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CORPORATE RELOCATION | Business Sectors

CALL CENTERS

.....NOWHERE IS THE LUCRATIVE LURE OF LATIN AMERICA FOR CORPORATE RELOCATION MORE MANIFEST THAN IN THE HIGHLY COMPETITIVE FIELD OF CALL CENTERS

But, the fact is, it’s not just Costa Rica that’s doing the luring. So are Honduras, Panama, Argentina, Brazil, and a host of other would-be motherlands that are rolling out a myriad of “near-sourcing” incentives such as major tax incentives, a bare minimum of onerous rules and regulations, low wages, skilled workers, and governments officials who openly proclaim (as one Honduras Embassy official recently did to this writer), “We’re here to help companies relocate to our wonderful country. You tell us what you need and we’ll help you get it.”

That open-armed bienvenidos to business posture is not limited to Honduras, of course. All over Latin America, top government officials are cutting the red tape and rolling out the red carpet to make corporate relocation as enticing as it is rewarding. And across the line, top executives – from Adam Smith’s legendary “butcher, brewer, and baker,” to international bankers and multifaceted manufacturers -- are finding that the grass is greener (and the ‘green’ is greater) across the border.

Nowhere is the lucrative lure of Latin America for corporate relocation more manifest than in the highly competitive field of call centers. An industry that does not require massive transfers of cumbersome machinery, or acres of land for sprawling plants, call centers have often taken the lead in the outsourcing arena. First in India and the Philippines, and now in Latin America, call centers have set the stage and pace for the transfer of not only technology, but for the wholesale expansion of industry.

A look at what they’ve done, where they’re going – and why -- is more than informative; it’s instructive. As the corporate relocation of all manner and mode of industry continues to intensify from a trickle to a torrent throughout Latin America, many see the saga of the call center transmigration as a blueprint for outbound business success.

LATIN AMERICA IS TAKING THE LEAD IN OFFSHORE RELOCATION

“More than 90 percent of executives in our survey say that they are either somewhat of very interested in IT off-shoring. Thus, for many companies, the question is no longer, ‘Should we go offshore?’ but rather, ‘What functions should we move offshore?’” – A.T. Kearney executive search report

Now, nothing in this article should be taken to suggest that India is no longer a solid site for offshore IT/call center relocation. India still leads the world in the number of off-shored call center agents. And it still costs far less to operate there than in the United States or Canada.

But, as the editors of Off-shoring Times recently observed, “India service providers, once considered the darlings of the outsourcing industry, today face challenges causing U.S. clients to question the benefit of sending work overseas.”

Among those challenges, ironically enough, is the very success of India’s offshore call center industry. As the demand for talent there has increased, the availability of workers has diminished, and, as one would expect where free market theories are allowed to apply, wages have increased along with turnover. Then, there are the problems associated with distance and time zones, added to distinct cultural differentiations.

That’s not to say that none of these exists in Latin America – after all, no hablo ingles is not a phrase unheard of in the southernmost regions of the Western Hemisphere. But, the distance is truncated, time zones are shared, and the cultural differences are evanescing.

Simply put: the road to Rio is a lot shorter than the travel routes to Rajasthan. And the airfares are considerably cheaper.

Plus, the costs are significantly less across the board in Latin America than in India, and certainly far lower than in the U.S. and Canada. Bruce Mehlman, Assistant Secretary for Technology at the U.S. Department of Commerce recently revealed that the New Jersey Department of Human Services had to pay 20% more for call-center services when it moved the jobs back to that state after critics blasted it for awarding work to an offshore contractor.

And, if the high costs of doing business onshore are bad for the public sector (where increased revenues are as easy as raising taxes), they are even worse for the private sector. Indeed, according to the National Association of Manufacturers, in the U.S., “External overhead costs from taxes, health and pension benefits, tort litigation, regulation and rising energy prices add approximately 22% to U.S. manufacturers' unit labor costs (nearly $5 per hour worked) relative to their major foreign competitors.”

But, that’s just the beginning of why Latin America is becoming the venue of choice for call center relocations (and other corporate entities). As Amit Shakardass, the Senior Vice President of Global Marketing at Sitel global management, recently assessed in his essay, Why Latin America, Why Now?:

“A perfect storm of business trends and customer demand has made Latin American countries — such as Brazil, Chile, Colombia, Mexico, Nicaragua and Panama — BPO hotspots. The region boasts an abundance of highly skilled workers and a well-established domestic and international business culture. Premier global conglomerates are well-established in several countries in this region.

“Many citizens have strong Spanish, English and, in many cases, Portuguese language skills, allowing companies to support the wide range of their customers from one location. Reliable and economical communications networks required to deliver high-quality voice and data traffic are available across several countries in the region.

“Moreover, these modes of communication are connected to many other locations across the globe. And just as importantly, governments and economic development groups have created an economic environment that attracts foreign companies to set up operations. For instance, many companies are flocking to the region largely due to the high quality of customer care they have come to expect from these countries and a high level of retention among employees.”

The fact is, the number of call-center workstations in Latin America is expected to hit more than three-quarters of a million in the coming year. That’s up from just 336,000 less than 36 months ago. A quick look at some of the advantages specific Latin American countries are offering – not only to call centers, but to manufacturers as well, large, medium, and small alike – helps explain why:

In the Dominican Republic, companies relocating to a “free zone” can expect to pay zero corporate taxes for 15 to 20 years. Plus, they’ll receive reduced costs for essential services, such as trash collection and utilities, greatly reduced labor costs (minimum wage of 80 cents per hour), the duty free import of raw materials and equipment needed for the business, and the duty-free export of finished products.

In Panama, call centers have been designated tax-advantaged “Export Processing Zones” since 1992 and have been exempted from international call taxes since 2001. Which in part may explain why companies like Dell, SITEL, ClientLogic, National Asset Recovery Service, and Starcontact, among others, have already set up shop there. And why as many as 73,000 highly trained agents will be employed there within the next 12 months.

In Honduras, the government has taken the unusual step of declaring the entire country a “Free Trade Zone.” Plus, it has designated select areas “Export Processing Zones,” which means that companies setting up businesses in such areas may receive benefits including: exemption from corporate taxes on profits … exemption from export taxes … exemption from import duties on raw materials and components … exemptions from taxes on profit repatriation … and unrestricted currency conversion.

As Shankardass concluded in his essay, “The future looks strong for a Latin American BPO (business process outsourcing) industry built on the foundation of highly skilled workers, well-established business culture, exceptional customer service, and affordable contact center services.”

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