Companies around the world have outsourced a host of functions to low-cost labor countries as a platform for growth. For this reason, nations such as China and India have been the popular choice and the leaders in this economic movement. Yet, Nearshoring in Latin America is now a real and more convenient option for many.
There’s more to labor cost-savings than meets the eye – especially for U.S.-based companies – when it comes to finding the best location and “shoring” strategy.
Out of the many alternatives worldwide, Latin America’s fast-growing economy, diverse labor force, and prime location solidify it as a leading candidate to host your company’s operation.
Nearshoring Growth in Latin America
Latin America has gained momentum in the nearshoring strategy due to its proximity to Canada and the United States, along with its skilled labor and similar time zones—not to mention that the IT-Business Process Outsourcing (BPO) industry overall market value is currently over $14 bn dollars.
Thanks to the rapid development of the BPO sector and the staggering growth of the startup-ecosystem – as showcased by industry darlings Rappi, in Colombia, or iFood from Brazil – enterprises in North America and Europe alike have set their sights on Latin American countries such as Mexico, Argentina, Brazil, Chile, Colombia, and Costa Rica.
HCL Technologies and TATA Consultancy Services established their operations in Mexico over a decade ago and never looked back. They provide high-quality consulting services to large corporations around the world, employing both a Mexican and Indian workforce.
4 Reasons Why You Should Consider Nearshoring in Latin America
A sound nearshoring model and strategy will give your company:
- Proximity. Many American companies outsource manufacturing overseas to have their products either completely built or assembled at low costs. However, being 10 hours and thousands of miles apart from the team handling your operation could translate into logistical nightmares. Nothing beats being able to hop on a quick 4-hour flight for a rush visit to your near-shore site south of the border.
- Language and Technical Proficiency. Latin American centers are adequately staffed and equipped to cater to the language and technical needs of any operation.
- Cultural Affinity. The fact that Latin America shares a border with North America makes things a lot easier. Cultural affinity helps teams communicate more effectively and efficiently. Also, labor conditions and regulations are more closely in line with the source country, which promotes a safer and relatable working environment.
- Reduced Overhead Costs. One of the most important factors involved in the decision-making of any operation is cost reduction. Latin America enjoys many advantages when compared to other low-cost labor countries:
- Attrition – Countries like the Philippines, India, and other Asian locations struggle with retaining personnel; whereas, in Latin America, attrition rates are very low due to the competitive fringe benefits that many of these companies offer to their employees i.e., health-care insurance, food vouchers, retirement fund, among others.
- Real-time services – The little to no difference in time zones, between the near-shore location and the source country, makes communication practical and more efficient.
Top Countries for Nearshoring in Latin America
The IT and BPO industry played a leading role in the financial and economic development of some Latin American countries, which gained ground in 2017.
Amidst the financial and economic strife that many companies around the world are currently facing due to inflation, procurement problems, geography, and policy-making, the leading countries in Latin America have managed to become the benchmark for consolidated companies and emerging start-ups:
Brazil, the largest economy in Latin America, boasts a competitive advantage in the BPO arena. Its large population and strong technical skills have turned São Paolo into the go-to destination for offshoring and nearshoring services for big players like IBM and Nestlé.
Mexico has leapfrogged to the forefront of the nearshoring race due to its IT service offerings, BPO-ready markets, and economic development in large metropolitan hubs such as Guadalajara, Monterrey, and Mexico City. According to the 2018 World Economic Forum Global Competitiveness Report, Mexico came in first place in the time required for foreign trade documentary compliance procedures on exports, competing with countries such as Argentina, Brazil, Colombia, Dominican Republic, and Paraguay.
Argentina managed to overcome severe economic depression in the early 2000s by investing in education and specialized training. Therefore, it has since experienced remarkable economic growth. In 2018, IBM Argentina consolidated its services by investing 15 million dollars to expand its capabilities of digital innovation by opening a Client Center that will provide support to international corporations through Artificial Intelligence.
Affectionally dubbed by many the “Latin American Wine Country”: Chile, is also known for its fair labor conditions, economic stability, and investor-friendly regulations. Companies like Air France, Teleperformance, Sitel, and Amena in Europe – and American companies such as Delta Air Lines – have all decided to expand their call-center operations to this south American nearshoring hot spot.
Choose The Right Strategy
We live in a time with outsourcing options aplenty; and you are certain to find a good fit for your industry, company’s size and manufacturing targets.
Weigh out your capabilities and goals, and don’t forget to cast a glance towards Nearshoring in Latin America in your pursuit for success.