El Salvador

Known among North American tourists as a low-cost vacation spot, El Salvador today is an ideal destination for business process outsourcing (BPO) as well, according to global research firm Datamonitor.

The country offers huge opportunities to North American businesses looking for offshore BPO bargains, said Peter Ryan, lead analyst at Datamonitor.

BPO is a form of outsourcing that involves contracting operations of specific business functions (or processes) to a third-party service provider.

Today the term primarily refers to outsourcing of services. These could include internal business functions, such as human resources or finance and accounting, or front office outsourcing, such as contact centre services.

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Reasons for favouring El Salvador as a BPO destination include the country’s close proximity to Canada, cheaper labour costs, and a workforce familiar with Western culture.

Datamonitor, however, advises BPO investors – and not just specifically those serving North America, looking to invest in El Salvador to “exercise considerable due diligence in assessing the new president’s administration once it takes office.”

Ryan said a recent research on BPO in Latin America has indicated crime as opposed to local politics is what is viewed as the major impediment to investment in El Salvador.

El Salvador today is far removed from the strife-torn country portrayed in Salvador,  the 1986 Oliver Stone movie staring actor James Woods.

That war ended way back in 1992.

Left-wing President Mauricio Funes of the Farabundo Martí National Liberation Front (FMLN), voted into office last month, has struck a reconciliatory note.

He has made overtures to the private sector, and wants to ensure growth of his country’s business process outsourcing (BPO) industry, according to Peter Ryan, lead analyst at Datamonitor.

While the country’s business elite has reservations about the new Salvadoran president keeping that promise, Ryan is optimistic Funes’ win over Nationalist Republican Rodrigo Avila, bodes well.

“By engaging both Salvadoran service providers and multinationals operating in the country, Funes is sending out the message that El Salvador is open for BPO.”  

While tourism remains the main draw for Canadians, business, investments in El Salvador have been growing.

Last year trade between the two countries topped $90 billion.

Canadian investments in El Salvador surged from $45.8 million in 2001 to more than $156 million in 2006, when an Air Canada subsidiary acquired 80 per cent of aircraft maintenance company Aeroman from the regional airline company Grupo TACA.

International financial institutions such as ScotiaBank and HSBC have also been pouring in billions of dollars to snap up local financial businesses.

The country’s BPO industry however, might still be in its infancy stage, said Ryan. He said many companies might not be capable of providing a large BPO workforce or expertise to meet more sophisticated outsourcing demands.

Local BPO firms may be smaller than their counterparts in Asia, Europe and even Latin America, said Yolanda Martinez, investment advisor at Proesa, a non-profit investment promotion agency for the Salvadoran government. But Salvadoran operations use this to their advantage.

“With a population of around 7 million, you can’t expect our country to produce a large BPO workforce. But our companies can specialize in niche BPO markets,” she said.

There are at least five large BPO firms in El Salvador. They specialize in data processing, call centre management, and business services.

Typical BPO personnel salaries are around $250 – $450 per month for Spanish speaking personnel, and $400 – $600 for English speaking contact centre workers.

El Salvador also has a large number of North American-born or raised citizens, who have returned to work in their home country.

“They have well-honed communication skills that make them ideal for customer contact with high-value clients,” Martinez said.

Apart from this, North American countries will find El Salvador’s close proximity a plus.

The country is only four hours by plane from Los Angeles and six hours away from Toronto. It also straddles the Central Time Zone making for a mere two to three hours time difference for both the Eastern and Western seaboards.

Martinez also points to a list of tax and investment laws designed to attract foreign investors. For instance, foreign investors are allowed to repatriate a substantial amount of the profits and foreign businesses are exempt from value added taxes.

(With files from Paul Roehrig – CIO.com)

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