Nearshore Americas

Omicron Brings New Level of Risk to Nearshore Operations

Just when we were cautiously optimistic about leaving the last 20 months of pandemic-filled difficulty behind, the Nearshore industry has, along with the rest of the world, been pulled right back into the thick of things.

Nearshore markets that were stumbled by previous waves of the coronavirus, like Jamaica, Dominican Republic and various Central American countries where vaccinations remain low, are at risk of being bowled over by a new and rapidly-spreading variant.

Omicron, which first emerged in South Africa, has swiftly made its way through massive portions of the population in many European countries and in the United States.

Just this week the US registered over one million daily coronavirus cases as omicron took hold. 

And omicron has already spread into Latin America, with Mexico, Costa Rica and Argentina among the region’s major industry markets that have confirmed cases of the omicron variant, which appears far more infectious that the previous variant of concern, Delta. 

Argentina, which on December 6 reported 2,477 new cases, reported 81,210 cases on January 4

Following the arrival of omicron, cases are rising. Argentina, which on December 6 reported 2,477 new cases, reported 81,210 cases on January 4. Having reported no new cases since early December, Costa Rica reported 5,315 new cases on Jan. 4.  

This is a pattern appearing in most other countries. The number of deaths remains low and appears to underline the understanding of scientists that omicron is ‘mild’ in comparison to previous variants. 

But should Latin American cases of omicron explode in the way that has happened elsewhere, pressure on the many creaky health systems of some nations will surely ratchet. 

For example, in New York, where omicron has been spreading like wildfire for just over a month, hospitalizations have hit a 20-month high, greater than any time during 2021.

Faced with more uncertainty, how will the Nearshore region fare? Latin America & Caribbean is undoubtedly more prepared for this wave than previous ones, but will the expected omicron spread inhibit the industry’s ability to respond at a time of high demand?

Risk and Vaccination

Though there’s been widespread concern of the region’s vaccination rates, many countries have done remarkably well and have higher rates than some countries of Europe.

Cuba has fully vaccinated over 85% of its vaccine with its own vaccine, while Chile, Uruguay and Argentina are all approaching some form of herd immunity with full vaccination rates of 87.3%, 77.3% and 73.3% respectively.

Rio de Janeiro and Sao Paolo, both in Brazil, have vaccinated over 99% of their adult populations with at least one dose

Capital and major cities have expectedly been at the forefront of vaccination efforts. For example, Rio de Janeiro and Sao Paolo, both in Brazil, have vaccinated over 99% of their adult populations with at least one dose. 

But other countries are lagging well behind. In Jamaica, a meagre 19.4% of the population has been fully vaccinated while in Guatemala, a market expanding into IT services to support a mature BPO market, just 28.4% of people have so far been fully vaccinated.

These vaccination rate divides will mean countries are likely to approach the coming omicron wave differently. The UK, which has been an omicron hotspot, advised people to work from home whenever possible despite high vaccination rates having kept serious cases and deaths low. 

Regional countries that have successfully vaccinated their populations, will have more flexibility in making decisions on whether to lockdown or move to work from home again. But the countries that have struggled vaccinating will likely be taken by countries in Latin America where vaccinations have been successful, like Chile, Cuba and Uruguay. 

What Will Happen to WFH?

The quality of Infrastructure and telecommunication services in individual countries is likely to play a large part in decisions to keep employees who’re still out of the office remaining at home, and those who have already returned to company quarters, back to their residences again.

Two months ago, over half the region’s professional population was working from home.

Such was the haste and size of the shift to home working that many governments – including those in Honduras, Colombia, Peru and Chile applied new rules and regulations for workers in the remote environment. 

It’s very possible that governments will push the workers that have already returned to the office back home if omicron case levels match the worrying predictions.

Jamaica’s situation ahead of the omicron wave could cause concern. The country’s extremely low vaccination rate, coupled with the congested residential internet connections, could stretch the abilities of stakeholders to provide the excellent service that country is known for. 

“I was working from home from March to June and there were lots of power outage problems. It was hard to last one full shift without experiencing an outage,” — Lourdes Soto, BPO team leader in Dominican Republic

Companies took steps to protect against infrastructure problems during the previous lockdown in April 2021, when an estimated 80% of the island’s BPO workforce was working from home. Anand Biradar, Director of the Board of Directors at the Business Processing Industry Association of Jamaica, told Nearshore Americas that the country’s infrastructure “didn’t support fully-fledged work from home” for the entire industry population. 

Similarly, BPOs in the Dominican Republic could see work from home struggles continue. Lourdes Soto, a team leader at Acquire BPO, told Nearshore Americas last year that: “I was working from home from March to June and there were lots of power outage problems. It was hard to last one full shift without experiencing an outage.”

A prolonged work from home period would also impact real estate prices in the region, many of which have seen plummeting valuations following the wholesale pivot to remote work that many companies have completed in the last 20 months. 

Jose González, director of market research and consulting at real estate services firm Cushman & Wakefield, told Nearshore Americas that in Costa Rica, Panama and the Central American region, there had been demand shock on commercial real estate prices during the pandemic, which he said, had “hit harder than the financial crisis of 2008.”

Andres Cardona, VP of advisory and transaction services at CBRE Colombia, said that in Santa Fe – the financial center of Mexico City, which is generally considered the financial center of Latin America – real estate prices had fallen off a cliff. “At the moment, it has a 50% vacancy rate,” he said in September. 

Trust the Numbers?

We still don’t know if a full omicron explosion that pushes Latin America’s population back into lockdown, or at least forces more stringent regulations on social distancing, will happen. But, just as in previous outbreaks, there are also concerns over reporting of cases in certain countries.

Economic disparities mean that few countries can match Austria’s testing rate of 61.49 tests per thousand inhabitants it achieved on Jan. 05, according to OurWorldinData.

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But fewer tests mean fewer positive results, and governments will act on data. The US is nowhere near Austria’s levels, testing only 3.96 people per 1,000. But it performs well in comparison to countries south of its border including Mexico (0.12 tests per 1,000), Guatemala (0.26 tests per 1,000) or Colombia (1.25 tests per 1,000). Argentina and Chile test 2.15 per 1,000 inhabitants and 2.64 per 1,000 inhabitants respectively.

These numbers may change as omicron tightens its grips in the region. But with questions raised over the accuracy of reporting of numbers by certain governments, doubt could linger.

We’ll have to hope that the Nearshore won’t be too badly affected.

Peter Appleby

Peter is former Managing Editor of Nearshore Americas. Hailing from Liverpool, UK, he is now based in Mexico City. He has several years’ experience covering the business and energy markets in Mexico and the greater Latin American region. If you’d like to share any tips or story ideas, please reach out to him here.

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