Survey: Currency Weakness a Minor Nuisance for Nearshore Firms

Last week Nearshore Americas conducted a brief survey on currency volatility across Latin America. Several key Latin American currencies have endured steep losses in exchange value in 2015. Recently the Brazilian real broke through the psychologically important barrier of 4 per 1 U.S. dollar, while the Mexican and Colombian pesos have also experienced steep declines. Yet, the survey results suggest that nearshore operators have found currency weakness to be a minor challenge to business operations and growth plans, and even if volatility continues through 2016 it is unlikely to pose a tall hurdle to firms conditioned to operating in the region.

Behind the data

All respondents held a C-suite post—most were either company founders, CIOs, or SVPs—which ensured the survey results were from a mature managerial audience that was versed in negotiating an array of firm operations. Half of the respondents conceded that currency volatility has “hurt” their operations over the past year. But, at the same time, the respondents also overwhelmingly noted that such volatility is not a distraction from their firm’s core operations.

For the most part, large BPO and ITO firms operating in Latin America do business in dollars, so they are not subject to a rapid rise in expenses from unanticipated dollar strength. However, that’s not necessarily the case with smaller firms. One respondent commented that many “local and regional firms and their contracts are often in non-U.S. currency…They are not prepared.” But overall Nearshore operators aren’t fretting over a crisis. They regard currency volatility as more of a nuisance.

Our Take

Despite calm leadership, in one respect the current wave of currency weakness could still cast a pall over the region. When asked about the lasting effects of the present boat of currency weakness across parts of Latin America, the respondents sounded a note of caution. Half of the respondents noted volatility will lead companies to move outside of Latin America. Although such a trend will not be specific to IT outsourcing or BPO services, it would nonetheless affect them.