Latin American offshoring drives gains amid crisis

MANAGUA, Nicaragua – On the sixth floor of one of Managua’s only high rises, young men and women spend hours on the phone in fast-flowing English. Televisions flash MTV and soccer, and walls of windows give a sweeping view of the city’s volcano-rimmed lake.

Calling in are customers from across the U.S. with questions about their mobile phone service. Every day, the slick new contact center, run by Tennessee-based outsourcing vendor Sitel, takes 15,000 calls.

Offshoring has brought Latin America thousands of similar sites in the last few years, as multinational clients tap the region’s cheap labor, good English and newly stable economies.

Now, the world financial crisis is speeding that trend, driving companies to further cut costs while the resurgent dollar makes hiring overseas more affordable.

For Latin America, the sector’s rise promises to reduce reliance on volatile commodity exports and to generate seed money to fuel future growth. And the customer service, technology and administrative jobs it is creating offer many a new ticket to the middle class.

The Managua call center, which gave The Associated Press access on condition that its foreign client not be named, employs 475 people, including graduate students, a professional chef, a billiards champion and all the members of a rock band. Their starting salary of $500 a month is more than triple the country’s average wage.

“It’s something you don’t find every day: a decent job with a good salary,” said Olivett Stephenson, a 25-year-old lawyer training telephone agents at the center, where two of her brothers have fielded calls.

Fourteen such sites drew $27 million in investment to Nicaragua last year, a new source of growth in the hemisphere’s second-poorest country.

“It shows a level of maturity” that so many nations have the infrastructure and work force to draw service jobs, said Alfredo Cuecuecha, an economist at CIDE, a Mexico City think tank. “These people are generating the human capital base that’s needed for the industry to survive and grow the region.”

Offshore services, a $76 billion global industry expanding by more than 25 percent a year, has roots in the 1960s, when U.S. companies began delegating back-office computer tasks to domestic, third-party vendors, freeing them to focus on their core businesses.

The telecom revolution moved that model offshore in the late 1990s, slashing communications costs and allowing companies to break up tasks and outsource pieces overseas.

With the recession sending U.S. unemployment to a 25-year high of 8.5 percent in March, those moves are raising concern. President Barack Obama vowed to eliminate offshoring incentives that exempt U.S. companies from paying taxes on foreign income they invest in facilities abroad, where many seek cost savings.

Yet offshoring to Latin America is driven by more than costs. While U.S. companies can save 28 percent of operating expenses by sending work to Brazil and 53 percent sending it to Mexico, they save 65 percent or more in China, the Philippines and India, according to the Everest Research Institute in Dallas.

Clients are drawn by the region’s proximity to the U.S., the top market for offshore services. That “nearshore” model makes overnight shifts unnecessary and eases management visits, while Spanish skills bring customers from Spain, Latin America, and the U.S., which has the world’s fifth-largest population of Spanish speakers.

Latin America is still hindered by rigid labor laws and high social security costs, and its comparatively small population – 565 million, half India’s or China’s – limits large-scale plans.

But governments have improved public services and offer tax breaks to offshorers. Mexico and Brazil, the region’s biggest providers, scored better on infrastructure and business environment than almost any other emerging market ranked by McKinsey & Company in 2005, boasting higher college graduation rates than India or China and the fastest growing pool of young engineers.

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