By Tarun George

We all know that labor market regulations are an important part of the decision to outsource to a foreign country. They standardize the rules for employer and employee, and make factors like labor costs much more predictable. At the same time, consensus is that excessively strict regulations do not allow the labor market to function efficiently.

The question for US companies eyeing the LATAM outsourcing industry is, when do these regulations become too rigid?

The current situation in many Latin American countries could be ‘too rigid’. Enterprise Surveys, a firm that specializes in company-level data collection in emerging markets,  conducted a series of surveys done last year across 14 countries in the region to test for the effects of strict labor regulations on the workforce. The subsequent report by David Kaplan, from Enterprise Surveys, states that laws such as high legally mandated severance payments, mandatory retraining of redundant workers, and restrictions on hours worked not only prevent the labor market from operating efficiently, but also cause lower levels of workforce participation, and higher levels of unemployment. He concludes that making regulations more flexible would lead to an average net increase of 2.1% of total employment.
The irony is these laws are often union-driven requirements to protect workers, but they sometimes end up doing the opposite. “We had many employees who legitimately wanted to work two or three 12-hour shifts during the week rather than five 8-hour shifts, but because of the overtime rule we couldn’t allow that” — Maggi Williams, VP Corporate Development, KM2

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SOURCE: NYTIMES

BOGOTÁ, Colombia (Reuters) — A Colombian court on Friday rejected as unconstitutional a proposed referendum that would have asked voters whether to allow President Álvaro Uribe of Colombia to seek re-election to a third consecutive term.

The decision by the Constitutional Court appeared to end Mr. Uribe’s effort to overturn the constitutional limit of two consecutive terms. Mr. Uribe, a conservative populist, is the United States’ staunchest ally in Latin America.

He told reporters that he accepted the court ruling and that he would not run for a third term in the May presidential election.

“I accept and I respect the decision of the Constitutional Court,” Mr. Uribe said.

The court decision signals the start of a tough campaign among political rivals seeking to replace Mr. Uribe, who after almost eight years in power has …

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The Colombian IT market is one of the least developed in the Latin America region, but is projected to grow at a compound annual growth rate (CAGR) of 12% over the 2010-2014 period. The market continued to grow in 2009, although there was a sharp deceleration compared with the previous year. The consumer-driven economic boom of recent years may have come to an end, but government programmes and growing computer affordability will support spending on IT products and services.

The economic outlook in 2010 remains problematic for the IT market, as Colombia increasingly feels the brunt of economic uncertainty as well as a subdued growth and investment outlook. Despite these factors, Colombian domestic spending on IT products and services should reach a value of US$3.3bn by 2014. The government sees increased information and communication technology (ICT) spending as a key means to advance its central strategic goal of helping the …

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Nearshore Americas has learned that global contact center giant Convergys, which serves half of the Fortune 50, is setting up a BPO  service center  in Bogota after receiving clearance to operate in a new free trade zone in the northern part of Bogota.

As many as 2,500 seats will occupied at the center within three years, according to two reliable sources. The center, which should be operational in June, will also offer financial back-office support services.

Colombia is without question one of the hottest outsourcing destinations in Latin America, and its transformation has been one of the biggest stories to hit the headlines in the Nearshore community in the last several months.

Convergys spokesperson John Pratt declined to comment late today on our report.

“This does not come as a surprise, really,” says lead BPO and call center analyst Peter Ryan, of DataMonitor, commenting on the development. “There is a lot of capacity in Colombia and the country has the potential to become the next big thing in South America,” said Ryan, comparing its rise to Chile and Argentina, which have become globally recognized outsourcing centers.

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The natural belief for most US nearshoring customers is that the big cities – Bogota, Guatemala City, Mexico City, Santiago among others – are the optimal destinations to establish services relationships.

The reality, as we are seeing more clearly than ever, is that the big cities are not the only option, and that prospective buyers should look very closely at some of the rising secondary cities across Latin America. Many of them have international airports, are located near a major university and are eager to welcome new business investment. The other critical factor is there is often less wage pressure which helps both providers and clients anticipate how to manage projects for the longer-term, knowing that competition for workers won’t spiral out of control.
For bigger countries like Mexico, Brazil and Colombia, there are a long list of secondary cities that are well positioned to become more visible on the global services map.

Doug Gattuso of Neoris says Cuiliacan, Mexico has been a star performer

Such is the case for Neoris, a global IT services and consultancy firm with a strong Nearshore presence, which employs several hundred staffers at a satellite center in Cuiliacan, Mexico. Speaking this week with Doug Gattuso, Neoris’ vice president and managing director for the US, he talked about the appeal of “rural” centers (Cuiliacan is tiny compared to Mexico City, with about 600,000 residents.) The city hosts two universities, including a technical college – Instituto Tecnologico De Culiacan – where Neoris pulls much of its talent.

For bigger countries like Mexico, Brazil and Colombia, there are a long list of secondary cities that are well positioned to become more visible on the global services map. Barranquilla, Colombia – for example – is a city with over 1 million residents and, is becoming better known for its professional services capabilities.

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By Karina E. Cuevas

Plenty of heads shook with dismay across Latin America, and particularly in Colombia, when Bogota was labeled as the riskiest outsourcing destination in the world for 2009, according to publishers of the Black Book on Outsourcing.

Lots of rankings come out annually about outsourcing providers, specialty areas, regions and cities – but this particular announcement seemed to be so at odds with reality that it triggered a slew of condemnations across the Internet and raised serious questions about the methods used by authors Scott Wilson and Doug Brown. (For further opinion, see Nearshore Americas’ reaction here.)

Modern City on the Rise

A city that generates over $250 million annually in the call center/outsourcing industry can hardly be called a dangerous investment option.  “It [Bogota] has a big and modern economy with over 500,000 college students, a major international airport and the advantage of moving more cargo in Latin America [than any other country],” says Vladimir Ramirez, Managing Director of International Development Group, a management consulting firm with operations in Colombia, New York and Chicago.  “It was number one in foreign investments last year (in LATAM) making it the first port of entry in Latin America and having both Colombian and international Spanish call centers located in Bogota.”

With facts like these, it’s hard to believe the negative comments on Bogota, but Black Book of Outsourcing doesn’t stop there. It places Bogota under the radar as a dirty and polluted city with an immature legal system.  When contact about the report, authors Scott Wilson and Doug Brown did not respond to questions.

“Many people know very little about Latin America and nothing about Colombia, so I don’t know if those people have ever been here or where they get their data,” says Ramirez. “Colombia, within its political context, has never had a coup d’état, it has only entered in a recession once at the end of the last century and from a public order point of view it is no more corrupt than India, Indonesia and other countries in Latin America.”
Teleaccion: Training Plays a Key Role

Colombia counts on the expertise of a consulting and training company, unique to Latin America, called Teleaccion.

It’s a 21-employee institution specialized in improving technology and BPO management within the country and nine other nations around Latin America.

It has focused on three primary countries of growth for the call center market, including Colombia, Peru and Venezuela.
“We have trained around 23,000 people within 157 contact centers in Latin America,” says Patricia Alzate, General Manager of Teleaccion. “We work for Latin American reality, not for American or European cultures. Our method is a practical and simple one that has showed great results.”

According to Ramirez, Colombia is a market waiting to be discovered by the international community.  Currently there are around 120,000 employees within the call center industry.  The largest call centers are located in Bogota which employs around 30,000 people. The country, with seven distinct regions, offers over 12 cities in which to base a company.  In five years, the call center/outsourcing industry is expected to generate $2.5 billion in revenue for the country.

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The hit on Bogota as the “Riskiest Place on Earth for Outsourcing” is a huge reminder of the vast amount of ignorance that exists both within the outsourcing industry and beyond about doing business in Latin America. I personally contacted “Black Book” author Scott Wilson two weeks ago to pursue details on his research methods and he initially was responsive.

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Cuba: A report is floating around that over 60,000 well-trained IT professionals are standing by ready to take on BPO work in a country that is quickly shedding its pariah status. Anybody up for planning a BPO conference in Havana?

Honduras: Some savvy folks from this emerging nation are making a strong case for cooking up some deals based on available capacity and its strong English-language training. Country leaders  must continue to define their asset base and bring out the more differentiated characteristics of this promising nation. Searching for answers on this market? Gabriela Calix of Green Valley Industrial Park is a great resource.

Colombia: Wow, what an interesting upside. Over 45 million people and a very compelling combination of favorable factors including a far safer society than in years past,  new telecom infrastructure and tax incentives. Vladimir Ramirez and Pedro Quintanilla both …

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