The manicured industrial park, with its steel and glass buildings, could easily blend in along one of Silicon Valley’s main tech strips – and that is just the impression that Isidoro Hodara wants to create. A long-time guru of foreign trade and investment, Mr Hodara is vice-president of Zonamerica, Uruguay’s ambitious attempt to create a free trade zone (FTZ) for companies that want to farm out operations in far-flung, lower-cost offices.
So far, Mr Hodara and Zonamerica president Orlando Dovat have bragging rights. The FTZ opened its doors 15 years ago, just when the global trend of offshoring and outsourcing became popular. On a 92-hectare campus, located on the outskirts of Montevideo, it began offering corporations a high-end technology backbone, complete with networking services and back-up data centres. Also on offer is a teleport for satellite communications, video-conference facilities and multiple telecom providers.
Business microclimate
“We created a microclimate that allows business to be conducted in the best possible environment,” Mr Hodara tells The Banker. “We combined the strengths of Uruguay as a whole – our high education levels, transparent government, strong institutions – with the free zone regime and our own infrastructure that caters to the needs of our clients.”
Zonamerica now houses 23 buildings, 183 companies and more than 4500 workers. Tenants include India’s Tata Consultancy Services, Japan’s Ricoh, a copy and fax machine maker, and Texas-based Sabre, a leading travel reservation system, which has a call centre in the FTZ hub staffed by hundreds of bilingual employees. Zonamerica “has world-class communications infrastructure at competitive prices, which contributes to cost savings”, says Daniel Carriquiry, head of Costa Oriental, a Uruguayan logistics operator in the zone.
More than 40 financial institutions are located there, including US-based Merrill Lynch and Wachovia, Spain’s Banco Bilbao Vizcaya Argentaria and Uruguay’s Crédit Uruguay. Most of them run private banking and consulting services. Consulting and auditing firms, such as New York-based Deloitte and PricewaterhouseCoopers, also have a presence there. “Zonamerica allows for innovation and gives companies first-world service,” says Roberto De Luca, a senior analyst at Deloitte in Montevideo.
Tough competition
Zonamerica faces tight competition – a growing number of countries offer FTZs, with high-end technology and incentives to attract companies that are interested in offshoring operations. “When you offer this level of technology and the ability to cater to such a wide range of services, you find yourself competing with the likes of Dubai and cities in India,” says Mr Hodara.
For now, Zonamerica is depending on Uruguay’s good reputation. Watchdog Transparency International rates the country above most of its Latin American counterparts and the World Economic Forum ranks the quality of Uruguay’s infrastructure above that of Brazil, Argentina, Mexico and Costa Rica. The population is educated, the government is democratic and Montevideo is regarded as a safe and pleasant place to live.
Uruguay’s strategic location is another advantage for businesses, as it is situated between Brazil and Argentina, which are the biggest members of the Mercosur trade union. Montevideo also has a port with a modern container terminal.
Not everyone is a Zonamerica cheerleader, though. “It’s an enclave,” says Gabriel Oddone, an economist at Montevideo-based consultancy CPA Ferrere. “It’s located in one of Montevideo’s poorest neighbourhoods.” Just beyond the high-security gates and walls, horse-drawn carts haul trash and anything that can be recycled. “Where are the social programmes to help out the surrounding area? I understand the need to attract investment, but I also don’t spot a positive effect outside of the park’s walls,” adds Mr Oddone.
It seems that Zonamerica’s management has noted the criticism. There is a blueprint for a private university near the zone, a shopping centre and condominiums. “We imagine creating a small-town environment that could directly employ people in the area and provide workers at Zonamerica,” says Mr Hodara.
The zone’s supporters point to a law that requires 75% of FTZ tenants’ staff to be Uruguayan. However, critics say the percentage may be reduced with authorisation from the economy ministry. Many tenant companies have sought such waivers so they could hire more expatriates.
The big picture
Mr De Luca argues that such naysayers are missing the big picture: Zonamerica hires plenty of Uruguayans and, in a country where the number of educated people is not always matched by professional jobs, the initiative could help to stop the brain drain.
Zonamerica is bringing in much-needed investment. Since the economic slide between 1999 and 2002, the government has been determined to diversify the economy and attract foreign investment. If Uruguay wants to ride the wave of change, by offering companies that want to expand overseas a viable option for their operations, Zonamerica is one option, says Mr Hodara. “I hope to see more Zonamericas. That’s our plan.”
