Industry Commentary

Nicaragua Unrest Throws Spotlight on Central American BPO

By April 26, 2018July 25th, 2023No Comments

Central America has welcomed vigorous growth in contact center services over the past decade.  Providers and their clients have been enthusiastic about sourcing bilingual labor and facilities in this region at a fraction of the price of what would be paid in the US. However, with protests growing against President Daniel Ortega for cronyism and overall feckless management of the economy, Nicaragua is facing significant public unrest. This makes it only the latest country in Central America to fall victim to such issues in the past year, and worries are permeating into the minds of both outsourcers and buyers that are looking at the region.  Notwithstanding the significant value to be found in this part of the hemisphere, recent events need to be a call to action for Central America’s BPO ecosystem to prevent erosion of existing and prospective business.

For the past several years, Nicaragua has been among the most important delivery points in Central America for front-office BPO services.  Its investment agency ProNicaragua has been  vibrant in its efforts to promote Nicaraguan BPO delivery in the United States.  This has borne fruit, with some of the leading global contact center providers establishing points of operation in the country.  However, with the recent instability that has occurred in the country, both providers and their clients are likely to question Nicaragua’s outsourcing viability.

Notwithstanding Nicaragua’s challenges over the past several days, the country retains significant value for outsourcers and enterprises.  Its contact center cost base is notably lower than that of the US, and investments in infrastructure made over the past decade have had a major impact on connectivity and accessibility.   And, while the BPO sector has historically concentrated itself into Managua (as opposed to moving into secondary centers, discussed in-depth in this Nearshore Americas expose from 2015), there has been some provider decentralization into the town of Bluefields.  But, in an industry where buyers prize stability at the top of their priorities, Nicaragua faces a big perception challenge.

And in the case of Nicaragua, perception should not be underestimated.  In the 2017 Ryan Strategic Advisory Omnibus Survey, Nicaragua fared relatively poorly in offshore destination favourability among US enterprise BPO buyers, besting only regional neighbor El Salvador, Central European mainstay Hungary and Balkan upstart Macedonia.  It is also tarnished by regional instability, including El Salvador’s surge in gang activity that was widely reported last year and the clashes following Honduras’ election some months ago.  With the latest events in Nicaragua, the spotlight will be on Central America’s BPO players to demonstrate their ongoing ability to drive value from the region.

In this instance, outsourcers operating in Nicaragua should look closely to historical antecedents for how best to manage the current situation.  An excellent example would be to study how Egypt’s BPO stakeholders were able to weather the storm of the Arab Spring in 2011, during which time there was minimal outsourcing delivery disruption.  And while Egypt’s outsourcing industry growth certainly slowed in subsequent years, BPO investors maintained their investments, due to the value that continued to be recouped from that country.  Outsourcing stakeholders in Nicaragua—including providers, trade associations and relevant government agencies—need to consider such an approach to their own sector, focusing on the country’s obvious strengths and finding solutions to challenges as the country passes through this period of unrest.