Latin America is a burgeoning market for outsourcing, and there are many good reasons for it. However, the region also poses a number of risks and costs that vendors are unlikely to publicize, reports CIO's Stephanie Overby. 

Over the last five years, the outsourcing market in Brazil, Chile, Mexico and other Latin American countries has come into its own. The proximity to the United States can make collaboration more effective and lower management costs.  Cultural similarities can enhance business relationships, and outsourcing IT or business process services can be an avenue opening sales to the local market.  Some Indian outsourcing providers are setting up shop in Latin America.

That said, there are costs and risks that should be carefully considered even though they may not be readily apparent, Oberby reports. To begin with, service delivery may be slower than anticipated, English language skills may not be up to par, and creativity may prevail over disciplined processes.

Prices vary considerably from country to country, depending on taxes, laws, and economic conditions. In some countries prices may be considerably higher than they were not long ago.

"Labor arbitrage has faded, especially in countries with smaller populations like Chile and Costa Rica," says Esteban Herrera, COO of HfS Research.

"A big difference in approaching an outsourcing engagement in a Latin American country versus India is the vast array of business climates, laws and economic conditions at play in each country," says David Rutchik, partner with outsourcing consultancy Pace Harmon.

Unlike India, no single Latin American country can offer massive scale.  In Costa Rica, 300,000 of the 4 million residents are already employed in the IT and business process outsourcing industries. Brazil has one of the largest populations to draw from, but it also has some of the highest taxes and salaries.

Political stability also must be considered.  The governments in Bolivia, Ecuador, Nicaragua and Venezuela have not necessarily shown pro-business tendencies.  

Physical security may be something to think about even where a pro-American government is in power.  Mexico and Guatemala have seen considerable violence in recent years, which may dampen U.S. personnel's enthusiasm for traveling to these countries.

For more:
- see Stephanie Overby's article at CIO

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