There are many universities in Latin America’s main cities. This combined with South America’s constant economic crisis over the last decades, has made the labour market extremely competitive. This has not only improved labour skills, but has forced universities and other education facilities to invest in new and high quality programmes.
Language Capabilities: Latin Americans are known for their language skills, which allow their countries to provide services to both English- and Spanish-speaking customers. Argentina, Mexico and Costa Rica have the best English-speaking capabilities in the region. We have found that other countries currently emerging on that front are Guatemala and Nicaragua. Additionally, Guatemalans, like Colombians, have a neutral accent that allows them to assimilate other Spanish accents and they are very good English speakers.
Nicaragua, on the other hand, has experienced a massive migration of people to the U.S., caused by the country’s political instability. This, and the fact that many Nicaraguans have migrated back to their country, has improved the availability of English-speaking labour. However, political instability continues to stymie foreign investments that could potentially develop this sector in the country.
Cultural Similarity: North America and Latin America have plenty of cultural similarities, including common European immigrant groups. Countries in these regions have been influenced by European migration over the past decades. Argentina for example, has been heavily influenced by Italian and Spanish immigration. Additionally, a significant pool of qualified Latin Americans has migrated to the U.S. and Europe, either to apply to various post-graduate degree programmes (such as MBAs) or to seek new opportunities that decades of local South American economic crises and high unemployment rates have made unattainable. Many from this labour pool have since returned to their home countries and have brought with them not only greater skills and experience, but also some of the cultural nuances of their adopted country that play a key factor in business relationships. These cultural similarities are key in a BPO environment, and we’ve found that they help improve the interaction between the retained organisation and the outsourcer
Which Location Brings the Best Benefits?
Across Latin America there are locations where companies can successfully establish operations to achieve a more efficient operating model. Argentina, Brazil, Chile, Colombia and Mexico are among the most popular Latin American locations for establishing operations. Wipro has developed a ranking methodology to help organisations decide which of these countries would offer the greatest benefits based on their needs and priorities. The ranking method is based on three primary business criteria, each composed of a group of key factors, as described below:
1. Cost effectiveness: Accounts for 40 percent of the overall ranking and is made up of three factors, with their own percentage weight:
- Compensation cost (40 percent): The average wages and average salary of BPO professionals
- Infrastructure cost (40 percent): Includes the average cost for Internet, real estate, utilities, telecoms and airfare cost to major destinations
- Tax and regulatory cost (20 percent): Includes the tax burden, currency fluctuation and corruption perception rate
2. Talent and resource availability: Accounts for 40 percent of the overall ranking and is made up of two factors:
- Education and language skills (40 percent): Incorporates the number of graduates per year; the adult literacy rate; mean scores on available tests (i.e., TOEFL) and quality in science, mathematics and management programmes
- Business process experience and skills (60 percent): Includes availability of qualified labour, workforce size, IT-BPO market size and number of CMM/CMMI certified centers
3. Business catalyst: This represents the quality of the overall business environment and accounts for 20 percent of the overall ranking. Three factors weigh in here:
- Country environment (40 percent): Business risk, political stability, quality of living, personal safety and employment rigidity
- Infrastructure (40 percent): Includes quality of overall infrastructure, availability of Internet bandwidth, telecom quality and utilities quality
- IP Security (20 percent): Includes protection of property rights and protection against software piracy
The combined score provides a consolidated ranking per location and describes some of the key strengths and weaknesses for each country.
While our methodology shows Colombia, Brazil, Chile, Argentina and Mexico to be the highest ranked offshoring destinations, other Latin American locations are gaining traction. For instance, a global BPO supplier opened operations in Guatemala in 2005 to provide nearshore services to U.S. clients and in 2008 started Financing and Accounting operations for Coca-Cola. Also, one of India’s key players, which currently employs around 1,000 people, is looking to expand Finance and Accounting operations in the country by setting up a second delivery centre. Guatemala is a country that has cultural affinity to the U.S., a highly qualified labour force with bilingual capabilities (Spanish and English) and, like Colombia, its speakers have a neutral accent that allows them to assimilate any Spanish accent, making it ideal for call centre services.
We’ve found clear signals that Uruguay is also looking to grow within the BPO and SSC sectors. For example, in March 2010, a 600,000-square-foot free trade zone called Aguada Park was opened to provide a high-tech infrastructure to companies delivering contact centres, BPO and SSC services (among others) in a well-located region and with low infrastructure and labour costs.
Peru is another country that has managed to catch the attention of global BPO service providers. In fact, one of the biggest Indian suppliers has recently announced the opening of a service delivery centre in Lima as part of its Latin America growth strategy.
Latin America vs Asia
So where does Latin America stand in comparison to Asia? Although Latin America shows a promising future, the region is not yet as mature as Asia is today. We’re well aware that Asia remains the most developed and popular destination for offshoring clients due its low labour costs, specialised skills and experienced offshoring community. However, Asia is struggling with factors such as rising wage costs, increasing inflation and currency fluctuation. Latin America doesn’t suffer the inflation rates and wage increases Asia suffers every year and it contains a good mix of labour skills and low operational costs.