Latin America: A Near-Shore Alternative

While countries like India and China attract all the attention, Latin America continues to gain ground in the offshore race. It is pulling ahead as a desirable destination, spurred on by advantages normally abundant in Asia as well as a few unique attributes of its own. Latin America’s proximity to the United States and its talented bilingual workforce have drawn increasing numbers of businesses to the region.

But companies looking to near- and offshore in Latin America still face daunting questions: Which Latin American countries provide the most attractive destinations? Is the region economically stable enough to invest in? How does it compare with Asia? Can locations in Asia and Latin America be leveraged simultaneously?

To answer these questions, we analyzed the advantages of near-shoring to Latin America and provided our clients with an overview of the region’s most attractive locations.

Why Latin America?

Latin American nations made significant strides in the 2007 A.T. Kearney Global Services Location IndexTM. The region has gained this momentum primarily due to its language capabilities and low costs. Latin America’s bilingual workforce allows many companies to deliver the same processes and service levels to their entire customer base from a single location.

Latin America also offers signifi cant labor arbitrage—not just for call centers, but for broader functions within business process outsourcing (BPO), knowledge process outsourcing (KPO) and information technology outsourcing (ITO). U.S. and European companies that have chosen a Latin American location have typically achieved savings ranging from 20 to 40 percent. Even in more expensive countries, such as Mexico, arbitrage savings range from 20 to 30 percent.

Finally, close proximity to and cultural affi nity with the United States have greatly facilitated business partnerships there.

How Does Latin America Compare to India?

Although Latin America has a promising future, it is still not as mature as India in terms of exporting BPO or ITO services globally. It has, however, had the capability locally for a number of years and is well positioned to expand and offer these services in the coming years. Attrition rates are much lower in Latin America compared to India and other Asian countries. In addition, Latin America can offer real-time services that cut down on expensive night shifts and long travel, as well as improved IT systems batching.

The proof is in the actions of several Indian-based companies, such as TCS and Infosys, that have entered the Latin American markets in response to key clients’ demands to expand their global footprint.

The Most Frequently Evaluated Locations in Latin America

The analysis of eight different Latin American destinations (Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, Panama and Uruguay) provides an in-depth look at the most popular offshoring sites and the strengths of each offshore sector. This allows companies to see the real trade-offs involved, and begin exploring for countries that best meet their particular needs. The key contenders in the offshore race are those countries that harness the Latin American trifecta: privileged location, abundant talent and competitive workforce.