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The Case for Uruguay: “Value and Capability” Matter Most

The small South American country of Uruguay represents a modest BPO market with a unique set of advantages and challenges. These have been brought into sharp relief during the COVID-19 pandemic, as has the country’s long-held position as a resilient value play.

“We don’t look at Uruguay as a cost play – this is a value and capability play,” says Chris Crowley, EVP and Chief Commercial Officer at Alorica. “Our services from Uruguay are not part of a commoditized BPO offering, and instead rely on an educated workforce that can deliver more complex and sophisticated services in English, Spanish, and Portuguese.”

Alorica has been in Uruguay since 2016 when it acquired Expert Global Solutions (EGS), the world’s largest privately-owned BPO company at the time. Today, Alorica has about 850 full-time employees in the Aguada Park free trade zone in downtown Montevideo, Uruguay’s capital, one of 12 free trade zones in the country.

Montevideo is a city well in excess of one million people – we get the benefit of a big city without the drawbacks,” says Crowley. “We can grow as fast as we need to because the talent is there thanks to the country’s strong educational policies, such as giving a laptop to every child when they start school.”

Alorica moved fast during the pandemic to allow its employees to work from home, helped by Montevideo’s robust infrastructure. As in other countries of Latin America and the Caribbean, Uruguay has also temporarily waived tax concerns related to having employees working outside of the tax-free zone.

Punching Above Its Weight

Uruguay is a small country tucked between two Latin American giants, Brazil and Argentina. Historically, it has used this position to its advantage, benefitting from trade with its large neighbors and ensuring that it can deliver political and economic stability to a population of only 3.5 million.

“Uruguay’s location bordering the largest and third-largest economies in Latin America – Brazil and Argentina – as well as its efforts to encourage investment and convert itself into a logistical hub for the region, mean that in many regards it offers opportunities that outsize its modest geography,” says Craig Dempsey, Managing Director and Co-Founder of Biz Latin Hub Group, which provides back-office services to companies looking to invest or locate in Latin America.

“While an inflation rate hovering between 5% and 10% over the past fifteen years is relatively high, Uruguay has remained stable while other countries from the region have seen much greater fluctuations and volatility,” he adds.

In fact, the political and economic statistics for Uruguay often put it at the top of the ladder when compared to other countries in Latin America.

For example, in Transparency International’s 2019 edition of its Corruption Perceptions Index, Uruguay had the lowest levels of perceived corruption in Latin America and the Caribbean. In 2018, the Intelligence Unit of the Economist placed Uruguay in first spot in Latin America for Political and Social Stability. The World Bank consistently gives Uruguay top marks in the region for Political Stability, Government Effectiveness, and Regulatory Quality – among other categories.

“Uruguay’s strong democracy and political, social and economic stability enable a safe and stable environment for doing business,” says Natacha Emicuri, Uruguay’s Deputy Country Head for Tata Consultancy Services (TCS). “The country has also emerged as a leader in executing our new TCS Secure Borderless WorkSpaces (SBWSTM) model, thanks to the country’s reliable and highly functional IT infrastructure.”

Uruguay has benefited from its ability to implement and oversee sounder financial policies than its neighbors” – Craig Dempsey, Biz Latin Hub

Back in 2002, Uruguay was TCS’s first Global Delivery Center to in Latin America. The country was chosen due to its unique advantages, including ease of doing. Over time, from TCS’s perspective, its value proposition has only grown.

“Over the last 20 years or so, Uruguay has made significant investments in business-enabling areas to help diversify its economy,” says Emicuri. “This has led to several progressive changes in the country’s IT connectivity, creating and amplifying technology educational programs and promoting the incubation of IT and technology investments with key benefits.”

At present, TCS Uruguay is the largest technology company in Uruguay. It operates from three buildings in the Zonamerica free trade zone in Montevideo, with nearly 2000 consultants.

Uruguay’s Pandemic Dividend

Like every country in the world, Uruguay has had to weather some economic headwinds during the pandemic. According to Fitch Solutions, employment and import demand remain suppressed, resulting in a widening of Uruguay’s current account balance in 2021. Inflation was in excess of 10% during periods of 2020 and the Uruguayan peso depreciated as COVID-19 ran rampant throughout South America, and hit the elephant next door – Brazil – particularly hard.

“Uruguay will always be subject to the ebbs and flows of its neighbors’ fortunes,” says Dempsey from Biz Latin Hub Group. “However, the country has also benefited from its ability to implement and oversee sounder financial policies than its neighbors.”

Assuming that a society is otherwise stable – which has been true of Uruguay – a boost in inflation and a depreciating currency can often be turned to the advantage of BPO providers given that they sell their services in dollars.

“The devaluation of the currency in 2020 was dramatic,” says Jose G. Ramirez, Alorica’s VP of Operations and Chief of Staff for LATAM and The Caribbean. “It helped us move some targets in terms of margins.”

Alorica’s employees in Montevideo are protected somewhat in that they make well above minimum wage, though over time inflation could be a concern.  The government is making some policy decisions, such as suspending federal wage increases, in an effort to keep things under control. And though things look bleak now, Focus Economics expects a rebound in 2021.

But there is another shift happening that is beyond anyone’s control that bodes well for BPO – and outsourcing in general – in Uruguay. That is the fact that more and more companies are looking to develop digital capabilities, leveraging cloud, automation, AI, and Agile technologies and practices.

“TCS Uruguay has experienced and been a part of these transformational initiatives,” says Emicuri. “We have experienced several instances of clients looking for Uruguay to become a more prominent delivery location within their global IT landscape, frequently taking the front seat in implementation work, providing key leadership and integration roles and improving the balance between delivery sites.”

 

Written by Tim Wilson for Nearshore Americas

 

 

2021-02-23T14:13:52-03:00February 23, 2021|Categories: Economy|Tags: , |