Equifax Inc. (EFX) recently announced that it has selected Chile for the launch of its new software R&D center. The company selected Chile as the desired location after considering some Latin American countries and Europe. It was impressed with Chili’s conducive business environment, availability of good talents and strong focus towards education. The R&D center in Chile will work in association with the Indian and U.S research centers of the company to analyze financial data and patterns, and assist decision making.

We believe this is a very prudent strategy that the company adopted. Equifax will be able to get high quality engineering talent for a substantially lower cost, which will ultimately translate in to better result. The huge exchange rate difference between U.S. dollar and Chilean Peso more than justify the company’s decision. The recent interbank rate between the two currencies are 1 USD = 560.472 Chilean Peso. The exchange rate benefit that the company derives will ultimately improve its margins.

This apart, a brand like Equifax won’t face much difficulty in attracting high quality technical graduates. The company is also working with several universities of Chile to further modify the engineering curriculum so that it can meet industry demand. Chile is rapidly becoming a global outsourcing hub and around 4200 companies from 60 countries are operating in the region.

Equifax is well-positioned to benefit from its leadership in important markets, heightened consumer concern regarding identity theft, and strength in international markets. While Equifax’s core business remains solid, the company is driving growth through new product launches and international expansion. However, given the high correlation to consumer and financial markets, as well as the U.S. exposure, the impact of the recession on results is likely to continue. The benefit that the company derives from this new R&D facility might be partially offset by the negative impact of recession.

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