Salvadoran BPO firms ideal recession buster for Canadian businesses

Images of death squads, martial rule and mayhem might still linger, but today’s El Salvador is far removed from the strife thorn country portrayed in Salvador,

Well-known among North American tourist as a low-cost vacation alternative to more popular and more expensive Latin American destination, the El Salvador of late is also poised to become an ideal outsourcing option as well, according to technology and business research firm Datamonitor.

Left-wing President Mauricio Funes of the FMLN party, who was voted into office last month, has kicked-off his administration with a reconciliatory note to the previous ruling party and has made overtones to strengthen relations with the private sector to ensure the growth of the country’s business process outsourcing (BPO) industry, according to Peter Ryan, lead analyst for Datamonitor.

Funes still has to overcome suspicion from his country’s business elite to keep that promise, but Ryan is optimistic that his win over Nationalist Republican Rodrigo Avila, bodes well.

“By engaging both Salvadoran service providers and multinationals operating in the country, Funes if sending out that message that El Salvador is open for BPO business,” Ryan said.

“The country presents an ideal BPO opportunity for Canadian and American businesses looking for offshore BPO bargains,” the Datamonitor analyst said. While tourism remains to be the main draw for Canadians, business investnments in El Salvador have been growing.

Last year trade between the two countries topped $90 billion. Canadian investments in El Salvador surged from $45.8 million in 2001 to more than $156 million in 2006, when an Air Canada subsidiary acquired 80 per cent of aircraft maintenance company Aeroman from the regional airline company Grupo TACA.

International banks such as ScotiaBank and HSBC have also been pouring in billions of dollars to snapped up local financial businesses to grabbed a piece of the growing Salvadoran economy.

Ryan foresees the bulk of BPO jobs carried out by Salvadoran outfits being for U.S. companies, but he sees no reason why Canadian enterprises shouldn’t do the same.

“Canadian companies can take advantage of El Salvador’s close proximity, cheaper labour cost and a workforce that is familiar with Western culture.” The country’s BPO industry however, might still be in its infancy stage, said Ryan. He said many companies might not be able to provide a large BPO workforce or expertise in more sophisticated outsourcing demands.

Yolanda Martinez, investment advisor for Proesa, a non-profit investment promotion agency for the Salvadoran government, said local BPO firms may be smaller than their counterparts in Asia, Europe and even Latin America, but the Salvadoran operations use this to their advantage.

“With an estimated population of around 7 million, El Salvador you can’t expect our country to produce a large BPO workforce. But the companies we have can specialize in niche BPO markets,” she said.

There are at least five large BPO companies in El Salvador. The firms specialize in Data processing, call centre management and business services.

Typical BPO personnel salaries are around $250 to $450/ month for Spanish speaking personnel to $400 to $600/month for English speaking contact centre workers.

El Salvador also has a large number of North American-born or raised Salvadoran people who have returned to work in their home country. “They have well-honed communication skills that make them ideal for customer contact with high-value clients,” Martinez said.

Apart from this, North American countries will find El Salvador’s close proximity a plus. The country is only four hours by plane from Los Angeles and six hours away from Toronto.

The country also straddles the Central Time Zone making for a mere two to three hours time difference for both Eastern and Western seaboards.

Martinez also points to a list of tax and investment laws designed to attract foreign investors.

For instance, foreign investors are allowed to repatriate a substantial amount of the profits and foreign businesses are exempt from value added taxes.

Here are some tips to help you get the most of your BPO contract:

Don’t shortcut internal preparation and strategy setting. Savvy sourcing decision makers should strongly resist the temptation to shortcut internal preparation. Although some deals certainly can be “fast-tracked” and still succeed, there is a lower probability of achieving strategic business objectives.

Don’t put the move from IT to business technology (BT) on hold. Regardless of current weaknesses in the broader economic market, an upturn will come, and the smartest businesses will continue to aggressively leverage technology as a business accelerator rather than as a sunk cost. The evolution from IT to BT-including pervasive technology use that boosts business results and in which the business becomes deeply embedded in technology-should not be put on hold. Laggards will be under even more pressure.

Leverage your existing outsourcing ecosystem. Firms that have good existing outsourcing relationships are much better positioned to grow their deals and accrue near-term savings. Now is the time to consider aggressively expanding existing healthy relationships with service providers. Firms should also drive hard for additional pricing and service concession from providers.

(With files from Paul Roehrig –

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Jim Love, Chief Content Officer, IT World Canada

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