Despite Impressive Economics, Bolivia Remains a “Wait and See” Proposition

Topping the list for Latin American economic growth in 2014 was not Brazil or Mexico, but Bolivia with growth of 5.5%. According to TeleSurTV, the Minister for the Economy and Public Finance, Luis Arce, told the national broadcaster, Bolivia TV: “There is very good news for Bolivians, because we will close 2014 with a growth of 5.5 percent … that means for the second time in 2014 we are privileged to be the economy with the best growth in the region, others have been more affected by the international crisis and have had weaker growth.”

In 2013, Bolivia was ranked 105 out of 144 for global competitiveness by the World Economic Forum. Despite this relatively low ranking, the county has been on an upward trajectory in terms of the competitiveness rankings. In the same year Mexico and Costa Rica were ranked 61 and 51 respectively.

Now with this impressive economic accolade under its belt, some are wondering whether this will herald the entry of Bolivia onto the world IT outsourcing stage in earnest. In a 2013 study of the Bolivian software development sector by Claudia Ricaldez Rocabado, it was noted that “Bolivia contributes to IT spending in the region with less than 9%. Thus, outsourcing (as in the case of Uruguay) offers a broader perspective for the software industry and new market possibilities worldwide. Already, several entrepreneurs have incurred in this market. In Cochabamba, there are more than a dozen small and large software companies that create systems for countries such as the U.S. and several others in Europe.”

As Rocabado highlighted, there is already some activity in the sector and an increasingly healthy and growing economy could certainly help to increase interest in the small Latin American country.

An Entrepreneurial Spirit

Sanjay Govil, founder and Chairman of Infinite Computer Solutions, said: “Sourcing from Latin America has become a priority for technology companies in the U.S. looking to offset costs and take advantage of the proximity and time zone, and Bolivia is definitely part of that conversation.”

Those that have ventured to Bolivia have found much of benefit to in terms of IT outsourcing to the country. “I first visited Bolivia two years ago and was amazed at the software development talent and entrepreneurial spirit I found there. We have certified two software development partner companies in the beautiful city of Cochabamba, the ‘city of eternal spring’, which is the center of software outsourcing for Bolivia,” said Steve Mezak, Founder and CEO of Accelerance Inc., and author of Software without Borders: A Step-By-Step Guide to Outsourcing Your Software Development.

Accelerance has certified 43 software development partners across the world, including Latin America. Said Mezak: “English skills are relatively strong and nearshore outsourcing software development to Bolivia continues to be a great value for our North American clients due to lower current awareness, a stable currency, a lower cost of living and the output of an excellent supply of qualified developers.”

More Needs to be Done

But some are more cautious about Bolivia’s potential as a key player in IT nearshoring. Jon Butler, Director at ISG, described Bolivia as presenting “an interesting paradox (high growth and low labor costs) for a limited number of clients.” He added: “While record commodity exports such as grain, minerals and gas drove the GDP of one of Latin America’s poorest countries to a region-leading 6.8% in 2013, many uncertainties remain in the minds of IT clients that would consider Bolivia as a serious IT outsourcing location.”

Butler explained that the commodity boom has led to what some would call “over-construction” in Santa Cruz’s Golden Triangle business park, but the majority of companies opening offices there tend to be commodity- or manufacturing-based companies. “As a result, Bolivia’s IT workforce tends to be more in-country focused with less experience operating in global environments. Clients are also concerned with the policies of President Morales who employed the military to nationalize the oil and gas sectors after only 100 days in office,” he said.

Still, Butler noted, there is the elixir of low labor costs. “On the South American stage, Bolivia does represent a low-cost alternative to more established locations such as Mexico and Costa Rica. Even compared to Argentina, Bolivian costs are low. However, the country’s minimum wage has quadrupled in six years and average salaries have risen by 20% since 2010 according to the Bolivian labor ministry,” he said.

According to Butler, this momentum only points to higher IT costs similar to the soaring in-country construction costs that have risen 60% since 2010.

“While some clients may consider an emerging location like Peru because of the ease of doing business there, it’s simply a much harder sell with Bolivia. In fact, when the US held free trade agreement talks with Peru, Chile and Colombia, Bolivia threatened to pull out of trade agreements with those countries in retaliation and has since more tightly aligned itself with Venezuela and Cuba,” Butler warned.

Development of Talent Key to Building the IT Sector

It’s not all doom and gloom, though. Butler noted: “Clients are adopting a ‘wait and see’ attitude with Bolivia and are continuing to look at Mexico and Costa Rica for their nearshore needs in the short-term.”

To position itself as an emerging player in IT nearshoring, Govil highlighted the need for Bolivia to focus on development and training. “Bolivia has shown great economic development. The country should continue developing the right ecosystem to be a serious contender for the IT sector,” he said. “This includes continued building of its educational resources, especially given Bolivia’s substantial population below 18 (the median age is 23 or so).  I believe that giving the workforce the opportunity to develop the necessary skill sets for IT jobs is the key to success.”

Whether Bolivia will be able to leverage its economic growth to claim a greater piece of the pie remains to be seen, but the potential is there. With the right approach to development and training, Bolivia could become a notable presence in the sector.