Latin America: The Enduring Promise of Latin America

In recent years, clients have been preferring this region as a nearshore destination even at higher costs than some of the farshore destinations.

Emerging destinations from the region are now competing with the more mature Asian offshore destinations. South America has the maximum number of emerging outsourcing cities - buoyed by growing US demand for nearshore services and regional economies tapping the under-utilized Services markets.

TOP CITIES IN THE REGION

Buenos Aires, Argentina has moved up in recent times.

Santiago, Chile- one of the most promising locations for KPO and ITO, and has very good skilled people to deliver on that.

But Chile, with a population of 60 million, cannot afford the same scale as Argentina does. The question for Santiago is- can they train and make available enough skilled people to compete with Chile, to take certain scalable work for BPO?

Brazil has largest scale in the region and Sao Paolo is a very favorite destination for clients for domestic market. Just behind Buenos Aires in preference.

San Jose, Costa Rica is a significant destination for ITO.

Lima, Peru is a favorite as a lowcost nearshore destination

Challenge- Perception of Colombia as a high risk destination has undergone significant change, though clients are still apprehensive

REGIONAL OUTSOURCING DYNAMICS

Latin America has not caught up with inflation with regard to total cost, so is still cost- effective. But cost is not the only factor. Countries are looking at reducing total cost of operation:

• Mexico promises to lower costs, and offers incentives

• Uruguay has free trade zones which offer 0% tax

• Colombia gives exemptions in taxes

• Most governments have very aggressive promotion agencies.

Total cost of doing service in Latin America is going to fall. The dollar has been an issue in Latin America. The dollar is losing ground here, as in many other parts of the world. Last year was especially complicated in this respect. This year is a little more stable.

MARKETS THE REGION CAN ADDRESS

With established regional markets, Latin America as a region has a very strong value proposition of having the ability to cater to multiple markets

• Nearshore to US English and Hispanic Market- 20% of consumers in US are Hispanic

• European Markets in Spain (Spanish) and Portugal (Portuguese)

Time zone issue- Latin America is very well positioned, is in more or less same time zone as in US and Europe.

Analysts say that with the world talking about 'agile development', it is very difficult to have agile development if you are farshore.

Latin America can be part of a dual strategy for companies- whatever has to be done in customer interface, do that with your Latin America 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 partnership capability

Clients find vendors ready to answer questions, and approachable as compared to other countries

Area offers not just cost-effectiveness but is ideally located for testing innovations, to set up R&D facilities there.

Challenge- Reaching the global market is a challenge for Latin America outsourcing players more particularly small and medium enterprises. Primary client remains the regional market. The full potential of the region in catering to external markets is yet to be optimized.

VALUE PROPOSITION

Unique Value Proposition for individual countries is often weak, as a result many country positions revolve around being part of a 'Multilingual Nearshore Destination'.

The region has to make effort to identify the niche value proposition that it has, i.e., competitive advantage in niches within ITO, BPO and KPO industry. This will also provide opportunity for individual countries to differentiate themselves from the pack

Colombia - 33% graduation students here are studying engineering. Colombia is in fact, a country of engineers. Yet it is not exporting engineering services.

Uruguay- Medical industry can prosper here. A very renowned French medical institute has opened office here. 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 engineering market in the US to help export engineering services from Chile, it's a very huge untapped market.

Brazil - leader in the world in certain agri-business processes.

Challenges-

• How to sell the region as a whole?

• Where there are natural resources, there is a service associated with it. But this potential has been left largely untapped.

• Central America needs to move away from manufacturing to services

The Enduring Promise of Latin America

Sruthi Ramakrishnan, Global Services Media

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