AMBASSADOR'S IT SECTOR ROUNDTABLE

UNCLAS BUENOS AIRES 000639

SIPDIS

SIPDIS
SENSITIVE

USDOC FOR 4322/ITA/MAC/OLAC/PEACHER
STATE FOR WHA/BSC AND WHA/EPSC
E FOR THOMAS PIERCE
EB/CBA FOR FMERMOUD, DENNIS WINSTEAD
EB/IFD/OIA FOR WSCHOLZ, MTRACTON
EB/IFD/OMA FOR AHAVILAND AND ASIROTIC
PASS NSC FOR JOSE CARDENAS
PASS FED BOARD OF GOVERNORS FOR PATRICE ROBITAILLE
PASS USTR FOR EEISSENSTAT, SCRONIN
TREASURY FOR RALBANO AND LTRAN
US SOUTHCOM FOR POLAD

E.O. 12958: N/A
TAGS: ECON EINV ECPS AR
SUBJECT: AMBASSADOR'S IT SECTOR ROUNDTABLE



1. (U) Contains business-sensitive information. Not for internet
distribution


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Summary
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2. (SBU) Ambassador hosted an information technology (IT) roundtable
for the Argentine country managers of IBM, Sun Microsystems, Hewlett
Packard, Oracle, Intel, Avaya, Dell, AMD, and Cisco. Company reps
noted strong growth over the past five years following Argentina's
economic crisis and emphasized Argentina's increasing importance as
a regional platform for new IT technology development to support
their businesses in other South/Central American countries. They
welcomed minimal GoA interference in the IT sector but were
concerned at the lack of any defined GoA agenda to promote the
sector's long term development, including through education
programs. Company reps contrasted the GoA's laissez faire attitude
with those of neighboring countries who have placed IT sector
advancement among their highest priorities. They responded
positively to the Ambassador's offer to arrange a follow-on meeting
with Planning Minister De Vido to encourage the GoA to better
exploit its competitive advantage in IT services and develop a
comprehensive IT sector development agenda. End Summary.

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Argentina a Strategic IT Headquarters
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3. (SBU) On March 28, Ambassador hosted a roundtable meeting for
representatives of U.S. IT companies operating in Argentina,
including IBM, Sun Microsystems, Hewlett Packard, Oracle, Intel,
Avaya, Dell, AMD, and Cisco. Company reps agreed that IT sector
growth in Argentina has been strong during the past five years of
Argentina's post-crisis economic recovery, a recovery in which GDP
growth has averaged 8 percent and where an undervalued currency made
the technical and creative talent the IT sector requires relatively
inexpensive. Many IT companies reported revenue growth rates in the
double-digits for the past four years. Cisco reported a 40 percent
increase in sales in 2006 alone.


4. (SBU) As domestic inflation progressively erodes Argentina's
labor cost advantages and shrinks profit margins, IT company reps
emphasized Argentina's strategic importance as a regional platform
for new technology development to support their business in other
South/Central American countries and in some cases Europe and the
U.S. Both Intel and Motorola have opened large software development
centers in the city of Cordoba. Avaya (a former division of Lucent
Technologies) opened a call center and recently launched its own
software "factory" dedicated to IP solutions.

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MINIMAL GOA INTERFERENCE - BUT LITTLE STRATEGIC VISION
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5. (SBU) In an Argentine economy plagued by increasing levels of
government intervention in markets, IT company reps hailed minimal
GoA regulation and interference in their sector. However, they also
noted the lack of any defined GoA agenda to promote the sector's
long-term development, including through education programs.
According to company reps, as a percentage of GDP, the IT industry
in Argentina represents a low 2 percent, compared to 5 percent in
the U.S., 3.7 percent in Europe and 3 percent in Chile.



6. (SBU) The major challenge facing the IT industry in Argentina
today, participants agreed, is the increasing difficulty in locating




qualified IT personnel, from call center technicians to software
engineers. They called on the GoA to take a more active role in
encouraging universities to create new programs and to better tailor
existing IT degree programs to provide the IT sector the trained
creative talent they need to grow. They also noted the need for
individual IT companies and IT associations to encourage the GoA to
invest now in the nation's IT future. To this end, Oracle explained
that they have developed a training program with the Argentine
Ministry of Labor targeting young unemployed Argentines. Company
reps contrasted the GoA's laissez faire attitude with those of
neighboring countries including Uruguay who have placed the
advancement of the IT sector among their highest priorities.

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BROADBAND ACCESS
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7.(SBU) In response to the Ambassador's question on broadband
access, participants noted that an overwhelming 92 percent of
broadband subscribers are located in the fiber optic corridor that
spans Argentina's three largest cities Buenos Aires, Rosario and
Cordoba and includes roughly half of Argentina's 40 million
inhabitants. Broadband use is rising rapidly, with a 67 percent
increase in the number of private and business sector high-speed
subscribers in 2006 alone. Argentina currently has approximately
1.5 million users and service subscriptions are growing 100 percent
yearly. Argentine broadband penetration, industry reps noted, lags
behind Chile but is ahead of neighboring Brazil.

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Embassy Advocacy
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8. (SBU) Ambassador appreciated the IT company reps willingness to
share their views and concerns and asked how the Embassy could best
advocate on their behalf with GoA authorities. They responded
positively to the Ambassador's offer to arrange a follow-on meeting
with Planning Minister De Vido to push the GoA to consider
developing a comprehensive IT strategy.

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Comment: A GoA chief Information Officer?
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9. (SBU) IT companies in Argentina welcome the GoA's laissez faire
treatment of their sector, but recognize that current high levels of
growth cannot be sustained absent greater GoA support to promote the
sector's long term development, including through education
programs. Participants highlighted diffused responsibility for IT
sector issues among GoA Ministries and suggested that Argentina
would do well to emulate other national efforts and name the
government equivalent of a corporate "Chief Information Officer."
Post will facilitate meetings for U.S. IT company reps with senior
GoA officials, including the Planning Minister, to encourage the GoA
to better exploit its competitive advantage in IT services and
develop a comprehensive IT sector development agenda.

Wayne