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Case Background
The case is based in fall 1998, when Intel was faced with the decision to select the location for its first
manufacturing plant in Latin America.
Research Methodology: Analysis following both desk research as well as field trips to potential
locations.
Main Requirements:
Readiness of authority to modify technical curriculum to match needs (Doesnt count as special
treatment; better training would benefit overall technical employability)
High proficiency in English
Favourable labour union regulations
Low wages as compared to USA
Excellent roadways
Acceptable airport
Willingness of authority to create an open skies initiative to increase connectivity (Doesnt count
as special treatment; would benefit other industries as well as tourism)
Incentives to companies in Free Trade Zones; No duty on imports, exempt from income tax for 8
years, 50% exempt for following 4 years; Government willing to negotiate further (Doesnt count
as special treatment; would benefit other companies as well)
CONS
Small size
Small population (3.5 million)
Small economy
Large investment might overwhelm the government
Lack of mid-level technicians (Need for training and development)
Number of flights insufficient for export
Higher electrical power rates ($0.05 per KW) compared to Mexico ($0.02 per KW)
Large size
Large population (160 million)
Owing to federal structure, plenty of competitive choices for location; States were ready to offer
attractive incentives
Special tax incentive for computer industry (50% reduction of corporate tax) on 5% investment in
Research & Development
High Tech hub in Sao Paulo hosted a large number of computer companies
Municipal government provided tax exemptions
Adequate number of prospective technical employees
Adequate infrastructure for power supply and airways
CONS
Modern infrastructure
Good technical training programme
Laws inhibited union formation
Low costs for unskilled labour
CONS
Large travel distance and time between USA and Chile (12 hours compared to 3 hours for Costa
Rica)
High costs for technical employees (Double that of Mexico, Costa Rica; Almost equal to USA)
Stiff and outdated capital control policies
No significant exemptions from the government; Government didnt interfere with market forces
Incentivized areas farther away from Santiago
CONS
Acceptable
Acceptable
Acceptable
Acceptable
Acceptable
Sahil Avi Kapoor
Acceptable
Acceptable
Acceptable
Acceptable
Acceptable
Brazil
Political Stability
Economic Stability
Labour Union Policies
Labour Wages
Road and Air Transport Infrastructure
Electric Power Supply
Security and Living
Educated Workforce
Taxation and other Government Incentives
Feasibility of Export
Acceptable
Acceptable
Not Acceptable
Not Acceptable
Acceptable
Acceptable
Not Acceptable
Acceptable
Not Acceptable
Acceptable
Chile
Political Stability
Economic Stability
Labour Union Policies
Labour Wages
Road and Air Transport Infrastructure
Electric Power Supply
Security and Living
Educated Workforce
Taxation and other Government Incentives
Feasibility of Export
Acceptable
Acceptable
Acceptable
Not Acceptable
Not Acceptable
Acceptable
Acceptable
Acceptable
Not Acceptable
Not Acceptable
Mexico
Political Stability
Economic Stability
Labour Union Policies
Labour Wages
Road and Air Transport Infrastructure
Electric Power Supply
Security and Living
Educated Workforce
Taxation and other Government Incentives
Feasibility of Export
Not Acceptable
Acceptable
Acceptable
Not Acceptable
Acceptable
Acceptable
Acceptable
Acceptable
Not Acceptable
Acceptable
2. Numerous special provisions readily accepted by the government especially suited for Intel,
including curriculum improvements, the Open Skies initiative and special tax exemptions for
all large investors.
3. A healthy and fast growing economy
4. A robust and efficient government
5. Highly effective business initiatives taken up by CINDE
6. High quality of English medium technical education
7. Favourable labour union regulations
Most of all, the authoritys ready attitude to undermine and overcome any obstacle(s) posed to business
investment proposals was highly commendable and impressive.