By Tarun GeorgeNicaragua is attracting intense attention as a sourcing target because of its complete lack of labor union activity in the call center space. BPO players like Sitel have been merrily expanding in the country, having opened their third center in Managua in late November to service the US market.
Nearshore Americas caught up with Mel Vance, Sitel’s Senior VP – Central America, to find out why labor unions are not visible and whether the concerns of many US firms’ over President Daniel Ortega are justified.
Why have labor unions not been strong yet in the call center industry in Nicaragua? The country and government always seems to be very pro-labor?
Vance – I posed that same question to ProNicaragua, and they stated that it’s really because the call center industry is in its infancy in Nicaragua. Sitel is one of the first large companies to come in and we have not tried to ‘pillage the village’ so to speak, or exploit the workforce, and it’s given us the opportunity to not only enjoy the first-mover advantage, but also do so in a relatively calm fashion. (Editor’s note: 24/7 Customer is another growing sourcing operation recently located to Nicaragua)
Another reason is that many of these workers are part of the MTV generation, and labor unions are not necessarily part of their lifestyle. Because it’s English-focused work, most of the employees in outsourcing industry have a skill set or lifestyle adjoined to the US. In fact 50-60% of them have even resided in the US. And for those with experience working in this industry, labor unions are just not a part of that.
In many of Sitel’s other areas like Mexico and Argentina with traditionally high union activity, the way we deal with labor unions is by engaging in collective bargaining.
So it’s just the call center outsourcing industry that has not formed labor unions in Nicaragua?
Vance – Exactly. The other industries like textiles of course use a different skill set, usually offer lower salaries, and have low profit margins. So very often the owners are forced to use unscrupulous practices in order to see some of the returns and still remain competitive. And so labor unions have arisen around those industries to protect their workers. But because the call center industry is still in its infancy in Nicaragua, we’re not seeing those practices come into play with any of the providers here.
In many of Sitel’s other areas like Mexico and Argentina with traditionally high union activity, the way we deal with labor unions is by engaging in collective bargaining. We sit down with them and discuss what we’re going to do and how we’re going to do it. When we do that In Nicaragua, it eliminates the need to form an actual dedicated union for call center outsourcing. The other industries in Nicaragua have been around for such a long time that they’ve always had the union influence in their business models, whereas in our industry there has not yet been the need.
Many US buyers are worried about the influence of Daniel Ortega. But we’ve heard that he’s actually been running the economy quite well, especially when it comes to outsourcing. Is that what you’re seeing on the ground?
Vance – It’s true, he has been handling things quite well. Two weeks ago I spent some time with the US Commercial Attaché in Nicaragua, and I asked him why that is. The response was that it’s all because of cronyism. A lot of Ortega’s former colleagues when he was in power under the Sandinistas during the Civil War, are now adopters of capitalism and the free-market enterprise. Many of them are now the major business owners of various industries in Nicaragua. Should Ortega go back to his old ways, or align himself too closely with Huge Chavez, the belief of the US embassy is that it would not be tolerated. Those business owners would stand to lose millions of dollars.
The thing is that Chavez views himself as a crusader against the US, and because of Ortega’s history he often get’s lumped into that category as well.
Is Ortega is truly ‘hands off’ so to speak, on the outsourcing industry in Nicaragua?
Vance – Yes Ortega does leave the outsourcing industry alone for the most part to do its business. In fact we’ve actually had opportunities to question certain decisions, and have been successful in getting things changed for the better in Nicaragua. A good example from our experience is a few weeks ago when the government declared a holiday for all businesses, which would have resulted in a four-day weekend. That’s very inconvenient for us, and so we reached out to ProNicaragua and challenged that decision through them. Ortega’s office then came back and said that it was a holiday for public institutions, and private local business could use their own discretion.
So firms here have chances to change the business environment, and in spite of problems with bureaucracy and the judicial system, they’re finding the conditions very acceptable to comply with.
In Part Two coming soon, Vance describes Sitel’s expansion in Nicaragua, as well as the challenges the company faces in the country.