The New Nearshore Alliance: How it Will Benefit its Partners

In my last post I discussed the implication of the new economic bloc planned between Colombia, Peru, Mexico and Chile. In particular we saw how each of those four countries have something unique to offer which the other three can benefit from. But today I’d like to talk about the deficiencies of each as a sourcing destination. In other words, what are the lacking aspects of their markets that they will gain through this economic alliance?  


Given the size of its outsourcing market, Chile’s downfall has always been its relatively small population of around 17 million. Compared to the labor pools of countries like Brazil or Mexico, Chile’s small workforce continually has companies worrying about scalability of their sourcing operation. That of course, is driving up wages. The secondary problem (as with many LatAm countries) is the low English proficiency among workers. The country’s niche technical capabilities mean that this is not as much an issue as it would be for a pure BPO destination, but the fact is that even IT outsourcing is better performed with a higher English proficiency. 

Chile has been working to fix the problem by implementing a very liberal immigration policy, which grants work permits in a matter of weeks, and allows firms to bring in foreign workers as they please. And this new economic bloc with Mexico, Colombia and Peru is another step in that direction. Chile is hoping that the free movement of labor will bring many educated workers from those markets, attracted by the higher quality of life in Chile.   


It may be the fastest growing country in Latin America, but the fact is that Peru has not yet been able to really leverage its economic expansion into higher end services. The Andean state is more known for its trade in natural resources, and increasingly for call center and some BPO. But in terms of creating high value jobs in IT, this is expertise and technically skilled workers that Peru needs from the other three countries in the alliance. 


Colombia has blossomed as an outsourcing destination in recent years, even moving into higher value ITO services. However most of the action is concentrated in Bogotá, which is getting very crowded. Some of the biggest tech companies have located to the city, and are competing very fiercely for qualified workers. As a result both vendors and buyers in the city have told me that they’re seeing a lot of ‘poaching’ of their employees, and it’s a practice that is crippling their business. 

Colombia is also looking for greater outsourcing legitimacy by partnering with secure destinations like Chile. While the country has largely shed the ‘unsafe’ stigma, many US business people still see Colobia as risky.  


Mexico is one that has gained the ‘unsafe’ stigma of late. Even though the recent violence is localized to specific towns near the border like Juarez, Us companies have generalized it to the rest of the country. This economic alliance is an attempt by the Mexican government to show North Americans that they are serious about business and promoting a better investment climate. The NAFTA treaty already gives Mexico an advantage, and this new alliance will help even more.