Following up on my last post about the reason why it’s in Latin America’s best interest not to be seen as one generic location, we’ll continue borrowing from Eric Hochstein’s piece “LatAm Nations: Be Different to Be Heard”. In this post we’ll show why it’s not only competition against farshore locations like India and China that is an obstacle, but also competition within the region itself.
Latin America competing internally
In short, the second reason a united regional image wouldn’t work for Latin America is that the countries are, and will continue to be, competing against each other for the limited business available. “Will countries, or the providers who operate in the countries, be willing to support a regional branding campaign rather than promote their own individual niches and local competencies?” asks Hochstein. “I doubt it. A ‘Go LatAm’ message can never become very coherent and comprehensive. And it can’t rise above the efforts of the individual countries and their associations.”
To illustrate this, let’s say a company with a very high value outsourcing project is trying to decide between two locations in Latin America – Guatemala and Honduras. These countries are very similar in terms of population, time zone, proximity, cultural affinity, GDP, education and even English proficiency. And not to mention, both countries could very much use some high value foreign investment and new job creation.
When the governments or investment promotion agencies of each country are vying for the project, will they be going at it from a regional perspective, with the idea that that it doesn’t matter which one the company chooses since both locations are so similar anyway? Clearly not. Instead, country negotiators will be looking to differentiate themselves from each other on the basis of very small technical details, perks and competitive advantages that they can offer the company. For example, the fact that Honduras recently built a world class tech park in San Pedro Sula called Altia Business Park. Most likely it will be an incentive like this that swings the company one way or another.
Fighting three battles at once
Hochstein puts this very well – “Each LatAm and Caribbean country fights at least three battles simultaneously. First, they’re competing against offshore activities in India, Asia/Pacific, Eastern Europe, and now, Africa – in cases where proximity may be less important than costs. Secondly, they’re competing against homeshore (US) and Canada when proximity is a factor (and they lose only when quality and risk are more important than low costs). And finally, once a provider or company has decided on Latin America, the countries compete against each other.”
We know this is the case since we’ve seen it over and over again. Which means that even though it’s fine for countries to talk generally about Latin America’s time zone and proximity advantages, those things become less important when companies get into the site selection process within the region. Each country must understand its own core competencies and learn to make a differentiated investment case to US firms.
So how can Latin American countries stay united while showcasing their competitive advantages? In my next post we'll be discussing one proposed alternative.