The bond default by Argentina barely two weeks ago has not deterred the top-notch banks such as Citigroup Inc. (C - Analyst Report) and JPMorgan Chase & Co. (JPM - Analyst Report) from considering the extension of their technology footprints in Buenos Aires. The availability of skilled professionals at comparatively low costs compared to other big Latin American nations such as Brazil and Chile are pushing these banking majors toward expanding their technology platform in this fiscally-ravaged country.
Citigroup’s technology unit in the country, known as the Argentina Development Center, is responsible for designing software for its Latin American business. The New York-based bank is planning to increase its workforce in the country by 20% within early 2015 from its current level of 430.
Again, JPMorgan is adding to its employee strength in the Argentine technology hub, while it is reducing jobs in its technology support divisions in Chicago, New York, Tampa and Dubai amid decline in revenues. Again, Accenture plc (ACN - Analyst Report) , the Dublin, Ireland-based information technology services firm, is adding around 700 employees in Argentina.
Albeit the default, Argentina, the second largest economy in Latin America, has thrown open a vista of opportunities for the global banks. With abundant supply of skilled workers, programmers and engineers, and highest literacy rate in Latin America and low cost of labor, the country is well-positioned to become a software technology hub in the near future.
According to government sources, this Latin American nation exported software worth of $900 million in 2013 and the figure is expected to reach $1.4 billion this year. The ample opportunities offered by this nation have enticed big banks to enhance their technology hub in the country.
However, extension of footprint in Argentina comes with associated risks. Citigroup has already cautioned investors that the risks emanating from the default can lead to losses. In fact, per a regulatory filing, the bank has warned that it may incur a loss of $80 million in case the US regulators downgrade Argentina.
However, the ground reality is that despite all the odds, the availability of talent in Argentina is encouraging the banking majors to improve their technology base in the country.
Currently, both Citigroup and JPMorgan carry a Zacks Rank #3 (Hold). One better-ranked bank is PrivateBancorp, Inc. (PVTB - Snapshot Report) , with a Zacks Rank #2 (Buy).