Outsource to Nicaragua
Business process outsourcing has become one of the main strategies for global companies seeking operational cost reduction and risk diversification. Nicaragua stands out as an attractive emerging destination as it offers excellent investment opportunities for business process outsourcing (BPO) companies looking to expand their operations in order to increase global competitiveness.
Due to its proximity and affinity to North and South American markets, its competitive cost structure and its young and qualified workforce, Nicaragua has quickly become an attractive emerging destination for investment in the Outsourcing sector, mainly for Business Process Outsourcing (BPO), Knowledge Process Outsourcing (KPO) and Information Technology Outsourcing (ITO) services.
Internationally renowned companies with excellent business practices have decided to invest in Nicaragua to take advantage of the human talent that allows them to complement their regional and global operations. Some of these operations include BPO companies such as Stream Global Services and Sitel, the latter of which opened its second center only one year after establishing in the country in 2008 and has continued to expand year after year, proving Nicaragua has the resources that allow outsourcing operations to provide high-quality and cost-competitive services, in addition to offering safety and a great quality of life to those living in the country.
Competitive Advantages for Nicaragua as an Outsourcing Center
1. Strategic Location
Nicaragua enjoys a privileged geographic location in the heart of Central America with just a 2.5 hour flight away from the southern cities of the United States. Its location not only allows the ease of travel for executives, but is also in the U.S. Central Standard Time Zone, facilitating business between countries and allowing companies to provide services in a cost and time effective manner.
2. Availability of a Qualified Labor Pool
Nicaragua’s population reaches 6.1 million and has a growth rate of 1.3 percent. An interesting fact about the population is that approximately 77 percent is under 39 years old, resulting in the availability of a young and dynamic labor force. Although Spanish is the official language in Nicaragua, the English language has become very popular. For historical reasons, there is a strong cultural affinity with the United States and Nicaragua has experienced the phenomenon of “reverse brain drain”, which consists of a group of individuals who emigrated in the past and have returned to the country with English proficiency and international experience in business.The Economist Intelligence Unit (EIU) stated in their 2012 Labor Market Risk report that Nicaragua is the country with the second lowest labor market risk in Central America. The report measures various indicators such as union strength, labor disputes, wage restrictions and hiring and firing restrictions.
The Government of Nicaragua along with the National Free Zone Commission, the Inter-American Development Bank (IDB) and the private sector, established a pilot program called “Capacity Building Program”, with an investment of approximately US$1.1 million, in order to generate a continuous pipeline of young and skilled bilingual workforce to ensure human resources sustainability in the outsourcing industry. This program will provide specialized English courses at different English learning centers and universities mainly in the country’s capital, Managua. Based on the results of the program, it could become a sustainable and permanent program. This effort is expected to generate approximately 3,000 additional jobs in the industry over the next three years.
3. Modern Infrastructure
Nicaragua has several office buildings that are home to internationally-known technology companies. Office space prices can vary depending on infrastructure, location and availability. At the end of the third quarter in 2012, the monthly index of construction activity recorded a growth of 20.5 percent, higher than that in the same period in 2011, which was 18.6 percent. Further construction of corporate buildings is expected to grow with various projects already underway.
4. Competitive Cost Structure
Nicaragua offers companies excellent opportunities for growth by reducing operational costs. One of the country’s main advantages is that the average salary is the most competitive in the region, so companies can recruit highly-qualified employees to perform BPO, KPO and ITO activities without incurring high operational costs.
5. Attractive Fiscal Incentives
In Nicaragua there are companies currently exporting their services, which have applied to tax incentives offered by the government. Nicaragua offers 3 forms of incentives for companies that are interested in establishing export-oriented operations.
6. Favorable Business Environment
Nicaragua has made important progress in the improvement of its investment climate in efforts to continue attracting high-quality foreign direct investment. The main legislation that governs foreign investment consists of the Foreign Investment Promotion Law and its bylaws, as well as other sector-specific laws that provide incentives for investment.
Nicaragua’s security levels have gained international recognition, as it has become one of the safest countries in the Western Hemisphere. Risk Briefing Services, part of the Economist Intelligence Unit, confirms this in its Country Risk Evaluation 2012, which ranks Nicaragua as the second safest country in Central America and the third in Latin American. The EIU Security Risk report measures indicators such as armed conflict, demonstrations, organized crime and kidnappings in different countries around the world.