Limited Growth and Focus on Local Business Define the Argentine and Chilean Contact Center Markets

The Argentine contact center outsourcing services market exhibited a minor decrease in its revenues in 2013 (1.7%) and attained US$867.8 million in the full year, hit by the …

Sebastian Menutti, Enterprise Communications Industry Analyst, Frost & Sullivan

The Argentine contact center outsourcing services market exhibited a minor decrease in its revenues in 2013 (1.7%) and attained US$867.8 million in the full year, hit by the significant loss of offshoring business. Meanwhile, the Chilean market earned revenues of US$367.8 million in 2013, which represented a mild annual growth rate of 2.7%.

Both marketplaces showed a manifest trend to focusing entirely on the domestic business and, as a matter of fact, lost offshoring businesses during 2013. Therefore, over 90% and 95% of the revenues in these markets were generated by local contracts in Chile and Argentina, respectively. This dynamic has been present in these marketplaces for nearly five years, as a consequence of the progressive loss of international competitiveness against other countries in Latin America, specially Colombia and Peru, but also Mexico and some Central American locations (when considering offshoring businesses from the United States).

Challenges Abound

In this framework, the Argentine outsourcers have to deal with an inflationary scenario that generated periodic wage raises, which forces them to increase their prices to face the higher costs. However, most of the outsourcers have not been able to keep up with the constant raises, due to the reluctance of many clients to pay the increased prices. As a result of this dynamic, the profitability margins in the contact center outsourcing industry in Argentina have been reduced.

Despite being in a stable economic and political position, Chile faces several challenges as well, as per a gradual but steady increase in costs – driven by the raises in the minimum wage – and a loss of international competitiveness. In addition, the Spanish economic crisis has led several Spain-based outsourcers to leave Chile and look for more competitive locations in the region, such as Colombia and Peru. Therefore, many Spain-based outsourcers with operations in Chile were forced to shift their business models and focus mostly on the local market, which has increased the competitive pressure in this marketplace and led to a fall in prices.

An important consequence of the loss of competitiveness is that many companies (clients) within Argentina and Chile are increasingly looking forward to nearshore their contact center services to more competitive locations, such as Colombia, Peru and Paraguay. This phenomenon has been taking place for the last five years, but has not reached its maximum expression yet, due to administrative burdens to import services in Argentina and the fact that the Chilean customers still prefer to talk to local agents rather than people from nearby countries. Moreover, the main outsourcers present in Argentina and Chile already offer at least one nearshore alternative to their clients, with more competitive offers. This process has become one of the key drivers for growth in marketplaces such as Peru and Paraguay.

 

Impending Regulation

Another common ground between Argentina and Chile is the existence of bills to regulate the contact center activity which threatens to further increase costs for the outsourcers. In Chile, the Congress has a pending bill, Call Center Workers Labor Statute, which forces the contact center service providers to guarantee some specific working conditions. Among them is the prohibition to allocate night shifts for an agent more than two weeks in a row; the fact that agents will have 15-second-breaks between calls and 15-minute-breaks every two hours; space and noise requirements and the obligation for providers to pay for medical exams for all agents every six months.

In Argentina a bill has also been proposed that would regulate the labor conditions for the local agents with similar clauses to the Chilean bill. However, it also forces the outsourcers to perform annual medical exams to all agents and to pay a minimal wage equal to the full basic salary established for a 48 hours job. Currently contact center agents salaries are calculated as a percentage of the fulltime basic wage, depending on the amount of hours worked (e.g. if an agent works 36 hours per week, its salary will be equal to 75% of the basic fulltime employee salary). Therefore, it is estimated that if this bill is approved the costs for Argentine outsourcers would increase between 40% and 90%. Additionally, this bill establishes that the Argentine customers must be served by local-based agents, which would in fact prevent the import of these services and severely affect other markets such as Colombia, Paraguay and Peru.

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It remains uncertain whether these bills will pass in the short term, as they are currently being discussed by the Argentine and Chilean congresses. However, if they were to be passed, it would strongly damage the international competitiveness of these marketplaces.

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