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Costa Rica, the Latin American home for Service Centers

MAY 12th 2016

English adaptation of the article by
Daniel Zueras, E&N Magazine; May 6, 2016.

Costa Rica, the Latin American home for Service Centers

 

"The world calls, Costa Rica answers" might be the welcome phrase for the small Central American country that has become a key part of the operations of many multinationals, by providing support for their operations. Shared Services Centers will generate 60,000 jobs by the end of 2016.

More than 55,000 jobs confirm the relevance of the booming shared services sector in Costa Rica. In 2000, when these businesses arrived, six companies employed 1,000 people. In late February, according to the Costa Rican Investment Promotion Agency (CINDE), there were already 154 companies exporting their services, 37 are SSC, as British American Tobacco, Cargill Business Services, Baxter Americas, Citi, Glaxo Smith Kline, Kimberly-Clark, Oracle, Pfizer, Walmart, Procter & Gamble, among others, providing all kinds of services within their corporations, from Costa Rica to the world.

And no, we are not talking about call centers. That’s the way multinationals began arriving, but those simple call centers have been changing towards more sophisticated environments: financial services, engineering, human resources, information technologies, taxation, shopping ... Multinationals bet on the “tico” talent and create quality jobs.

According to a study by PROCOMER, wages in Free Zones are 80% higher than the national average (US $ 1,480 monthly compared to US $ 814 out of it). And speaking of shared service centers (SSC, which are embedded in a free trade zone regime), the average monthly income in 2014 was US $ 1,790. Precisely because the talent is paid.

And the evolution continues. According to Deloitte, the transformation of shared service centers to global services organizations (Global Business Services) requires different corporate governance models, as well as new profiles of talents and skills, but above all, it requires more innovation. To this we must add the interference of the new trend of robotics and how it is changing the business model, in order to add value and maximize human talent in strategic roles. All this was discussed in Costa Rica in the 2016 Global Business Services Roundtable, organized by the consulting firm in mid-February, a sign of the importance of this small country on the global board of SSC.

"They are an important source of quality jobs, with an increasingly higher level," says Federico Chavarria, director of consulting and Deloitte´s world leader for its global services centers. The fact that a “tico” is the global head of the firm’s service centers, says a lot about the country´s work in this regard.

Federico Chavarria.

20 years ago, the operations coming (like Western Union or P&G, two of the pioneers) "were very operational and simple," argues Chavarría, but today "they increasing demand more talent, more quality, more education, more technological and digital skills, greater customer service”.

Irving Soto, Investment Promotion director at CINDE affirms that the strengths that the country plays to attract these companies are, in this order: "Education (with good English levels), rule of law, political, economic and social stability; and geographic location”. A third language, especially Portuguese and French, helps companies decide to penetrate in Costa Rica, and to hire that qualified personnel.

"Costa Rica offers well-trained technical level talent, with English-speaking skills and a time proximity that gives us high levels of flexibility and agility," says Amir Durrani, executive vice president of Global Delivery, NTT DATA, an information & technology services supplier company that announced the opening of its service center in the country in mid-February this year.

They are not the only firm that has announced its arrival this year, as of March of this year, so have Ingram Micro, Uber and Evonik, in addition to Akamai´s expanding operations. And in just two weeks, from April 22, Grupo Bimbo, Amazon, Sykes, Pfizer and Manpower have confirmed openings or extending service centers operations, which will generate 2,200 new jobs.

"Costa Rica has managed to position itself because of the training, the quality of the people, for having invested in education…" argues Chavarría, but (there's always a but) continues: "We are staying behind. More must be done. Right now we are living with the inertia of the past. Costa Rica must have a more aggressive and modern education policy, with more technical careers, more innovation, engineering or technology in digital fields. "

We must not forget that the SSC is the sector of foreign direct investment that generates the most employment. According to Soto, this year it could reach 60,000 jobs in the country. The goal of CINDE is to attract at least 18 service companies in 2016, generating 6,000 net jobs.

Roche has invested US $ 5.5 million for the new headquarters of its Shared Services Center.

To this must be added the indirect labor that generates all this activity. From the boost to business hotels, to transportation companies or the multitude of SMEs that supply these "new factories" of the XXI century; although he misses more higher-value backward linkages.

The pressing problem to keep growing at the pace that the sector has been doing so in recent years is talent availability. The country has quality professionals, but existing SSC continue to expand jobs, and new companies also demand more professionals.

Two clear examples of the higher need for intensive labor due to growth of its operations in the country are VMWare and The Results Companies. The first opened in Costa Rica in 2012 with 18 employees and in 2015 had nearly 500; the second began in 2014 with 30 employees and ended 2015 with about 1,000 employees.

"It's a very intensive industry in job creation," said Soto, “grows much faster than manufacturing”.

"Education is our calling card, but also our biggest challenge," deepens Soto, for which there is a close relationship between business, academia and government. Costa Rica needs new technical and university courses that will not overflow it against the challenges of the future. CINDE and the government are working closely with the TEC, National Learning Institute and the Ministry of Education to try to strengthen the required education.

"We envision a knowledge economy in Costa Rica," said the CINDE official.

The new generation of global service centers will be highly automated: "There is talk of robotics - points Chavarría - with a highly advanced computer system that replicates what humans do”.

Today, reports are being done by robots already. For the leader of Deloitte, "humans must add more value", which changes the profile with a different preparation, towards a more analytical and digital one.

"It is an interesting opportunity for Costa Rica to reeducate people with those skills, to carry out higher-level jobs, more challenging and better rewarding" concludes Chavarria, and for this a well-defined national policy is needed.

Weapons to compete globally

A good part of the success of this policy focused on attracting companies of this type is given by country´s openness to trade, which is a fundamental point of the free trade agreements (FTA) and free zones.

The country competes not only with Latin American rivals when trying to attract businesses, but also with countries in Asia and Europe.

To meet the challenge, it just has that handful of tools of human resources, trade openness and free trade zones. Other countries create ad hoc laws for businesses to locate in their territory (some even pay full wages of workers for a few years, give away land to attract companies ...).

Hence the importance of the Free Zones Regime, which gives legal certainty to companies already installed, and makes others keep coming. A study by PROCOMER (Costa Rica´s Exports Agency), made with the support of CINDE and the Ministry of Foreign Trade, notes that between 2010 and 2014, the free zone companies, bought domestic firms US $6,400 million in goods and services, and they gave back to Costa Rica US $5.7 in social and economic benefits for every dollar of benefits granted; but it doesn’t stop having a bad reputation among some sectors because of the tax exemptions.

Of course, Costa Rica does not compete with other countries in costs, which are in a superior scale to many of its competitors. "We compete on quality, not price," insists Federico Chavarria.

And that quality gives return. Productivity per employee rose 40% from 2005 to 2013, from US $ 35,000 to US $ 50,000. If services exports accounted for just 1.3% of GDP in 1999, in 2013 they reached 5.8% of GDP; and today account for 34% of the country's exports (compared to 15% in Argentina, its closest competitor in this statistic).

In addition, Costa Rica is also leading Latin American statistics in regard to exports of services per capita: US $1,240 per capita, in a distant second place is Chile (US $719); and a far third, Argentina (US $335).

The trend for global SSC will continue booming, and Costa Rica wants to stay in the top. This trend has to do with costs for businesses. According to a recent study by Deloitte, 16% of the companies recovered their SSC investment in the first year of operation; 34% did so between the first and second year; 30% between the second and the third, 11% by the fourth year, and 9% after the fourth year.

Original article at:

Link: http://www.estrategiaynegocios.net/lasclavesdeldia/957319-330/costa-rica-la-casa-latinoamericana-de-los-centros-de-servicios