Honduras Appears to Gain from StarTek’s Closure in Costa Rica

Costa Rica has again been rocked by the departure of a global services-related player – this time StarTek plans to shutter operations in Heredia and lay off more than …

Costa Rica has again been rocked by the departure of a global services-related player – this time StarTek plans to shutter operations in Heredia and lay off more than 500 employees.

The Denver, Colorado-based call center firm has stated in a press release that it would soon organize a job fair to help its employees find other jobs. StarTek’s Heredia site provided customer relations and technical support to mainly telecom companies in the United States. (T-Mobile is widely known in industry circles as one of Startek’s lead customers.)

“The last day of operation is planned for August 30, 2014,” stated the BPO provider, adding that it had already notified its decision to all employees in the Central American country.

The U.S. firm has not disclosed the precise reason for closing its operation. “The difficult decision to close our Heredia site was made as part of our strategic plan to optimize our capacity and continue building upon the efficient solutions we provide our clients,” said Chad Carlson, president and CEO, in a statement.

When asked today by Nearshore Americas why Startek was shutting down, Rosemary Hanratty, spokesperson for Startek, wrote in an email: “There were many factors in the decision I am not aware if the wage inflation in Costa Rica played a role.”

Analysts have often blamed Costa Rica’s rising wage cost for the exodus of global companies. StarTek, which launched its Costa Rican operation in 2010, is the fifth international firm to scale down operation in the Central American country in recent past. The other four are: Intel, which is shifting a large part of manufacturing unit, Bank of America, PET Packaging, and appliance manufacturer MABE.

Ovum Analyst Peter Ryan said that he believes StarTek is scaling down operation in Costa Rica only to expand in relatively cheaper Honduras.

The US call center firm had hinted at such a move in one of its recent statements. “We recognized important losses in our Latin America segment associated with the furniture, fixtures and leasehold improvements at our site in Costa Rica after an impairment analysis indicated estimated future cash flows were insufficient to support the carrying values,” stated the company in one its past financial reports.

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“I have not had a chance to speak to anyone in StarTek yet, but I believe the lure of cheaper locations in the nearshore region could be a reason for StarTek to close down operation in Heredia,” Ryan added.

“StartTek can find good quality agents in Honduras, which is also much cheaper location than Costa Rica.”

When asked about further expansion  Honduras, Hanratty stated: “Several of our sites will see an increase including Honduras and we are not sure at this time how many and which site has been determined.”

StarTek, which employs about 1,300 people in Honduras’s second city of San Pedro Sula, has recently launched a call center in the capital city of Tegucigalpa.

StartTek may even shift a small portion of its operation to the United States but that is a very distinct possibility, said Ryan, adding that the company’s financial performance had improved in the past one year.

Costa Rica investment authorities continue to invest significant time focusing on ‘higher-value’ knowledge based services, which has resulted in recent investment plans by Intel and VMWare. At the same time, the appeal of Costa Rica for routine customer service functions continues to diminish in light of up-and-coming destinations like Honduras, Guyana and Belize, which are generally lower-cost destination but also do not have the heritage Costa Rica has for software and higher-functioning IT-related services.

 

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