El Salvador Journal: A Success Story Growing Cautiously

Spend a few days in San Salvador (as I’m doing with a group of analysts and advisors on a PROESA– sponsored country tour), and you learn quickly that a not-forgotten civil war and having the smallest geographic size of any country in the region creates a unique kind of hunger among the professional class in El Salvador. Put simply, El Salvadorans are careful – even conservative – about using their resources. And in the case of human capital, the call center and BPO industries are well aware that ongoing expansion has to be managed wisely so that supply of workers does not outstrip demand.

First Hand Familiarity

The good news is that El Salvador is a success story. From a handful of specialized BPO operations (including a Crowley finance and accounting shared services center) to over 40 mostly bilingual call centers employing more than 10,000 associates, San Salvador is a superb case example of how the country benefits from widespread, and often first-hand, familiarity with the United States. As many as two million native El Salvadorans are living in the United States – and similar to Nicaragua and Colombia, many of them are returning back home to find employment opportunities that were nonexistent a generation ago. Industry leaders here see positive results with functions like customer service and upsell/cross-sell activities which reflect and leverage workers’ US cultural affinity.

In meetings with Stream Global Services, Sykes, Transactel, Teleperformance and Office Gurus the clear message is that the market has reached an important stage in its maturity. The most impressive facility stop on our tour was with Stream Global Services where Salvador Salazar (Member of 2010 Nearshore Americas Power 50 Ranking) took our group on a visit to the firm’s youthful and dynamic center in the heart of San Salvador, employing over 1600 agents who primarily provide IT support to US clients. He says new agent hires are generally paid around $600 per month, plus an additional 30% of the amount focused on fringe benefits.

However Salazar, who also oversees operations in Costa Rica and Nicaragua, did point out that Stream would be hard pressed to continue expanding in El Salvador the way it has in recent years in the other two countries. Beatriz Peraltra, a senior operations executive at Sykes in El Salvador, echoed a similar sentiment – the future of the country’s call center/BPO industry expansion is largely in the hands of the government which has great influence on the quality and pace of development of human capital.

The fact that a left of center president,  Carlos Mauricio Funes Cartagena, now runs El Salvador does bring some concerns among business leaders about the rise of a pro-labor, pro-union mindset.

Comparative Advantages

But to be clear Salazar is not saying El Salvador is disadvantaged when compared against neighbors like Costa Rica – which faces a different sort of pressure. “We only lose our advantage when we compete against HP in servicing US customers”, said Salazar, referring to the fact that HP, Amazon, Equifax and a number of other multinationals soak up a big portion of the qualified English-speaking labor pool.

For Salazar, El Salvador offers a more attractive business/labor operating environment than in another key Central American delivery location – Nicaragua. “There you pay severance whether the worker resigns or gets fired”, which is not the case, he says, in El Salvador which has historically been a more right-leaning, business oriented environment. Further, Salazar adds: “We at Stream focus on a lot of tech support and we cannot do that in Nicaragua – the population there does not have the technical talent.”

Salazar does point out Nicaragua has other attractions, including the performance of the agents themselves.“The good thing about Nicaraguans  –  they are very friendly so they create good rapport with the customers.”

The fact that a left of center president,  Carlos Mauricio Funes Cartagena, now runs El Salvador does cause some concern among business leaders about the rise of a pro-labor, pro-union mindset. In fact, some BPO leaders here indicate that the government has promoted unionization in certain industries.

The reality however in the call center/BPO industry is that there is no evidence of a desire among the worker population to organize. Industry leaders stress that unionization could restrict the flexibility required for centers to expand, re-locate and re-deploy resources based on client requirements.