Nearshore Americas

Bucaramanga: Colombia’s Quiet Corner Starts to Make a Strong Case

Over the last few years, Colombia has rightfully established itself as one of the most compelling locations for Nearshore services. While Bogota and Medellin – both internationally renowned metropolises – have hogged the limelight, the comparatively tranquil city of Bucaramanga has been slowly building a formidable foundation as location for specialized business services.

The capital of the state of Santander, Bucaramanga is known as “Colombia’s Beautiful City” and its comparatively high living standards have long marked it out to Colombians as an attractive place to live. It has also earned a reputation of being a regional hub of commerce, and earlier this year it was declared to have the most favorable business environment in Colombia based on its low unemployment and poverty indices and high economic growth rate.

Since Colombia began to catch the Nearshore wave, the city’s appeal has gone international. After spending three years listed as “on the radar” by outsourcing researchers Tholons, in 2010 it made it onto their list of the top 100 global destinations, where it  currently ranks 85th.

Humble Beginnings

Despite its growing reputation, Bucaramanga’s outsourcing sector remains dominated by small and medium companies rarely employing more than 100 people and the only major player already operating in the city is outsourcing multi-national Atento.

Atento first opened shop in the city with 300 employees in 2007, establishing what has since grown into a 1,700-seat call center. “We chose Bucaramanga because it has an important competitive agenda, a voice and data network that suits our business, 11 daily flights to Bogota, very high schooling levels, two of the best universities in the country and thriving industry,” the head of Atento’s Colombian operations told the media at the time.

Bucuramanga Key Facts and figures
Colombia’s seventh largest city with a population of 525,000, rising to 1.2 million in the metropolitan area.
• Time Zone: Central Time, 1 hour behind New York
• The city has a 95% literacy rate and rates first among Colombian schools and universities in SAT equivalent performance tests.
• There are 17 Higher Education institutes in Bucaramanga and the region has the second highest rate of people with undergraduate and postgraduate education.
• GDP per capita stands at $11,516, the fourth highest in the country.
• Bucaramanga has Colombia’s highest living standards, most equitable income distribution and lowest poverty rate – 18.50% – the second lowest in Latin America
• The Santander region has the highest economic growth rate in Colombia over the last decade at an annual average of 4.4%
• The city has a mixed record on security – the murder rate of 14.3 per 100,000 people is less than half the national rate; however the robbery rate last year was 359 per 100,000 in the metropolitan area and 485.7 in the city itself – nearly four times the national average.
• Renowned as one of Colombia’s most connected cities, Bucaramanga was the first city in the country and the second in Latin America to get WiMAX coverage.

From the value proposition outlined by Atento, Bucaramanga experts always return to one factor – education. Over 8,000 professionals graduate from Bucaramanga’s higher education every year. Just under a third of those leave with engineering qualifications, the majority in areas such as systems, telematic engineering, electronics and telecommunications while around the same number qualify in economics, business management, accounting and other related areas.

Talent Differentiation

With the numbers of graduates matched by some of the best results in Colombia, “it is clear that companies that want to outsource in Bucaramanga will find a really interesting human capital,” according to Horacio Caceres, the director of the economic observatory at the Bucaramanga Chamber of Commerce.

However, it is not just the numbers that have been catching investor’s eyes. “Our universities have an important reputation on a national level,” said Caceres. That reputation is based on how closely the city’s universities and technical colleges work with business and industry, a collaboration that has seen the development of a number of top quality investigation centers recognized by the Colombian institute for Development of Science and Technology.

However, when it comes to language skills, the city’s education system is still lagging behind. According to the 2005 census just 4.7% of the population is bilingual compared to 9.4% in Bogota and 5.5% in Medellin.

Nevertheless the city’s authorities and business community are taking action to address this weakness. The Bilingual Committee – a special public-private partnership involving universities, English institutes and the Chamber of Commerce – is running language training programs both in work places and at schools and universities. “The process of language training in Colombia is still young,” said Caceres. “[However] we are working hard to make sure it takes its place in public education.”

Cloudy Business Climate

The language skills gap is not the only concern for potential foreign investors in Bucaramanga. Last year, the city scored badly in the World Bank Doing Business report, plummeting from 3rd place out of the 21 Colombian cities assessed to 18th, with particularly bad scores in starting a business, dealing in construction permits and registering a property.

However, the city was again quick to tackle the issue with the creation of a series of new business roundtables to address the slide. The public-private working groups will analyze the city’s performance in all five areas assessed by the World Bank and suggest how the processes could be simplified and quickened. “It is clear that the business community and the population must move towards generating value in all fields,” said Caceres. “It is a long race but at least we have started to run.”

Last year, the city’s outsourcing sector was boosted by the opening of a new Zona Franca – the Santander Offshoring and Outsourcing Park. The park boasts all the features expected from such zones – convenient location, security, telecommunications infrastructure, a flat 15% income tax rate and several tax exemptions – and will soon also feature a new development to act as a shared services center for companies located in the zone.

Companies will also be able to access two universities to be located within the zone, which will help provide training, business advice and consultancy services. One of the universities will specialize in IT and the other in international business.

The Changing Phenomena 

The park has now been open for business for just over a year and has already attracted ten companies, among them a major European outsourcing player, which is set to announce its plans for a new 700-seat contact center in the coming months. The new center will join a variety of companies providing KPO services in areas such as logistics, engineering and even architecture and construction.

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“Things have changed with the Zona Franca,” said Caceres. “It was the first seed that has sprouted and it has made us think about how to look for outside investment.”

In the future, the main target of the park will be shared services for the oil and gas industry as the park management looks to capitalize on local expertise – Santander is at the heart of the Colombian oil industry.

The new zone complements two existing Zona Francas specializing in health services and it is this type of niche service provision focused on health and oil and gas which will provide Bucaramanga with its best opportunity for growth, according to Mauricio Velasquez, the Zona Franca’s Outsourcing Advisor. “When you get to a party late, you have to differentiate yourself if you want to dance with the beautiful girls,” he said.

According to estimates by Velasquez, the city only has the capacity for at most three more contact centers of up to 2,000 seats but could cater to up to 100 boutique oil and gas and health service providers with around 50 seats each. “We don’t want to be an all you can eat city,” he said.

With the Zona Franca up and running, Bucaramanga’s outsourcing future looks bright if it can manage its growth on the sustainable scale suggested by Velasquez. With its business friendly environment and well of human capital resources complementing the strategy of niche targeting, the city has the potential to become an attractive destination that maximizes its advantages and is comfortable with its limitations.

To learn more about doing business in Bucaramaga, feel free to connect with Kirk Laughlin, Nearshore Americas’ managing director.

James Bargent

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