Amassing data for site selection purposes can be challenging, at best. Firms get paid big dollars to curate and make sense of information they pull together from IPAs, research firms, global governance organizations, and proprietary research efforts. Any honest site selector will tell you that the data is always incomplete, but nevertheless it serves to keep a pulse on different nearshore destinations and to narrow candidate destinations for site visits. Our friends at Arledge Partners shared with us a bunch of data they have a collected on nearshore markets and we explore it in this Central America “data mashup.”
Guatemala has surfaced in several of our articles recently, one in which we reviewed a PRONACOM report that highlighted Guatemala’s youth population (70 percent of the county’s population is under 30), and stated that Guatemala has graduated 15,166 students in careers given to call center and BPO work between 2000 and 2009. Guatemala City has a comparatively large labor force for a Central American capital at 1,640,000 while an estimated 250,000 Guatemalans country-wide speak English. For one of those customer support bi-lingual agents, a fully loaded wage is estimated US$ 997 per month.
Saddled with a poor literacy rate in the mid 70 percent range, Guatemala City buoys that by producing 4,000 bilingual graduates (ESOL or equivalent) per year. Annual attrition rates for contact centers are said to be in the 60-75 percent range and rising due to the scarcity of English speaking labor and labor market saturation.
Nicaragua on the other hand is touted to have significantly lower attrition than other Central American nearshoring destinations by our interviewees in a recent article about boutique Nicaraguan BPO firms capable of complex pilot projects. Arledge’s 2-35 percent estimations for Nicaraguan attrition confirm this assertion. With a literacy rate also hovering around the mid 70 percent range it seems a campaign for just plain old literacy is just as pertinent as one for English literacy; nonetheless, the capital city Managua counts 95,000 university students enrolled in ESOL courses. If those graduates find work as customer support agents, their employers can expect to pay a US$ 725 fully loaded cost.
It is not surprising that Central American countries that rank comparatively high in literacy and high school participation like Costa Rica and Panama also rank on AT Kerney’s 2011 Global Services Location Index, 19th and 34th respectively. (No other Central American countries are on that list)
The data we got from Arledge did not include Honduras so we talked to an expert in country that pointed out Honduras does not have a functioning investment agency like other Central American countries, which makes good data hard to come by. Our source told us that although the bilingual labor pool in San Pedro Sula is quoted at 85,000 it is more like 40,000; bilingual schools graduate about 8,000 students per year, one-third of which are potential call center candidates.
Additionally, there is a significant untapped labor pool in Tegucigalpa that counts another 60,000 bilinguals, approximately half of which are suitable for call center work; the capital graduates the same amount of students from bilingual schools as San Pedro Sula. Attrition runs at about 10 percent per month in contact centers and a bilingual agent will cost $2.90 per hour.
San Jose, Costa Rica obviously has a higher strict cost (without factoring in worker productivity) of doing business than other Central American nearshore destinations as it is by far more mature; bi-lingual customer service agent cost estimates run around $1250 per month. San Jose’s 1,300,000 strong labor force is the most diverse in Central America and that is what attracts the many higher value added nearshoring operations despite Costa Rica’s smaller 143,000 bi-lingual population. With a literacy rate outpacing their Central American counterparts, Costa Rica is even more recognized for their technical high schools where students specialize during their last three years in fields like graphic design, computing, technical support, etc.
Costa Rica Surprise
Costa Rica doesn’t have impressive high school participation rates, they hover around the mid 60 percent range, however, El Salvador’s are worse – 55 percent according to UNICEF. Despite challenges, the young market has built a 12,500 strong BPO workforce composed of 45 companies including the big players like Stream and Teleperformance as reported in a recent NSAM article. The cost structure appears to be right as well for those big contact center players; US$ 766 fully loaded monthly wage for a bilingual customer support agent, of which there are some 170,000 bi-lingual candidates in the Salvadorian workforce.
It is not surprising that Central American countries that rank comparatively high in literacy and high school participation like Costa Rica and Panama also rank on AT Kerney’s 2011 Global Services Location Index, 19th and 34th respectively. (No other Central American countries are on that list) Estimates show that the English speaking workforce in Panama is assessed at about 200,000 while companies outlay US$ 864 per month for bi-lingual customer services reps. The labor force of Panama City in total registers at 1,401,000, 75 percent of that workforce is employed in services. Annual attrition rates in Panama are estimated at 40 percent.
Benefits, Taxes, and Labor Market Risk
Benefits as a percentage of base wage rates in the US usually run around 20-30 percent according to the US Bureau of Labor Statistics, in Latin America it is higher. El Salvador is the lowest at 27.6 percent while Costa Rica and Panama come in at 34.3 percent and 38.13 percent respectively. Guatemala and Nicaragua fill out the upper limit of Central America at 45 percent and 45.6 percent respectively.
The World Economic Forum ranks countries based on the taxes they exact on companies and workers. Here again (the lower the number the better) El Salvador leads with a score of 35 and Guatemala follows close behind at 40.9. A few points separate Panama at 50.1 and Costa Rica at 54.8 while Nicaragua records a score of 63.2.
The Labor Market Risk metric supplied by the Economic Intelligence Unit of the Economist is compiled by measuring things like union strength, labor disputes, wage restrictions, and firing restrictions. The more developed economies of Costa Rica and Panama are ranked lower risk at 34 and 35S. The less developed economies of Guatemala, Nicaragua and El Salvador are scored at 55, 55, and 61 respectively.