Five Latin American countries have placed in A.T. Kearney’s newly released 2016 index of the leading nations for global services. The consulting firm’s “Global Services Locations Index” — which measures countries by business environment and availability of skilled talent — forecasts that both Colombia and Trinidad and Tobago are emerging to be among the brightest hotspots amid a global services environment where the threat of machines taking jobs from humans seems to be at an all-time high.
Interestingly, the firm believes that talent is more widely available in Latin America than in Eastern Europe. The report argues that Costa Rica is particularly well positioned, because Ticos have the resources to weather the storm of robotic process automation (RPA), a transformational techn tool predicted to kill thousands of outsourcing jobs in the years to come.
Colombia jumped 23 spots to be ranked 20th, marking the largest advance of any country in the index. A depreciating peso and a growing army of technology workforce are making Colombia a more reliable destination for outsourcing firms. For the first time ever, Trinidad and Tobago, a country of nearly 1.4 million inhabitants, has also managed to land on the index.
Brazil rose four spots and now ranks 4th, largely due to the declining value of its currency, the real. Softtek’s launch of an IT R&D center in partnership with the University of Fortaleza, the opening of GE’s oil and gas research center near Rio de Janeiro, and the Italian Gi Group’s July 2015 acquisition of Brazilian BPO firm Holomática all seem to play a major role in boosting Brazil’s services industry. Mexico placed eighth in the ranking — down four spots from its previous ranking. The report offers few details on Mexico’s decline and instead lauds the country for its expanding telecom infrastructure and booming population of information and communications technology (ICT) professionals.
Growing Allure of Costa Rica and Colombia
Ranked 19th in the index, Costa Rica’s efforts to improve educational standards appear to be paying high dividends. According to the United Nations, Costa Rica invests a greater percentage of its gross domestic product (GDP) in economic infrastructure than any other country in Latin America.
The A.T. Kearney report estimates that value-added services might represent 34% of Costa Rican exports. “Costa Rica’s labor force is small and relatively more expensive than in other countries in the region, but social cohesion is high, the business environment is friendly, workers connect well with U.S. culture, and work quality makes up for the cost differential,” the report noted.
Walmart directs its supply chain in Central America out of Costa Rica, and Amazon offers high-end English-language customer support from the country. In June 2015, Cargill opened a shared services center employing 200 people to handle the finance and human resources functions for its operations in the Americas, with plans to add IT, strategic sourcing, transportation, and logistics in the future.
“Costa Rica has evolved to offer services that, though originally might have been more on the transactional side, has moved up the value chain and in many cases, working in a virtual teaming with onshore centers,” said Johan Gott, a principal in A.T. Kearney’s private equity practice. “The combination of IQ and EQ that is required for those types of jobs still has a long time before it will be replaced by automation.”
The report also applauds Colombia’s effort to grow human talent. Since 2012, the country’s Digital Talent Initiative has funded IT studies for more than 6,100 Colombians. Even the telecom infrastructure is strengthening by the day, with the roll out of 4G and fiber optic cables.
EXL has recently inked an agreement with Colombia’s Carvajal Tecnología y Servicios to provide Spanish and English-language operations support from Bogotá and Cali. Atento has also opened new contact center in Pereira, promising to create 2,000 jobs.
Rise of Trinidad & Tobago
According to the report, Trinidad and Tobago is one of the largest sources of native English-speaking talent in the Western Hemisphere (outside of Canada and the United States). In addition to that benefit, it enjoys a strong telecommunications infrastructure, a nearshore location to the United States, and a host of tax incentives.
Canada’s Scotiabank runs its Caribbean finance and administration service operations from Trinidad and Tobago, and Delta Airlines also operates a contact center in the country.
But Gott says that because of its small size, it may never be host to large centers hosting thousands of employees. “But it is certainly an option for companies seeking smaller operations, English speaking talent, that’s in the same time zone as United States and Canada,” he said.
Peru, ranked 47th, is another new entrant in the index. The consulting firm says infrastructure costs in Peru are competitive, but more attention is required to improve the quality of the infrastructure outside of Lima and the population’s labor skills.
“Construction of the National Fiber-Optic Backbone Network, slated to begin in 2016, will connect the country’s provincial capitals, including Arequipa, Trujillo, and Chiclayo, with high-capacity networks,” the report added.
The Threat of Automation
Automation, sometimes referred to as “no-shoring,” is still in its infancy, but automation, when combined with business process as a service (BPaaS), has all the potential to be a powerful force for disruptive change. Therefore, the report urges countries to adjust their curricula to better prepare the labor force for higher-level tasks.
“For the first time, we have a trend — automation — that could displace the leadership of the likes of India and China in outsourcing,” noted Arjun Sethi, global leader of A.T. Kearney’s strategic IT practice and principal author of the study. “Technology’s relentless progress continues to transform in unanticipated and fundamentally different ways not only where work is moving to, but how and by whom — or by what — it is being done.”
But the same report says that some countries may survive the onslaught of automation. “One set of countries that starts off with an advantage is those that complement advanced traditional BPO skills with the requisite soft skills that machines cannot replace: India and the Philippines, for sure, but also Sri Lanka, Costa Rica, and South Africa.”