Q&A: Guatemala BPO Hindered by Negative Local Perception & Governmental Indifference

Vinod Narayan, Vice President of the Board of Directors for the Call Centers & BPO Commission under AGEXPORT, explains what is hindering Guatemala's BPO growth, and what the local industry is doing to change that.

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Guatemala’s emergence as a choice nearshore BPO location is happening, but it’s happening slowly. Since throwing its hat into the ring ten years ago, the country is still held back by a population that views BPO as a bad industry to work for, and a government that lacks the motivation to change that, despite being one of the best-positioned Central American countries to capitalize on nearshore demand.

Population wise, Guatemala has more than three times as many people as Costa Rica, four times as many as Panama, and nearly twice as many as Honduras. Add this to the lower wages in compared to Costa Rica and Panama, and the potential for growth is obvious. The challenge is communicating these benefits to ministers and residents to give the industry a boost.

Following the BPO Guatemala event earlier this month, we caught up with Vinod Narayan, Vice President of the Board of Directors for the Call Centers & BPO Commission under AGEXPORT, and VP & Center Head for Guatemala at 24/7, to get an on-the-ground perspective of the real hindrances to Guatemala’s growth.

Nearshore Americas: Despite companies like Alorica and Telus betting big on Guatemala’s BPO potential, what are the main factors holding the country back from faster BPO growth?

vinod
Vinod Narayan, Vice President of the Board of Directors for the Call Centers & BPO Commission under AGEXPORT, and VP & Center Head for Guatemala at 24/7

Vinod Narayan: The BPO industry is not an industry that government agencies or many people in the market fully understand. Unfortunately, for the better part of the last six or seven years, the public’s perception is that our industry is similar to the garment manufacturing industry, bearing with it the idea that BPO jobs are like working in sweatshops. All of the effort that is going towards changing the perception of the industry has been directed towards internal stakeholders, like government agencies and academia, because once the internal opinion is changed, external players will further realize the country’s BPO potential.

What are AGexport and other local agencies doing in order to shift that perspective? Is it working?

When we learned that the Institute of Social Progress was running a study in the market, we worked with them in order to focus on how the BPO industry has transformed the lives of people within it over the last 17 years. The study took into account the social index rating of Guatemalans in the industry.

Alongside things like tangible assets and healthcare coverage, the social index rating is based upon the median family income for those who are entering the industry, which is currently around 5,000 to 6,000 Quetzals (US$820) per month. After around five years in the industry, this should move to around 20,000 Quetzals, because you would expect that people get promoted over that time period. We identified that people joining the industry typically held around a 40% social index rating, but that after five years, that doubled to 80%, showing high mobility for BPO workers over time.

This data has been showcased to government agencies like the Ministry of Economy, the Ministry of Labor, and the Ministry of Finance, as well as international aid agencies, such as United Aid, USAid, and the European Union. These agencies have been involved in development programs in Guatemala and, as such, they now have information that showcases the ability of the industry to promote social progress and provide employment to young people.

What have been the main challenges in actually getting the social index rating to that level within the industry?

Acceptance in the market; correcting the negative perceptions that have been established. The country has also typically been dependent on agriculture and manufacturing, which has led to a labor pool focused on these industries. Thirdly, the government considers the services industry to be exporting products, specifically telephone calls. It’s very difficult for us to help them understand that we are exporting a service and not a product, and they have requested we hand over call recordings, which we will not do.

There are also specificities in the labor code for both full-time and part-time workers, and we have been asked to use a specific compensation structure centered on minimum payment for full-time staff. However, the minimum payment clause raises our costs and is not viable for us if someone only wants to work ten hours per month, so a lot of people who could potentially be employed by the industry are missing out. This has resulted in a long-term demand from the industry for the labor code and its policies to be amended to accommodate a more flexible compensation structure.

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How about challenges in resource availability? Where does Guatemala currently stand in the English skills and talent shortage dilemma?

The quality of talent required to support predominantly customers in the U.S. is not at the right level when people graduate from schools and colleges, and the government seems to be completely blind to this issue. The Ministry of Education has a minister responsible for bilingual education, so you would assume that this is centered on Spanish and English, but it is Spanish and the local Mayan language.

The government is focused upon the internal expectation that they need to promote the Mayan language and support the indigenous tribes through their education, which is a good start. However, they are totally unaware of the market potential for BPO and are ignoring the issue of English education. For this reason, out of the 200,000 people that graduate each year, the entire market could only realistically hire 15,000 to 20,000 people. The BPO industry can hire only 2,000 people directly without additional training.

AGexport and local BPO players have implemented finishing schools to change this, so what have been the results since they were established this year?

While the trainee numbers are over what we expected, the pass rate has not been as strong. Our initial goal was that by the end of the first year we wanted 600 people trained through the finishing schools, and we are currently at 625 people. We had also planned to reach a 75% success rate by the end of 2016, but we are currently at around 63-64%. For next year, we want to ramp up to 1,500 people trained and expect a success rate of 75-80%.

The cost of putting trainees through the finishing school this year was between $180 and $200 per person. With help from our partners at INTECAP, we have been able to reduce that cost to only $70 per trainee. Even so, at some point in time, you start facing challenges in terms of enrollment, because the courses are full time, eight hours a day, and last ten weeks—not all candidates have the means to sustain themselves during that time, so we have started looking at a new scholarship program to start first week of February 2017. The program helps trainees through the 10-week period with day-to-day costs like food, travel, etc., because their standard of living is at a stage where they’d struggle without continued income.

To be a part of the scholarship, applicants need to have passed high school education, and some of the funding agencies have suggested a maximum age of 30 years, which we are not fully agreeing with, but have accepted at this point in time to get the ball rolling. They are also subject to background checks, which the industry performs anyway. There also has to be an English capability level of A2, which typically rises to B1 after then training is complete.

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