Nearshore Americas

Cultural Affinity: A Big Influence on Caribbean and Central America Contact Center Sourcing

The Central American and Caribbean (CaCar) region was one of the fastest growing market for Contact Center Outsourcing (CCO) in Latin America in 2013. This marketplace attained revenue of $1.4 billion last year, representing a year-on-year growth of 9.9%, a rate bettered only in Colombia and Peru. The main driver for this growth was offshoring from the United States, activity that is expected to continue leading business in the region in the years to come.

Unlike in most of the Latin American region, close to 90% of the CACAR’s CCO revenue is generated by providing services to other countries, and among them the United States accounts for almost 90% of the business. Frost & Sullivan expects that the United States will nearshore contact center services to Latin America for over $2.7 billion in 2017, after exhibiting double-digit growth rates in the whole 2013/2017 period. CACAR was able to account for close to 60% of this volume in 2013, meaning that the business opportunities for this region will rise at least during this forecast period.

Close Cultural Ties

The key factor that helps to explain why CACAR generated more than half of the revenue that the United States nearshored to Latin America is that there is a strong cultural affinity between Central America and the U.S. This is an undeniable competitive advantage for this region, one that is especially relevant when considering voice-based contact center services. When an American customer speaks on the phone with an Indian agent – for example – they can feels alienated by to the cultural disconnect and the very different accents between the two parties; this is not the case when the agent is Costa Rican or Dominican, as both speakers are more likely to share similar views on many different issues and the communication will feel far more “natural” for the customer. This can be explained by two factors:

  • Cultural affinity with the United States is greater in CACAR than in almost any other location in Latin America. Central American people are used to watching the same TV shows, wearing the same clothes and even playing the same sports as Americans.
  • The Hispanic population based in the United States has reached nearly 50 million people, which has led a large portion of Americans periodically interacting with Hispanic people.

In other words, the CACAR region still represents a growth opportunity for the CCO industry. However, marketplaces within this region are different in terms of market maturity and labor pool saturation, and they can be grouped in categories. In this sense, CACAR offers the chance to develop services with distinct costs and – therefore – with different levels of value added.

Mature Marketplaces

Costa Rica and Panama are the countries in CACAR with the highest levels of market maturity, due to a longer industry history in these countries, favorable economic environments, stable political frameworks, strong infrastructure capabilities and educated and qualified workforces. As a result, these marketplaces are further specialized in more complex BPO services with higher value added, when compared with other locations in the region. However, these marketplaces exhibit significantly higher costs than their neighbors and more saturated labor pools, which makes it harder and more expensive for outsourcers to search, recruit and maintain desired personnel.

Incipient Markets

Locations such as Honduras and Nicaragua have less mature markets and less saturated labor pools, meaning the agents in these countries are less expensive. However, the infrastructure conditions and business environment are less encouraging than in the above-mentioned countries. Within this group, Guyana and Belize are even less penetrated countries and – despite their small populations – offer a very important competitive advantage: their official language is English. This positions these locations as potential hubs for offering voice services to the United States.

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Other marketplaces

El Salvador, Guatemala and Dominican Republic are located in a middle ground between the Mature and Incipient markets, both in terms of costs and the complexity of services that can be offered within the countries.

In a nutshell, the CACAR CCO market still exhibits plenty of room to grow in the coming years. Frost & Sullivan expects that the compound annual growth rate for revenue in the 2013/2020 period will be of 8.4% and that CACAR will remain one of the hot spots for CCO in Latin America. However, outsourcers will have to find ways to overcome the saturation that undermines the principal cities in the region and threatens the area as a whole.

Sebastian Menutti

ICT Industry Principal, Frost & Sullivan.

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