Outsourcing to Nicaragua

This appeared n Business Week Online recently:

Nicaragua Decades after the Sandinista revolution in the 1970s put it at loggerheads with the Reagan Administration and prompted an estimated 400,000 people to flee the country, Nicaragua is trying to get back into the global economy by embracing outsourcing. With the prodding of trade promotion agency ProNicaragua, the Spanish-speaking country of 5.3 million people has rolled out an aggressive package of incentives to attract foreign investment.

ProNicaragua's pitch emphasizes the country's low crime rate, moderate 5% annual inflation, and a newly-improved telecom infrastructure that features fiber-optic connections to the U.S. Nicaragua is staking its ground on attracting call centers, and to speed the process along, the government spent $3 million to build a 500-seat call center in the capital of Managua. ProNicaragua hopes to announce its first major tenant early this year.

Most of the work there will likely serve Spanish-speaking customers in the U.S. or elsewhere in Latin America, but to highlight Nicaragua's potential for bilingual customer service, the government also has assembled a database of 5,000 English-speaking workers available for hire. Call center workers typically earn $300 to $600 per month -- higher than in India, but only half the rate in neighboring Costa Rica and Panama.

To sweeten the deal, ProNicaragua has pushed through an impressive package of economic incentives, including a 100% exemption from income and capital gains taxes for call-center businesses in special economic zones. Such businesses also will be able to import equipment with no duties, avoid value-added taxes, and pay no property taxes on their facilities. Nicaragua's modest goal is to create 4,000 call-center jobs by 2009, but ProNicaragua Director Juan Carlos Pereira thinks it can do far better.