Sunday, August 07, 2005
Why Latin America Is the New India
With its beaches, golf courses, cuba libres, and rock-solid social-security system, it's no wonder that Costa Rica is luring American executives who want an alternative to Indian outsourcing. After sending thousands of technology and call-center jobs to India and the Philippines, major U.S. companies including Dell (DELL) and Procter & Gamble (PG) are now looking to Latin America to meet their outsourcing -- or rather, "nearsourcing" -- needs. Like India before them, Brazil, Nicaragua, Panama, and especially Costa Rica are embracing the trend with business-friendly policies and aggressive marketing. "Costa Rica is moving up very fast," says Ram Mohan, IT manager for P&G, which operates a 1,000-employee center in San José, Costa Rica, to handle financial and infrastructure systems support.
Currently, 24,500 Costa Ricans work in call-center and IT jobs, doing everything from fielding complaints about shampoo to answering questions about insurance. The number of call-center positions alone is expected to double in the next two years, says Federico Cartín, executive director of the nonprofit Costa Rican Chamber of Information and Communication Technology. In Latin America as a whole, the number of call-center workstations will hit 730,000 in 2008, up from 336,000 in 2004, according to market-research firm Datamonitor. Brazil is expected to get a big slice of that business, thanks to some of the lowest labor costs in South America. Business promotion agency ProNicaragua expects its homeland to create 3,000 new jobs in the next few years, while Dell already employs 2,000 workers at its Panama call center.
It helps that the scenic shores of Central America are just a five-hour flight from the East Coast, but that's not the only appeal. The region also shares two time zones with the United States -- the better for handling phone calls -- and Costa Rica, in particular, is full of well-educated workers, having abolished its army more than 50 years ago and rechanneled the funds into education, including mandatory English training. Though its progressive labor codes translate into relatively high wages, the "Switzerland of Central America" also boasts an extensive social-security system that makes it easy to perform background checks.
Nearsourcing Hot Spots
Here are the countries and companies helping to turn Central and South America into the new hubs of bilingual outsourcing.
BRAZIL
SELLING POINTS Very low labor costs; a five-year suspension on export taxes for IT hardware and software.
COSTA RICA
SELLING POINTS Stable, neutral government; social-security system that enables preemployment background checks.
NICARAGUA
SELLING POINTS Very low overhead; influx of foreign investment.
PANAMA
SELLING POINTS Excellent telecommunications infrastructure; political and economic stability.
Sources: Costa Rican Chamber of Information and Communication Technology; ProNicaragua; listed companies
To counter Costa Rica's image as an underdeveloped banana republic, the Chamber of Information and Communication Technology has a new campaign promoting the country as "green and smart." Intel, which has been manufacturing microchips in Costa Rica since 1998, recently launched a software division there, while call-center operator Sykes Latin America employs Costa Ricans to help its corporate clients do everything from answer tech-support questions to serve customers who've lost their credit cards.
Other burgeoning hubs are also making a concerted effort to attract IT business. Nicaragua, where an influx of foreign investment is helping to pull the country out of its war-torn past, has created an online database to track the bilingual employee pool. When ProNicaragua launched Nicasearch.com last year, more than 4,200 applicants registered online. Medical-services provider Almori is currently the largest bilingual call-center employer, but ProNicaragua expects business to increase rapidly. Meanwhile, Brazil is moving to attract business by suspending export taxes on IT hardware and software for the next five years. Citibank and IBM (IBM) are among the companies already sending work there. And who can blame them? With all due respect to Mumbai, we're betting most American execs would rather spend their time on the road in Rio.
Currently, 24,500 Costa Ricans work in call-center and IT jobs, doing everything from fielding complaints about shampoo to answering questions about insurance. The number of call-center positions alone is expected to double in the next two years, says Federico Cartín, executive director of the nonprofit Costa Rican Chamber of Information and Communication Technology. In Latin America as a whole, the number of call-center workstations will hit 730,000 in 2008, up from 336,000 in 2004, according to market-research firm Datamonitor. Brazil is expected to get a big slice of that business, thanks to some of the lowest labor costs in South America. Business promotion agency ProNicaragua expects its homeland to create 3,000 new jobs in the next few years, while Dell already employs 2,000 workers at its Panama call center.
It helps that the scenic shores of Central America are just a five-hour flight from the East Coast, but that's not the only appeal. The region also shares two time zones with the United States -- the better for handling phone calls -- and Costa Rica, in particular, is full of well-educated workers, having abolished its army more than 50 years ago and rechanneled the funds into education, including mandatory English training. Though its progressive labor codes translate into relatively high wages, the "Switzerland of Central America" also boasts an extensive social-security system that makes it easy to perform background checks.
Nearsourcing Hot Spots
Here are the countries and companies helping to turn Central and South America into the new hubs of bilingual outsourcing.
BRAZIL
SELLING POINTS Very low labor costs; a five-year suspension on export taxes for IT hardware and software.
COSTA RICA
SELLING POINTS Stable, neutral government; social-security system that enables preemployment background checks.
NICARAGUA
SELLING POINTS Very low overhead; influx of foreign investment.
PANAMA
SELLING POINTS Excellent telecommunications infrastructure; political and economic stability.
Sources: Costa Rican Chamber of Information and Communication Technology; ProNicaragua; listed companies
To counter Costa Rica's image as an underdeveloped banana republic, the Chamber of Information and Communication Technology has a new campaign promoting the country as "green and smart." Intel, which has been manufacturing microchips in Costa Rica since 1998, recently launched a software division there, while call-center operator Sykes Latin America employs Costa Ricans to help its corporate clients do everything from answer tech-support questions to serve customers who've lost their credit cards.
Other burgeoning hubs are also making a concerted effort to attract IT business. Nicaragua, where an influx of foreign investment is helping to pull the country out of its war-torn past, has created an online database to track the bilingual employee pool. When ProNicaragua launched Nicasearch.com last year, more than 4,200 applicants registered online. Medical-services provider Almori is currently the largest bilingual call-center employer, but ProNicaragua expects business to increase rapidly. Meanwhile, Brazil is moving to attract business by suspending export taxes on IT hardware and software for the next five years. Citibank and IBM (IBM) are among the companies already sending work there. And who can blame them? With all due respect to Mumbai, we're betting most American execs would rather spend their time on the road in Rio.
