Nearshore Americas

COUNTRY PROFILE: Fighting Labor Scalability Issues, Honduras Kick Starts BPO Industry

When Nearshore Americas reported on the ‘Nearshore Business and Investment Forum’ in San Pedro Sula, Honduras in September, we were impressed at the number of multinational firms in attendance. Players like Atento, Sykes and Sitel showed up, indicating there is no lack of “shoppers” poking around looking to better understand the Honduras sourcing equation.With a long history in manufacturing, Honduras looks set to climb the value ladder to professional services. But analysts fear that the main ingredient for a strong call center destination – a skilled language proficient workforce – may be in short supply. Can Honduras produce enough talented labor to meet firms’ demand, or will the market become quickly saturated like so many others before?

Honduras’ bid for the professional services market has been expected by industry watchers for some time now. With an established reputation for ‘maquila’ manufacturing, US companies working here include Hanesbrands, Jockey, American Airlines, Gildan, Delta Airlines, Citibank and HSBC. But investment promotion agency FIDE is now using the country’s advantages (proximity and the Central time zone) to attract large call center players with deep pockets and long term investment horizons.

Some telling facts and figures on Honduras:

  • Population of 8.04 million. Labor force of 3.3 million, with 38.4% unemployment and a literacy rate of 84.8%
  • GDP of $32.5 billion, with a currency risk rating of ‘B’ by the Economist Intelligence Unit.
  • 2009 Ease of Doing Business rank of 141, according to the World Bank.
  • Ranked 91 out of 131 countries on the WEF’s 2010 Global Competitiveness Index, behind Costa Rica, Guatemala and Panama, but ahead of Nicaragua.
  • 47% of the employable workforce between the ages of 20 and 34.

Altia Business Park

Honduras’ capital and largest city is Tegucigalpa, with a population of 1.2 million. However the business and sourcing action is concentrated on its secondary city San Pedro Sula (800,000), which alone generates over 60% of national GDP. And it’s really because of Altia Business Park, the first world-class business center in Honduras designed specifically to host call center and BPO operations. According to Anupam Govil, Partner at management consulting firm Avasant, “Altia brings together all the essential elements such as workforce quality and availability, costs, infrastructure and telecom robustness to provide an ideal nearshore destination”. The park functions as a Free Trade Zone, which means firms located there are exempt from any local or national tax.

In terms of available workers, there are approximately 28,000 students enrolled in universities in the region. Around 2900 graduate each year, with 870 of those students fully bilingual. That’s good, but not great, and FIDE is working hard to raise that number. However Altia helps firms find employees by maintaining a database of 5100 resumes of fully qualified Spanish and English-speaking workers, ready to begin immediately.

Labor offering

A large selection to choose from – Because of the complete absence of large call center players in Honduras, incoming firms have a unique opportunity to shape the workforce to suit their needs. As John Glasgow, General Manager of language training firm CEDS told us in June, “It’s a very new market. Any company coming here is going to find an excited labor pool and a business environment that’s happy to have them”. That being said, it will require that outside intervention to ramp up the talent, since CEDS reports that it’s difficult to convince employers in Honduras to invest in training of workers.

We spoke with Honduras Foreign Minister Mario Canahuati, to ask what initiatives were being implemented for additional training. “We’re in the process of establishing an alliance with SENA”, he said. SENA is the national human resources training organization in nearby Colombia. “They train millions of workers a year, and the idea is that with their help we can provide the skilled labor supply that BPO firms require”.

English proficiency – Honduras actually has more English speakers as a proportion of population than the average Central American economy. The reason is an excellent system of universities and high schools that are being proactive in raising awareness of the outsourcing industry, and producing students that meet the language proficiency criteria. Honduras has 410 bilingual high schools – more than any country in Central America.

“We’ve seen great success in finding bilingual staff for our operation”, says Oscar Cordova, Site Manager for HCE, a subsidiary of business gifts company Myron. “We started with back-office customer care in 2008, and then transitioned virtually all support and customer care call handling to Honduras in 2009”. However his is a relatively smaller operation, and it’s unclear whether there is the English proficient labor capacity to support BPO operations on a much larger scale. In fact according to a source working closely with FIDE and the government who preferred to remain anonymous, “It’s possible for two, maybe three large companies to go into Honduras, each with around 1500 seats. After that, it’s over”. That scalability is a huge threat to Honduras’ infant sourcing industry. There are currently an estimated 1200 workers employed in the call center industry.

In terms of affinity with the US, “Honduras has a very Americanized culture. The proximity creates a value add, which really helps with communication”, says Kathia Yacaman, Corporate Marketing manager at Grupo Karims. Read our more detailed assessment of Honduras’ labor pool here.

“The president is very clear on what is required to stimulate the economy.. He knows it must come from the business community and foreign investment” – Foreign Minister Mario Canahuati

Attractive cost

Honduras’ advantage is in its low wage rate. A Spanish call center agent would earn $310-450 a month, while a bilingual rep would be paid $400-600 a month.

In terms of real estate and rental prices, Honduras is among the cheapest in Latin America. Class A office space in Altia costs approx. $20 per square meter. The telecom infrastructure in the country is also strong, with three submarine cables to the US. However the main improvement necessary in Altia is ensuring greater redundancy.

The challenge of politics

Political commitment – Still the biggest challenge in Honduras remains the lack of awareness about what the outsourcing industry can bring to the economy. And so we see a reluctance in government to create space around the lucrative trade in manufacturing and agriculture, for trade in professional services. We asked Canahuati what President Pepe Lobo’s stance is on the BPO and call center industry. “The president is very clear on what is required to stimulate the economy”, said the Foreign Minister. “He knows it must come from the business community and foreign investment”. That’s encouraging, but we still have not seen any real help or outsourcing-targeted initiatives from the Honduras government.

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With the rise of Central American neighbors Nicaragua, Guatemala and El Salvador, it’s critical that the government and FIDE work to differentiate Honduras in terms of its comparative advantages.

Perception of instability – Literally everyone we spoke to agreed that Honduras is still fighting the stigma of its military coup last year. For US companies already worried about ongoing violence in Brazil and Mexico, the image of political instability in Honduras is difficult to get over. “It has scared away many investors”, says Yacaman. “But Honduras is now back to normal, just like before. It’s a new market, and the labor pool is wide open. It’s just a matter of bringing companies here to see it”.

Tarun George

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