Honduras Holding its Own Despite Headwinds

Having established itself as a major business processes outsourcing (BPO) hub in recent years, Honduras has been plagued by social unrest in recent months as a result of proposed legislation that would privatize parts of the education and healthcare sectors.

Protesters are demanding the resignation of the country’s second-term President Juan Orlando Hernández, who they accuse of neglecting public services, and Honduras is also making the news in the US as caravans of Central American migrants fleeing violence and poverty in the region are crossing Mexico, headed for the US to seek asylum.

The increased flow of migrants prompted President Trump to threaten to impose tariffs on the import of Mexican goods as a means of pressuring the Mexican government to stem the migrant numbers.

As a result, Mexico has deployed its newly created National Guard to its southern border, and the country now has 45 days to prove it can staunch the migrant flow.

‘Impact on new investments’

“It is undeniable that this situation affects the business climate and creates uncertainty among clients, although the current situation is not affecting the business of our current clients in Honduras,” Vanessa Oquelí de Riera, managing partner at law firm García & Bodán in Tegucigalpa, told Nearshore Americas.

She blamed the situation on “the unbridled ambition of the political class, and corruption”.

“Unfortunately, this kind of situation always has a greater impact on new investments, and which can put the brakes on plans of companies unwilling to invest in a country experiencing political upheaval,” she said.

She said however that call centers is one of the industries, along with energy, that is bringing the most investment to Honduras.

“We’re at the first stages of customers expressing a little concern, and it will depend on the government getting things stabilized, and quickly,” Jon Ellsworth, VP for business development and a solution architect at US-based BPO company Knoah, and which operates two call centers in Honduras, told Nearshore Americas.

There is concern regarding Honduras’ ongoing instability, he said.

“It does give people the jitters, everybody wants to be secure, nobody wants to go to where they will not feel safe.”

“All eyes are on what continues to happen there,” he said.

“Our commitment to the geography is very solid, but this kind of situation also obligates us to ensure that we have business continuity and recovery plans, as well as security plans in place to protect our customers,” Ellsworth said.

Since setting up in Honduras in 2016, Knoah has expanded to Guatemala, the result, he says, of the company looking at other countries as a contingency plan.

“The company asked itself, what happens if, for some reason, something happens to Honduras? At the time we entered, the country was very stable, and had not seen the conditions it is seeing now. As a purely preventive measure, we carried out due diligence in the Dominican Republic, Guatemala, Belize and Mexico, and we decided that Guatemala won out,” he said.

However, Guatemala’s BPO industry exports suffered a 12% year-on-year contraction in 2018, to around US$600 million, according to the country’s Exporters’ Association (Agexport), and which predicted a flat year in 2019.

Regarding Honduras’ future, Ellsworth made a comparison to Nicaragua, which also underwent political instability last year, with the violent repression of anti-government protests.

“But that country is now seen more favorably as a result of the situation having calmed, and that is the hope for Honduras.”

Talent supply threshold

Knoah is looking to open a third contact center in Honduras, and Startek opened its third customer experience management center in the country in January, now employing around 2,200 Hondurans.

And Knoah’s Ellsworth does acknowledge that talent supply could be an issue in the future in the capital Tegucigalpa, which has a population of around 1.2 million.

“There is a threshold at some point on the number of people you can hire,” he said, adding that universities in Honduras are looking to close the skills gap and align themselves more with businesses’ personnel needs.

“As more outsourcers move in, that will put a strain on the supply of talent, and which forces companies to adjust in order to remain attractive to employees,” he said.

Kathia Yacaman, executive VP at Grupo Karims, a Honduran IT services and real estate company, says the company has not seen any change in investor or client sentiment regarding doing business in Honduras as a result of the recent unrest, and neither has the situation altered the company’s plans.

Grupo Karim owns Altia Smart City, an IT-focused business park in San Pedro Sula, Honduras’ second city, and which, she said, is at full occupancy, and that the company will add another tower to the complex this year, and another tower in Tegucigalpa in 2020.

Tegucigalpa will also see the construction of a 27,000-square-meter tower, called Ventu, being developed by Grupo Vision Development and Grupo Jamar especially to house companies in the BPO and IT sectors, according to Central America Data.

Altia Smart City is home to the country’s manufacturing industry association (AHM), and which says there are 11 BPO companies operating in the business park.

In 2013, Grupo Karims’ philanthropic Fundación Grupo Karims launched a bilingual education program, aimed at increasing opportunities for young people looking to enter the IT and BPO sectors.

“The program is converting state schools into a first-class bilingual system, and now operates three schools in Tegucigalpa, with plans to add two more,” Yacaman told Nearshore Americas.

The BPO sector is also supported by Honduras 20/20, an investment promotion agency, which stated in 2018 that the country is Central America’s second most attractive outsourcing destination after Costa Rica.

Honduras 20/20 is currently unable to offer insight into the BPO panorama however, as its website is down for maintenance.