Latin America: the enduring promise of Latin America
Posted On May 19, 2022
In recent years, clients have been preferring this region as a nearshore destination even at higher costs than some of the farshore destinations.
The emerging destinations in the region now compete with the more mature Asian destinations on the high seas. South America has the largest number of emerging outsourcing cities, fueled by growing US demand for nearby services and regional economies tapping into underutilized service markets.
MAIN CITIES OF THE REGION
Buenos Aires, Argentina has moved up in recent times.
Santiago, Chile – One of the most promising places for KPO and ITO, and it has very skilled people to deliver on that.
But Chile, with a population of 60 million, cannot afford the same scale as Argentina. The question for Santiago is: can they train and make available enough skilled people to compete with Chile, to take some scalable job for BPO?
Brazil has the largest scale in the region and Sao Paolo is a very favorite destination for clients from the domestic market. Just behind Buenos Aires in preference.
San José, Costa Rica is an important destination for ITO.
Lima, Peru is a favorite as a low-cost near-shore destination
Challenge: The perception of Colombia as a high-risk destination has undergone a significant change, although clients are still concerned
REGIONAL OUTSOURCING DYNAMICS
Latin America has not caught up with inflation relative to full cost, so it remains profitable. But cost is not the only factor. Countries seek to reduce the total cost of operation:
• Mexico promises to lower costs and offers incentives
• Uruguay has free zones that offer 0% tax
• Colombia gives tax exemptions
• Most governments have very aggressive promotion agencies.
The total cost of providing the service in Latin America is going to fall. The dollar has been a problem in Latin America. The dollar is losing ground here, as in many other parts of the world. Last year was especially difficult in this regard. This year is a little more stable.
MARKETS THAT THE REGION CAN ADDRESS
With established regional markets, Latin America as a region has a very strong value proposition of having the ability to serve multiple markets.
• Nearshore to the US Hispanic and English market: 20% of US consumers are Hispanic
• European markets in Spain (Spanish) and Portugal (Portuguese)
Time zone problem: Latin America is very well positioned, it is more or less in the same time zone as the US and Europe.
Analysts say that with the world talking about ‘agile development’, it’s very difficult to have agile development if you’re on the coast.
Latin America can be part of a dual strategy for companies: whatever needs to be done in the client interface, do it with your Latin American team, and connect with your Asia-based team for the rest of the process.
Analysts advise looking beyond outsourcing traditional works to Latin America and thinking in terms of innovation. Latin America has leadership and capacity for association
Customers find providers ready to answer questions and accessible compared to other countries
The area not only offers profitability, but is ideally located to test innovations and establish R&D facilities there.
Challenge: Reaching the global market is a challenge for Latin American outsourcing players, particularly small and medium-sized companies. The main customer is still the regional market. The full potential of the region to serve foreign markets has not yet been optimized.
The unique value proposition for individual countries is often weak, as a result many countries’ positions revolve around being part of a ‘Multilingual Nearshore Destination’.
The region has to make an effort to identify the niche value proposition it has, that is, competitive advantage in niches within the ITO, BPO and KPO industry. This will also provide the opportunity for individual countries to differentiate themselves from the rest.
Colombia – 33% of graduates here are studying engineering. Colombia is, in fact, a country of engineers. However, it is not exporting engineering services.
Uruguay- The medical industry can prosper here. A renowned French medical institute has opened its offices here. It has more doctors per capita than any country in the region.
Chile building its competitive advantage from natural resources. There are services around the natural resources. It has copper, it also has copper engineers. In a study of the engineering market in the US to help export engineering services from Chile, it is a very large untapped market.
Brazil – world leader in certain agribusiness processes.
• How to sell the region as a whole?
• Where there are natural resources, there is a service associated with them. But this potential has been left largely untapped.
• Central America needs to move from manufacturing to services