Safety and security are ever-present concerns for companies looking to expand outside of their home market. The Nearshore region, and Latin America in particular, has a reputation for trouble. Media coverage of Latin America in the US and Europe most commonly reports on serious and violent crime, and as a result, an all-too-familiar perception of the region is one of insecurity. As multiple studies have pointed out, the over reporting of violence simply leads to more.
The Intelligence Unit of The Economist magazine recently released its Safe Cities Index 2021. In it, 60 global cities are ranked by digital security, health security, infrastructure security, personal security and environmental security. As usual, Latin American cities scored low.
Each of the regional cities included in the list – Buenos Aires in Argentina (34th in overall rankings), Bogota in Colombia (41), Mexico City in Mexico (42), Quito in Ecuador (45) and Caracas in Venezuela (45) – scored below average in the overall score as well as personal security rankings. Though Lima in Peru was removed from this year’s list, in 2019 it placed 45th in overall rankings.
Homicide rates in the region are shockingly high. Over half of the top 20 countries with the highest homicide rates in the world are located in the Nearshore region, according to data from statista.com, with El Salvador the standout country in an unwelcome list, leading with 82.84 homicides per 100,000 inhabitants.
High levels of violence cannot be ignored nor denied. But does the level of insecurity seen in Latin America pose a serious threat to Nearshore players in comparison to other outsourcing markets? The answer is complex.
“One-third of global homicides take place in Latin America. It’s the most violent region in the world,” Guillermo Vázquez Del Mercado, a Latin American security analyst and associate professor at the Centro de Investigación y Docencia Económicas (CIDE) told Nearshore Americas recently.
“But the level of threat depends on the context and the place,” he added.
The Proof is in the Pudding
The Safe Cities Index also includes other major outsourcing hubs, including Mumbai (India) and Manila in the Philippines. Both Mexico City and Bogota score above Mumbai and Manila for personal security, yet neither of these cities carry the same grave reputation for danger and violence as Latin American’ Nearshore hubs like Mexico City and Bogota, which score above them.
Perception is important. Though now a decade old, a Nearshore Americas’s report on the perception of personal safety found that “sourcing buyers perceive Latin America to be more dangerous than India.”
Eduardo Ordóñez, a Mexico-based country risk analyst for a UK-based consulting firm, suggests that the high rates of violence found in Latin America have done little to reduce the interests of foreign business. If Nearshore companies are querying whether Latin America is a safe country to move into, they should consider that the proof is in the pudding, he says.
“Brazil and Mexico are two of the region’s most violent places, but they’re also the strongest economies,” Ordóñez pointed out.
They’re also the highest recipients of foreign direct investment in Latin America, according to the United Nations Conference on Trade and Development. Though FDI rates plummeted in 2020 due to Covid-19, Mexico still received US$29.1 billion of investment while Brazilian FDI hit US$24.8 billion. Chile came third, followed by Chile and then Argentina.
Huge economic interest and high levels of FDI remain in these violent countries because violent crime is overwhelmingly carried out by organized crime groups, Ordóñez explained. Though horrifying, this violence is specific to certain geographies. Violence is not a huge problem in the urban areas where the majority of Nearshore interests lie.
“Petty crime absolutely exists,” he said, but the region’s infamous security reputation is generated by groups working in locations where Nearshore players simply wouldn’t have an interest in working.
“If you are located in areas of Mexico City, Guadalajara or Monterrey, you may well be safer than in parts of some US cities,” said Vázquez Del Mercado.
“Brazil and Mexico are two of the region’s most violent countries, but they’re also the strongest economies” — Eduardo Ordóñez
One of the metrics that the Safe Cities Index marks out is poverty: “The index data this year, as in the past, seem to give a clear message: at the urban level, personal security and income levels are connected,” it reported.
This is far too broad a brush to use, suggests Ordóñez, and points out that a region where poverty is rampant, personal security and the threat of violence remain connected to specific locations.
“I’m not convinced that the connection between crime and poverty is significant,” he said. “There are huge areas where serious poverty exists but crime rates are low,” he said.
Nearshore operators looking to expand into new Latin American markets should follow the same common sense approach that they would do when moving into other global regions, Vázquez del Mercado believes.
“If a company is coming from the US or Europe for the first time, and it doesn’t know the language nor the culture of the country, then play it safe. Go where everyone else goes,” he said. Bogota, Mexico City, Santiago and Buenos Aires are all mature, favored geographies for companies moving into the Nearshore for the first time.
“There are some very basic, security 101 elements that can also be used,” he added. “Keep a low profile, move around during the day, and don’t go to places you don’t need to go to.”