Are Higher Costs Crippling Argentina’s Call Centers?

The Argentina BPO/ call center community has converged this week in Buenos Aires to confront – among other things – growing concern that Argentina is losing its place as a premiere Latin America contact center destination. Inflation, scalability concerns and an ongoing mismatch between government and private industry agendas represent the biggest worries for the industry. We decided to check in with two of the most respected analysts in Nearshore BPO/call center services – Juan Gonzalez, of Frost and Sullivan, and Peter Ryan, of Ovum – who are attending the Tenth Regional Contact Center & CRM Congress in Buenos Aires this week.

Being on the ground in Argentina this week, how would you rate the country’s prospects for call center services and outsourcing?

Peter Ryan: The sense here is mixed.  I see the industry converged at the meetings as positive about the opportunities for the future, but more than one person has raised the prospect of inflation, as well as lack of global awareness relative to spots like Colombia and Mexico.

Juan Gonzalez: Expectations are still on the ground.  However, industry leaders have already realized that they will need to work further than they used to do when Argentina’s key competitive advantage was the pricing.  Right now, companies need to show their clients why to pay that premium to come, or remain in, Argentina.

Event though most of the recent news seem to be not very encouraging (TeleTech closing one site in Rosario, issues with the Unions, Arvato reducing their staff in Buenos Aires) there are also good signs: Aegis entering the market through the acquisition of Actionline, Argentina still posseses one of the highly educated populations within Latin America.

Kirchner and the Peronistas appear to be hitched to a pro-labor mentality, which does not take into account capital inflows from the rest of the world

In regard to macro-economics, are there signs that the president and her senior ministers have the right mindset to make the country more attractive for FDI?

Ryan: Personally, I don’t see this as being the case.  Kirchner and the Peronistas appear to be hitched to a pro-labor mentality, which does not take into account capital inflows from the rest of the world.  It is a shame, as this country is extremely commercial, sophisticated and developed but the existing administration appears intent on ignoring both BPO and making the country competitive with other Latam commercial giants like Colombia and Mexico.  The sense I have from the conference is great frustration with the Kirchner regime.

What are some of the biggest barriers the country faces?

Ryan: There is a serious cost issue in Argentina.  With wages increasing each year, people are spending and not saving, which is pushing up prices on everything, which is pushing not just offshore work away to other countries, it is also pushing Argentinean domestic work to other countries in Latam, like Peru.  Until the government abandons its reflationary, pro-union agenda, it is unlikely much progress will be made.

Gonzalez: The main issues are a lack of government support, lack of self-promotion abroad, lack of a sense of unity among industry members and also inflation rates.

In the past there has been evidence of a chasm between the federal government and the Buenos Aires city government in terms of doing what it take to a viable IT/BPO investment climate.  Is that still the case?

Ryan:  It has been hard to discern this same shift this time around, but my sense is that it remains to some degree.  The business people of Buenos Aires are intent on maintaining a strong offshore BPO and IT presence in Argentina, and I have no doubt city hall would like to see that too.  It is, however, contingent on positive action by the federal government, which to date does not appear in the cards, especially as the country ramps up to an election.