Nicaragua Wants to Become A Nearshore Hot Spot | Article

coffee potJuan Carlos Pereira says when most Americans think about Nicaragua, they think of Oliver North and the Iran-Contra arms hearings of 1987. But that’s not the Nicaragua that exists today, insists the Executive Director of ProNicaragua, a marketing arm created by the President of Nicaragua to encourage foreign business investment.

Pereira says the nation’s ten-year civil war ended in 1989. He’s in charge of the new revolution: bringing BPO outsourcing to Nicaragua. He says creating outsourcing jobs is the government’s “No. 1 priority.”

When democracy returned to the country in 1990, so did many nationals who left during the war. He says about 400,000 fled the violence, moving to the US, Canada, Mexico, or Costa Rica. He’s a good example. His family moved to Washington DC when he was in elementary school. He went to college in California and then earned an MBA at Harvard.

Many of those people have now returned to the country with good education and top English skills. Pereira says nationals like himself who lived in the US developed a cultural affinity for America. This “reverse brain drain” makes Nicaragua attractive as an offshore location, he insists.

“Aggressive” Incentives to Attract Suppliers

The government is eager to capture some of the offshoring business, so it has created “aggressive incentives.” They include:

  • A 100 percent tax holiday on earnings for outsourcing suppliers as long as their customers are outside Central America
  • No property taxes for outsourcing facilities
  • No VAT taxes
  • No duties on IT equipment suppliers bring into the country as long as they apply for Free Zone status

The Employment Base

Nicaragua’s leaders realize that English is the linga franca of offshoring. It has established an English-language registry so outsourcing suppliers can easily find workers. Currently there are 4,500 people in the directory; Pereira says 40 percent of those are fluent. The country also has several bilingual high schools so students can perfect their English before graduating.

Pereira says the government is in the process of creating an English training program for students who want to work for BPO providers. He expects it to be open late this year.

“We wanted to make it easy to set up shop and find qualified candidates. Our goal is to jump start offshoring,” explains the ProNicaragua executive.

Pereira says the cost structure is competitive. He says a bilingual customer service representative will earn $300-$400 a month fully loaded.

Fiber Optics and Beautiful Beaches

It’s a near shore location for American buyers. Nicaragua is in the central time zone (so is Chicago and Dallas) and is just a 2.5 hour flight from Miami or Houston (assuming the airlines cooperate).

The country also has the necessary infrastructure for offshoring. Pereira notes Nicaragua has fiber optics and redundant cable at competitive costs.

In addition, Nicaragua is “a very inexpensive place to live,” says Pereira. “You can buy beachfront property for next to nothing,” he says.

Finally, Pereira claims Nicaragua is the “safest country in Latin America.” This is a crucial component for the personal safety of American executives who work in the country or visit their offshore suppliers. The movie “Man on Fire” was about the fictional institutionalization of kidnapping in the highest reaches of the Mexican government. “The boss doesn’t have to worry about getting kidnapped here,” he says. The country’s homicide rate currently is 9.8 per 100,000. Costa Rica, viewed as one of the safest Latin countries, has a homicide rate of 20.3 per 100,000.

Why Nicaragua is Interested in Offshoring

The government is interested in attracting outsourcing service providers to Nicaragua because the country “has a huge pool of talented workers looking for jobs.” He says 70 percent of the population is under 30. Local universities currently have 90,000 students enrolled. “We need to help them find work,” he says.

The country wants to attract suppliers for two more reasons: outsourcing jobs pay more than the typical job in Nicaragua and offshoring provides “a low-impact way to develop the economy.” Even though Nicaragua has a lot of ocean front property, it doesn’t have to spend a significant amount developing a mega port, for example.

So far these programs have attracted three outsourcers and several captives. They include a BellSouth captive which handles operations for Latin America and Almori, a supplier that provides back office services to medical offices in the US. However, Pereira hopes 2005 will be a big year for Nicaraguan offshoring.

Note: Pereira will be speaking at HRO World in New York City on April 12, 2005.

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