. In Chile, the emphasis on neoliberal policies and the lingering impact of the long military dictatorship under Pinochet had resulted in labor laws that were somewhat more flexible than was the case in other Latin American countries. For example, in the event of a strike, companies could hire replacement workers immediately.28 (This would only apply if Delta’s workforce in Chile became unionized.) The normal workweek in Latin America was 40 to 42 hours per week, with overtime payable after that. In Chile, the normal workweek was 48 hours long. These hours could be distributed among five or six days. On any given day, the employee could work up to ten hours. Any excess over 48 hours per week was to be considered overtime.29 Pay for overtime was 50% above regular pay. Companies that terminated their employees for just cause were not obligated to pay severance. Just cause went beyond typical provisions about numerous absences, etc., to include the economic condition of the firm.30 Nevertheless, the employer might be obliged to pay compensation for years of service plus a 50% penalty if the employee could prove in court that the termination event cited by the employer was unjustified. Regarding sick leave, employers were not required to pay for these days. Chilean workers who became sick were covered at the beginning of the fourth day of illness under a Chilean health plan known as Instituciones de Salud Previsional (ISAPRE). However, it was common practice for employers to cover the employee for the first three days.31
• Availability of Qualified Labor Force. Chile had excellent universities, and, like Argentina, a relatively large, well-educated middle class. Although it was a small country with only 15 million people, over 7 million were concentrated in the greater metropolitan area of Santiago.

DO

• Tariffs. Although Chile was a member of Mercosur, it was only an associate member. This meant that
Chile participated in the free trade aspects of Mercosur, but not in the Common External Tariff
(CET). Chile was free to set its own external tariff rates. In the 1970s, Chile had established a low uniform external tariff rate—one single rate for virtually all imported products—and this rate had been reduced over time. By 2000, it was only 9%, and projected to be reduced by 1% every year.
Eventually, of course, Chile hoped to join a free trade agreement (FTA) with the U.S., so that tariffs between the two countries would be reduced to zero.32
• Government Support. Beyond all this, Mary knew that the Chilean government was willing to provide support to Delta’s investment should the company decide to locate its Contact Center in
Chile. Just a few weeks before, two representatives from Corporación de Fomento de la Producción
(CORFO), Chile’s economic development agency, had visited Delta’s headquarters. CORFO was

27

See Figure 2.
The Economist Intelligence Unit, “Country Commerce Report: Chile,” February 2000, p. 42.
29
Information provided to author via fax from Lynne M. Matute, April 15, 2004.
30
The Economist Intelligence Unit, “Country Commerce Report: Chile,” February 2000, p. 42.
31
Information provided to author via fax from Lynne M. Matute, April 15, 2004.
32
This FTA was signed in 2003.
28

8

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preparing to launch a High Technology Investment Program in order to attract high technology and other nontraditional industries to Chile. The kind of nontraditional industries that CORFO wanted to attract were service-related industries that employed workers with advanced technical training, such as shared financial services33 and technical support centers. This was exactly the sort of investment Delta planned to make.

PY

While CORFO did not offer tax incentives, it was willing to offer training grants for new employees
Delta hired in Chile, provided that Delta was willing to locate the Contact Center in a less-developed region of the country near Valparaiso. However, Delta was concerned about that, because possibilities for recruitment of educated, bilingual employees seemed more limited in that region than in the capital, Santiago. But the Chileans seemed flexible on this issue. It did seem likely that CORFO would do what it could to assist Delta, since having one high profile, successful investment project of the type they wanted to attract might be something that they could use to attract future investors.
Negative Aspects

CO

• Small Size of the Labor Pool. Even if 7 million of Chile’s 15 million people were concentrated in the greater metropolitan area of Santiago, Chile was much smaller than Mexico (total population 100 million, 25 million in greater metropolitan area of Mexico City), where Delta had operated its principal reservation sales office since 1987. Chile was also considerably smaller than Argentina (population 37 million, 12 million in the greater metropolitan region of Buenos Aires). If Delta invested in
Chile, and CORFO’s program to attract more such investment was successful, increased demand for the limited pool of qualified call center employees might drive up wages over time.

NO

T

Mary had seen this phenomenon occur firsthand in London, where it was called “Dublinization” after a similar situation that had arisen in Dublin, Ireland, years before. In Ireland, the Industrial
Development Agency (IDA) had been highly successful in attracting investments in call centers in
Dublin. Soon, there were so many call centers, and call center workers were in such demand, they could move from company to company seeking better wages, driving up the overall wage levels in the process. In theory, at least, a similar “Dublinization” of Chile was a possibility.

DO

• Remoteness. In 2000, Delta still did not fly to Santiago. Although it did not yet travel to Buenos
Aires either, flights to Buenos Aires from Delta’s headquarters in Atlanta were more numerous and easier to find than were flights from Atlanta to Santiago.
• Language. One advantage Delta’s reservations center in Mexico had always possessed was that the
Spanish spoken in Mexico tended to be clear and distinct. Therefore, it was not difficult to find employees there who could meet Delta’s standards in this area. In Chile, in contrast, the spoken
Spanish pronunciation at times exhibited a marked regional variation.34 This, too, would be a factor to consider.

33
As mentioned earlier, “shared financial services” referred to the consolidation of identical services performed in different offices or branches of one company, such as sales and technical support, accounting, human resources (e.g., payroll), billing, etc., into one location.
34
Of course, the Argentines also had a very distinct accent, quite different from any other Latin American country. A03-04-0011

9

Figure 1

Latin America Telecom Ranking

The following rankings are based upon an evaluation of competition levels in five local segments: local telephony, longdistance telephony, mobile telephony, Internet services, and corporate data communications. The factors included: number of carriers available, pricing, and the market share of total subscribers.
10. Bolivia
11. Peru
12. Mexico
13. Ecuador
14. Panama
15. Uruguay
16. Nicaragua
17. Honduras
18. Costa Rica

PY

1. Chile
2. Argentina
3. Puerto Rico
4. Paraguay
5. El Salvador
6. Guatemala
7. Venezuela
8. Brazil
9. Colombia

Comparative Costs for a Three-Minute
Peak Time International Call, $USD
5.69
15.04
17.31

NO

Chile
Mexico
Argentina

T

Figure 2

CO

Source: Pyramid Research, Inc. 2002.

DO

Source: Economist Intelligence Unit, December 2001 (www.eiu.com).

Figure 3

Representative Salary Comparisons, $USD (annual)*†

Position
Head of Sales
Accounting Manager
Human Resource Professional
Junior Programmer
Administrative Assistant

Argentina
286,172
156,882
69,702
25,694
40,814

Chile
97,854
59,666
42,497
12,368
25,218

Mexico
258,464
92,313
61,211
20,455
37,155

*After the January 2002 devaluation of the Argentine peso, salaries in Argentina dropped dramatically and are currently much lower than these figures would indicate. The significant political and economic uncertainty in the country continues to be a deterrent to foreign direct investment.
†These salary comparisons are for representative positions only, because direct comparative data on call center positions in Argentina, Chile, and Mexico for the year 2000 are not available. Source: Watson Wyatt, Global 50 Report: Remuneration Planning Report 2001/2002.

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