http://www.miami.com/mld/miamiherald/news/13779719.htm

Posted on Fri, Feb. 03, 2006

Outsourcers finding solution in the Americas
Hoping to take a bite out of India's popularity for outsourcing, Latin America is attracting U.S. companies needing cheap white-collar labor.
By DOUGLAS HANKS III
dhanks@MiamiHerald.com

When accountant salaries cut too deeply into the profits of his Miami hotel company, Carlos Rodriguez decided to ship his entire bookkeeping department offshore. But he didn't look far: Instead of India or China, Rodriguez set up shop in his native Costa Rica.

''I started saving money overnight,'' Rodriguez boasted of the 2001 move from South Florida to San Jose. Today, Driftwood Hospitality Management employs 15 people there and pays them about 25 percent of what they would make in the United States.

Driftwood's Costa Rican outpost places the company in the middle of a fast-growing niche within the globalization trend. While Asia attracts most of the attention -- and angst -- when it comes to white-collar jobs moving overseas, Latin America and the Caribbean have established themselves as major factors in outsourcing, too.

''There's a significant shift happening,'' said Philip Peters, chief executive of Zagada Markets, a Miami firm researching the call-center industry in the Caribbean Basin. Latin American and Caribbean ``governments are looking at this as another sector that can really affect their economies.''

In call centers alone, according to Zagada Markets, roughly 33,000 people work as operators throughout the Caribbean -- answering questions about XM satellite radio, wired money from Western Union and Colonial Penn life insurance. Procter & Gamble, Hewlett-Packard and Sykes use Costa Rican offices for accounting, personnel and other back-office services.

The numbers still pale compared to outsourcing magnets like India (not to mention Eastern Europe, the Philippines, and Canada). But call centers -- the best-tracked segment of the outsourcing industry -- have grown an average of 54 percent a year in the Caribbean since 2002, according to Zagada Markets. Central America will increase its call-center jobs 34 percent by 2008, according to research firm Datamonitor.

Brazil, with 186 million people, is seen as Latin America's biggest growth market for so-called ''near-sourcing.'' The Global Outsourcing Report's ranking of the most competitive countries in the field predicts Brazil will rise from No. 15 to No. 4 on the list within 10 years (when India will also lose No. 1 to China).

And Cordoba, Argentina, boasts one of the Western Hemisphere's highest concentrations of engineers, a techie corps populating software labs for Intel and other U.S. computer giants.

Near-sourcing proponents see the movement getting a large boost with the implementation of CAFTA, a landmark trade treaty designed to lift business restrictions among the United States, Central America and the Dominican Republic.

Outsourcing experts say labor costs in Latin America and the Caribbean generally run about 50 percent higher than in India, but that gap is narrowing as outsourcing grows more popular.

''I was over in India in 2005. The one thing you heard the managers say was it's very hard to keep staff,'' said Peter Ryan, an offshoring analyst for Datamonitor. ``Some call centers in the Delhi region even have individual cars going to pick up workers at their house.''

But along with the standard offers of cheap labor and government incentives, Latin American and Caribbean nations also tout outsourcing advantages tied to their geography:

• Language: Companies targeting the U.S. Hispanic market can tap Latin America's pool of workers fluent in both English and Spanish. Nicaragua goes so far as to pitch itself as Latin America's version of the Midwest with its ''neutral'' Spanish accent.

• Lingo: Though Asian call-center workers speak English, near-sourcing advocates boast of fluency in slang and pop culture that comes with living close to the United States.

• Location: By sending operations south, U.S. companies can enjoy relatively short flights and few time-zone complications in dealing with their offshore centers.

Still, the region brings its own set of liabilities to the competition for outsourced jobs.

Along with higher labor costs, Latin America lacks the deep pools of English speakers found in former American and British colonies like India and the Philippines. A growing leftist movement has exacerbated concerns about government stability, while small populations and limited office space keep some big operations looking elsewhere.

Concerns about worker skills also hurt Latin America, said Simon Bell, who studies outsourcing for A.T. Kearney consultants in Alexandria, Va.

''The biggest impediment for Latin America is the education systems,'' Bell said. ``If you look at any standardized test, Latin America collectively ranks at the bottom.''

Critics see offshoring as an assault on U.S. jobs. There is also debate about the impact on consumers, who could get cheaper goods but also less reliable service as low-wage foreign workers take on crucial tasks like customer service and data processing. Not only do customers have to contend with language barriers, but they also can lack the security that comes with U.S. laws on punishing and disclosing data theft, said Thea Lee, policy director of the AFL-CIO labor union.

''There is a difference between efficiency and cheapness,'' Lee said.

Lawmakers in California tried to pass a bill blocking companies from processing medical records in countries without strict privacy laws, but Gov. Arnold Schwarzenegger vetoed it. Lawmakers across the country are pressing for more limits on outsourcing.

Rodriguez of Driftwood said he was able to transfer his bookkeeping staff to other positions within his company, which is growing partly because of the cash he saved from offshoring. And Christy Duprey, general manager of the Driftwood-managed Doral Hampton Inn, said she has no complaints about her Costa Rican support.

At least once a day Duprey loads receipts, invoices, and payroll forms into a scanner by her desk. She then transfers the documents to a file accessible to Driftwood's San Jose bookkeepers, who crunch the numbers and send back a report.

Duprey hasn't met any of the San Jose staff, but chats with them on the company's instant-messaging system.

Duprey doesn't let them know she speaks Spanish, so the electronic conversations unfold in English.

''Julio's good,'' she says of her main contact in San Jose. 'He has my budget. He enters all my numbers. He will tell me, `You had a great month, Christy.' ''