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The Colombian Outsourcing and Offshoring Industry: The Effects of Institutions and Agglomeration Economies

Nir Kshetri*, The University of North Carolina—Greensboro, The U.S.,

Marleny Cardona, Konrad Lorenz Fundación Universitaria – Bogotá Colombia.

Hugo Díaz , Konrad Lorenz Fundación Universitaria – Bogotá Colombia.

Suelen Castiblanco , Konrad Lorenz Fundación Universitaria – Bogotá Colombia.

Paper prepared for Conferencia Deslocalización de servicios y cadenas globales de valor: ¿Nuevos factores de cambios estructurales en América Latina y el Caribe?

Santiago, Chile 18-19 de Octubre de 2012

*Corresponding author

Bryan School of Business and Economics The University of North Carolina at Greensboro P. O. Box 26165 Greensboro, NC 27402-6165. Tel: 1- 336-334-4530 Fax: 1- 336-334-5580 Email: nbkshetr@uncg.edu

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The Colombian Outsourcing and Offshoring Industry: The Effects of Institutions and Agglomeration Economies

Abstract

While the Latin American outsourcing and offshoring industry is largely dominated and

overshadowed by Brazil, Mexico and Argentina, Colombia is emerging as a major challenger.

Global and local companies are expanding their operations to mid-sized cities in the country.

There is also some evidence that the Colombian outsourcing industry is slipping into a higher

gear and moving towards high-value, data and knowledge-based services. In this paper, we seek

to understand formal and informal institutions and the factors associated with economies of

agglomeration in the Colombian outsourcing and offshoring industry.

Keywords: Outsourcing, institutions, agglomeration economies, Colombia, voice-based BPO

services

1.0. Introduction

An article published in Business Week in 2006 suggested that Colombia was among the ―Up-

and-Comers‖ economies in the Latin American region in terms of the development of the

outsourcing industry (Reinhardt et al., 2006). In general, while developing Asian economies such

as India, the Philippines and China have dominated the global outsourcing industry, in recent

years, global outsourcers are paying more attention to middle-income countries in Latin

American (Business Latin America, 2010). While the Latin American outsourcing industry, is

largely dominated and overshadowed by Brazil, Mexico and Argentina, as evidenced by global

outsourcing services providers‘ establishment of major centers in Mexico City, Monterrey and

Guadalajara (Mexico), Sao Paulo and Rio de Janeiro (Brazil), and Buenos Aires (Argentina),

Colombia has been emerging as leading outsourcing destinations together with Costa Rica,

Chile, Panama, and Uruguay (EmergingMarketsNOW, 2008).

In recent years, Colombia is becoming an attractive outsourcing destination (Business Latin

America, 10/4/2010). A number of multinationals have established call centers in Colombia. For

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instance, the IT services provider, Convergis (http://www.convergiscorp.com/) opened a call

center in Bogotá in 2011 with 850 bilingual agents to serve an international telecommunications

client via phone, web-chat, SMS and email. The company plans to increase its workforce to

5,000 and expand its offerings to include customer service, technical support, help desk, back

office, and Interactive voice response (IVR) support (NSAM, 2011). Similarly, Sitel first

established its Latin American call centers in Colombia in the 1990s and then expanded to

neighboring countries such as Brazil, Panama, Mexico, Chile and Nicaragua (Hansen, 2009).

Likewise, Fiserv, which provides integrated information management systems and services, such

as transaction processing, business process outsourcing, document distribution services, and

software and systems solutions has significant international operations in Colombia (Data

Processing & Outsourced Services Industry Profile: Global, 2009).

In 2009, the size of the Colombian outsourcing and offshoring industry was estimated at

US$1.8 billion, which was 6.1% of the Latin American outsourcing and offshoring industry

(Parker, 2010). Colombia ranked No. 5 in Latin America behind Brazil, Mexico, Argentina and

Venezuela (Parker, 2010). The Colombian government‘s target is to create of 305,000 jobs and

US$10 billion in sales by 2019 and 600,000 jobs and US$48 billion in sales by 2032 (Pinzon,

2010)

The business process outsourcing (BPO) sector dominates the Colombian outsourcing and

offshoring industry. Call centers accounted for 59% of the overall BPO sector in 2007. The

contribution of human resources, finance and accounting sectors was 34% and that of the data

carrier sector was 7.0% (McKinsey & Company, 2008). There is, however, some evidence that

the Colombian outsourcing and offshoring industry is slipping into a higher gear and moving

towards high-value, data and knowledge-based services. For instance, according to the Industrial

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Research Institute's (IRI) 2011 survey conducted with its member companies, 2% of the

respondents considered Colombia as a possible international location for R&D laboratories. It is

also worth noting that the same proportion of respondents considered Argentina, Israel, Austria

and South Africa as possible international R&D locations (Antcliff, 2012). Note that in a similar

survey conducted in 2010, no respondent considered Colombia as an appropriate international

location of R&D.

The objective of this paper is to analyze the roles of institutions and agglomeration

economies in the development of the Colombian offshoring industry. The paper is structured as

follows. We proceed by first providing a review of the relevant literature. Then we examine the

roles of institutions and agglomeration economies in the development of the Colombian

outsourcing and offshoring industry. Next, we provide a case study of the outsourcing and

offshoring industry in Medellín. It is followed by a section on discussion and implications. The

final section provides concluding comments.

2.0. Literature Review

Prior research indicates that institutions and agglomeration economies are among the most

important determinants of FDI locations (Campos and Kinoshita, 2003). In this regard, it is

important to examine whether the same relationship holds for the outsourcing and offshoring

industry. In this and the next section, we extend this logic and develop this line of argument to

consider the development of the Colombian outsourcing and offshoring industry.

2.1. Institutional theory

Institutional theorists have emphasized the importance of formal and informal institutions in

shaping the behaviors of economic actors (North, 1990; Scott, 1995, 2001; Parto, 2005). An

economic system is arguably a ―coordinated set of formal and informal institutions‖ (Dallago,

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2002) influencing economic agents‘ behavior. Institutions are the ―rules of the game‖ (North,

1990, p. 27) and include ―formal constraints (rules, laws, constitutions), informal constraints

(norms of behavior, conventions, and self-imposed codes of conduct), and their enforcement

characteristics‖ (North, 1996, p. 344).

Institutional theory deals with the issue of seeking legitimacy, approval and support from

various actors in the environment (Dickson, BeShers & Gupta, 2004; Campbell, 2004).

Institutional influence in the outsourcing and offshoring industry becomes an admittedly

complex process when providers and users of outsourcing services need to derive legitimacy

from multiple sources such as employees, clients, client‘s customers, professional/trade

associations and governments. These issues are even more crucial as offshore outsourcing entails

developing long-term relationship with partners that have different norms and are embedded in

different social and legal institutions (Kshetri, 2007).

Prior researchers have employed Scott‘s (2001) three institutional pillars: (i) regulative;

(ii) normative and (iii) cognitive to examine the growth of the outsourcing and offshoring

industry. These pillars relate to ―legally sanctioned‖, ―morally governed‖ and ―recognizable,

taken-for-granted‖ behaviors respectively (Scott, Ruef, Mendel, & Caronna, 2000, p. 238). The

following examples illustrate the three pillars from the standpoint of outsourcing and offshoring

industry. Prior research has indicated that privacy laws in the origination country and the

strength of rule of law in the destination country affect the extent to which services can be

outsourced (regulative institutions). In some economies, professional and trade associations in

the destination country play an important role in driving the growth of the outsourcing and

offshoring industry (normative institutions). For instance, India‘s National Association of

Software and Services Companies (NASSCOM) has played an exemplary role in stimulating the

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outsourcing and offshoring industry by bringing various institutional changes in the country

(Kshetri & Dholakia, 2009). Finally, the culture of modern management and the degree of

cultural compatibility between the origin and the destination countries are important (cognitive

institutions) (Kshetri, 2007).

2.2. Economies of agglomeration

The idea in economies of agglomeration is that as a large number of firms in related industries

cluster together, each firm may benefit from positive externalities in various firms. Factors such

as the presence of competing multiple suppliers, knowledge spillovers, availability of

intermediate inputs, a higher degree of labor specialization and division of labor lead to a

decreased costs of production. For instance, by locating close to other firms, they benefit from

positive spillovers from investment and economic activities that are already in place. Several

mechanisms associated with economies of agglomeration include technology spillovers,

advantages of thick markets for specialized skills, and the backward and forward linkages

(Marshall 1920). Prior research in economic geography has emphasizes the linkages effects. For

instance, users and suppliers of intermediate inputs tend to cluster close to each other because the

large market provides greater demand for goods and supply of inputs (Krugman, 1991).

3.0. The Colombian Outsourcing and offshoring industry: The Roles

of Institutions and Agglomeration Economies

Table 1 presents institutional and agglomeration economies related factors facilitating and

inhibiting the growth of the Colombian outsourcing and offshoring industry.

3.1. Institutions related to the outsourcing and offshoring sectors in Colombia

Regulative institutions

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Regulative institutions consist of regulative processes and activities related to the setting of rule

and policies as well as monitoring and sanctioning (Scott, 1995). These are mostly related to the

state.

A high priority is placed on the development of the BPO sector, which is one of the eight

sectors that are part of the country‘s Structural Transformation Policy of the National

Competitiveness and Productivity Policy formulated by the National Planning Department

(DNP, 2008, 2010). The government has also announced an investment of US$ 20 million in an

attempt to strengthening this sector (MCIT, 2011). Company income tax incentives are also

offered in this sector. In 2010 the government eliminated the value added tax for the BPO sector

exporting companies giving them the same incentives that companies exporting goods enjoy.

The government has established three free trade zones with BPO facilities in Bogota, Manizales

and Pereira. In addition, local governments in Medellín and Bogotá are working for the

establishment of free trade zones specializing in BPO

The Colombian government has also established a national registry for bilingual

individuals (www.ispeak.gov.co). Companies in the BPO sector thus can more easily find

qualified employees. In addition, Bogotá has created a program to fund English language courses

for call center employees (Andrade et al., 2010).

Normative institutions

Normative institutions introduce ―a prescriptive, evaluative, and obligatory dimension‖ (Scott,

1995, p. 37). The basis of compliance in the case of normative institutions derives from

professional and social obligations. Some examples of normative institutions include trade clubs

and other associations as well as recently created organizations such as The Colombian

Association of Contact Centers and BPO, and the National Business Association of Colombia

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(ANDI) Chamber of BPO&IT in terms of their roles in the growth of the outsourcing and

offshoring industry.

Recently created private institutions have helped stimulate the outsourcing and offshoring

industry: The Colombian Association of Contact Centers and BPO, and the National Business

Association of Colombia (ANDI) Chamber of BPO&IT. The latter has 12 member companies

with15,000 employees and generate US$250 million. The services provided are related to

optimization of processes in the health sector, telecommunications, finance, administration and

back office. Companies belonging to the Chamber have developed trade relations with Spain, the

U.S., Mexico, Guatemala, El Salvador, Costa Rica, Panama, Venezuela, Argentina, Peru, Chile,

Puerto Rico, Ecuador and others (Pinzón, 2010). The Chamber has signed memorandums of

understanding on cooperation with the following international associations: India‘s NASSCOM,

Brazil‘s BRASSCOM, the Australian Business process outsourcing association (ABPOA), The

Czech ICT Alliance, The Business Processing Association of the Philippines (BPAP). It has also

formed the Colombia Chapter of International Association of Outsourcing Professionals (IAOP),

which is the first such chapter in Latin America (ANDI, 2009). This would facilitate the

interaction of Colombian entrepreneurs in this sector with those from other countries and create

awareness about global trends in the sector. It would also encourage foreign investment in this

sector.

Finally, it is worth noting that Colombia has adopted International Financial Reporting

Standards. This development would help Colombian professionals in financial and international

accounting standards.

Cognitive institutions

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Cognitive institutions are ‗‗the shared conceptions that constitute the nature of social reality and

the frames through which meaning is made‘‘ (Scott, 2001, p. 57). There are built on the mental

maps of individuals and organizational decision makers (Huff, 1990).In cognitive institutions, we

analyze how various components of the country‘s culture and the degree of its cultural similarity

with major outsourcing origination economies such as the U.S. have affected the growth of this

industry.

Speaking of cultural similarity between the U.S. and Brazil, Carlos Diaz, vice president of

Pan-America and global accounts officer for Meta4 and an expert of HR issues in Latin America

noted: "The countries share many cultural references—music, movies, television shows, etc.

…You wouldn‘t have to explain who Mickey Mouse is to a Brazilian, but that may not

necessarily the case when it comes to somebody from India" (Ruiz, 2007). This observation is

equally applicable in the Colombian case.

In light of the growing Hispanic market in the U.S., Colombian contact centers Spanish-

speaking U.S. regions. One advantage of Colombia is that people in the country have a neutral

accent. This allows Colombians to assimilate other Spanish accents. Moreover, a large

proportion of Colombians are good English speakers (Diaz, 2011).

3.2. Agglomeration economies in the outsourcing and offshoring sectors in Colombia

We note from Table 1 that Colombian clusters are characterized by a low degree of firm-level

specialization and poorly-developed enterprise networks (Pietrobelli and Barrera, 2002). These

factors tend to constrain the local external economies and collective efficiency. Moreover,

backward linkages are poor or lacking (Pietrobelli and Barrera, 2002).

In a discussion of the economies of agglomeration in Colombian outsourcing and

offshoring industry, it is worth noting that several decades ago U.S.-based firms outsourced the

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jobs related to assembling fabrics cut to Colombia. The reduced costs of communication and

transportation increased the attractiveness of Asian countries due to their lower wages

(Morawetz, 1981). However, once industrial clusters and hubs are established, the associated

advantages tend to persist even when the original industries disappear. In this regard, Colombia‘s

involvement in outsourcing related business for a long time is likely to be a crucial asset for the

development of the BPO industry.

The country‘s well-developed textile fabrics, apparel and fashion industries have generated

positive externalities for the offshoring and outsourcing and offshoring industry. For instance,

INEXMODA, the Institute for Colombia‘s fashion exports, supports local businesses to follow

the global trends in this industry. In addition, INEXMODA helps to organize exhibitions and

source innovative machinery (Pietrobelli and Barrera, 2002).

4.0. A Case Study of The Development of the Outsourcing and

offshoring industry in Medellín

This case illustrates the factors examined in the previous section in the context of the

development of the outsourcing and offshoring industry in Medellín, the second biggest city in

Colombia. BPO revenues for Medellín in 2008 was $ COP 354,454 million (US$185 million),

which was 37% of the total market in Colombia (Agencia de Cooperación e Inversión [ACI] &

Alcaldía de Medellín 2009).

A number of local as well as multinational companies have established BPO center in the

city. For instance, Hewlett-Packard has a BPO center in Medellín, which handles the company‘s

internal back-office needs worldwide (Sutter and Williams 2011). Likewise, in the early 2012,

Kimberly Clark announced the creation of a Global Innovation Center in Medellín, which will

serve as an addition to its existing centers in South Korea and the U.S. (Tholons, 2012). Local

companies in this sector in the city include Allus sectoren Global BPO (formerly Multilink SA),

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Teledatos, and EPM-Emtelco Teledatos. In 2002, EPM opened for operations Colombia's largest

call center.

4.1. Formal and informal institutions in Medellín

From the standpoint of regulative institutions in the outsourcing and offshoring industry, it is

probably fair to say that the most significant changes have been in Medellín. After Sergio

Fajardo became the city‘s mayor in 2003, he brought dramatic changes to create an

entrepreneurial environment. Fajardo established innovation centers and allocated 40% of the

city‘s budget for education and US$17 million a year to stimulate entrepreneurship (Isenberg,

2010). These measures have paid off brilliantly. Recent studies have suggested that Medellín is

safer than Washington, DC, and many U.S. cities (Isenberg, 2010).

During his mayorship, Fajardo also took initiatives to form entrepreneurial networks

consisting of universities, entrepreneurs, private equity funds, large companies (e.g., the local

power utility (EPM)), nonprofit organizations (e.g, Proantioquia Foundation and Comfama), and

diaspora networks with roots in Medellín (Isenberg, 2010). He also focused on building

beautifully designed, technologically advanced public libraries and community centers (Isenberg,

2010).

Various organizations formed in the public and private sector deserve special attention.

The Servicio Nacional de Aprendizaje (Learning National Service) (SENA) was created in 1957,

which is a government institution and is also financed by private enterprises. SENA provides,

inter-alia, training services, technical skills cortication and quality insurance (Pietrobelli and

Barrera, 2002). Likewise, ACTUAR, the Foundation for the Recovery of Antioquia was created

in 1980. In association with SENA, ACTUAR provides training to workers in a diverse range of

industrial sectors.

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In Medellín, joint initiatives involving the business community, the local government,

and the civil society have often been successful. Just as important is a strong sense of belonging

to the region (Pietrobelli and Barrera, 2002). Trade clubs and other associations in the city have

increased opportunities for inter-firm interactions as well as to strengthen the business-

government collaborations (Pietrobelli and Barrera, 2002).

4.2. Agglomeration economies in Medellín affecting the development of the outsourcing and offshoring industry

More fully developed examples of economies of agglomeration are found in Medellín, which has

more than 6 IT services companies with CMMI certifications (Tholons, 2012). The city also has

a number of large multinational companies such as Owens Illinois, Sab Miller, Phillip Morris,

Procter & Gamble, Renault Toyota, Teleperformace, Allus Global BPO, and Unisys; and has

headquarters of 19 of the 100 largest enterprises in Colombia (Tholons, 2011). In the early 2012,

Kimberly Clark announced the creation of a Global Innovation Center in Medellín, which will

serve as an addition to its existing centers in South Korea and the U.S. (Tholons, 2012).

Medeiin‘s industry-oriented culture has been an important source of economies of agglomeration

for the outsourcing and offshoring industry. Private sector businesses have created a number of

financial and training centers, which have facilitated the development of a strong local

productive network (Pietrobelli and Barrera, 2002). These networks have greatly facilitated the

development of the outsourcing and offshoring industry.

4.3. Institutional change agents and institutional entrepreneurship

Sergio Fajardo‘s roles and initiatives in the development of the outsourcing and offshoring

industry in Medellín can be analyzed from the perspective of institutional entrepreneurship. A

growing number of studies have suggested that institutional entrepreneurs challenge or disrupt

particular models of social or economic orders and construct new organizational fields

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(DiMaggio and Powell, 1991; Scott, 2001). Fajardo brought significant changes in the economic

model of the city.

Institutional entrepreneurs ―lead efforts to identify political opportunities, frame issues

and problems, and mobilize constituencies‖ and ―spearhead collective attempts to infuse new

beliefs, norms, and values into social structures‖ (Rao et al., 2000, p. 240). They also engage in

activities related to deinstitutionalization (dissolution of existing logic or governance structure)

as well as institution formation, which entails the birth of a new logic or governance structure

(Scott, 2001).

Institutional entrepreneurs' subject positions‖ need to be dominant that can allow them to

gain wide legitimacy, bridge diverse stakeholders and compel other actors to change practices

(Maguire et al., 2004). In this regard, it is important to note that Fajardo was elected as an

independent, which allowed him to ―escape the tradition of patronage and clientelism‖

(princeton.edu, 2009). His ―Let‘s Work Together,‖ motto led to establishment of partnerships

with key institutional actors such as Colombian the national government, Medellín city

councilmen and other relevant groups such as the teachers‘ union and comunas (affected

neighbourhoods).

It is important for Institutional entrepreneurs to mobilize external and internal

constituents, have financial resources (DiMaggio and Powell, 1991) and be able to communicate

with other institutional actors in the system so that their initiatives are perceived favorably

(Groenewegen and van der Steen, 2007). Fajardo was able to increase land taxation for the city,

which provided with financial resources to invest in the developmental projects. He was able to

change public perceptions, which played an important role in building citizen support.

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Theorization or ―the development and specification of abstract categories and the elaboration

of chains of cause and effect‖ is an important process through which institutional entrepreneurs

facilitate the diffusion of new ideas (Greenwood et al., 2002:60). Theorization provides

rationales for the practices to be adopted and thus increases the likelihood of acceptance of the

practice (Strang and Meyer, 1993). Two key elements of theorization concern framing and

justifying. Framing focuses on the need for change and justification is value of the proposed

changes for concerned actors (Greenwood et al., 2002; Maguire et al., 2004). In order to

understand framing and justifying, we can offer the following example: During the first year of

his tenure as the city‘s mayor, he started the construction of new schools and libraries in the

poorest part of the city. New building sites were open with big poster, which read: ―Here are

your taxes!‖ (boeristudio.it, UD).

5.0. Discussion and Implications Colombia performs better in cost saving than other Spanish-speaking countries such as Chile,

Argentina and Mexico (Ryan 2011). Due the recent institutional changes, firms in outsourcing

and offshoring industry can take further advantage of this benefit. This means that outsourcers

setting up bases in Colombia can attack the surrounding Latin American markets. That being

said, it is also the case that global outsourcers are increasingly looking at factors other than low

costs.

Outsourcing industries in different cities and regions in the country may have different

advantages. For instance, Pietrobelli and Barrera (2002) found that while firms in Bucaramanga

had entered global production and marketing networks, Medellín firms were mainly oriented to

the national market. Outsourcers are also in a position to take advantage of the Colombian

market to initially target the domestic market due to the country‘s growing economy. In this

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regard, while Medellín might have a comparative advantage to serve the national market whereas

Bucaramanga‘s advantage could be in serving international clients.

Institutional changes taken place in recent years have helped the development of the

outsourcing and offshoring industry. Various changes such as establishment of free trade zones

with BPO facilities in Bogota, Manizales and Pereira, investments in this sector, creation of a

national registry for bilingual individuals, Bogotá‘s program to fund English language courses

for call center employees, elimination of the value added tax for the BPO sector, and adoption of

International Financial Reporting Standards that certifies Colombian professionals in financial

and international accounting standards are set to transform the Colombian outsourcing and

offshoring industry.

The approach to economies of agglomeration helped us understand how the Colombian

outsourcing and offshoring industry is benefit from positive externalities generated by firms in

related industries through processes and mechanisms such as the presence of competing multiple

suppliers, knowledge spillovers, availability of intermediate inputs, a higher degree of labor

specialization and division of labor.

There is some evidence to suggest that, as is the case with most countries in the

Caribbean and Central America, Colombia-based outsourcing companies tend to underperform

their Brazilian counterparts in attracting high-value BPO activities. For instance, Colombian

firms mostly offer voice-based BPO services (call centers) to serve the U.S. clients (Business

Latin America, 2010). Companies in Brazil, on the other hand, offer higher value services. For

instance, the BPO component of CMP Braxis and Tivit involves enterprise resource planning

(ERP) functions and payment processing transactions (Business Latin America, 2010). Likewise,

Mexico offers IT outsourcing in addition to BPO services to U.S. customers (Business Latin

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America, 2010). One explanation for this might be that high-value BPO activities in Colombia

are still disadvantaged by poor economies of agglomeration. Compared with more successful

countries in the region, Colombia lags behind in skilled human resources (McKinsey, 2008).

To illustrate the effects of institutions and agglomeration economies in the development

of the outsourcing and offshoring industry, the paper also provided an in-depth case study of the

development of this industry in the city of Medellín. We also analyzed the role played by Sergio

Fajardo, who became the city‘s mayor in 2003 as an institutional entrepreneur. Fajardo brought

dramatic changes to create an entrepreneurial environment in the city, which also stimulated the

growth of the outsourcing and offshoring sector.

The presence of a large number of software companies with CMMI certifications has

helped Medellín improve the level of depth and the quality of service delivery. Such capabilities

have attracted providers such as HP and others in the city. From the standpoint of institutions as

well as agglomeration economies for the outsourcing and offshoring industry, it is probably fair

to say that the most significant changes have been in Medellín.

Finally, global and local outsourcing companies are expanding their operations to mid-sized

Colombian cities. There has also been a gradual shift towards high-value, data and knowledge-

based services (Andrade et al., 2010). These trends are likely to facilitate the development of

agglomeration economies in the mid-sized cities as well as for the high-value services in the

country.

6.0. Concluding Comments

The article has provided novel and unique insights into the facilitating and constraining factors

related to the Colombian outsourcing and offshoring industry by looking this issue from the

angles of institutional theory and agglomeration economics. We also compared Colombia with

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Latin American leaders in the outsourcing and offshoring industry. Our approach would be

helpful in identifying the country‘s competitive advantages in various types of outsourcing

services in the country (e.g., voice and non-voice).

The underlying problem facing Colombia centered around weak rule of law leading to

negative publicity about guerrilla, drug cartels and high crime rates, which slowed investments in

the country. A wave of change is coming on this front in recent years. The above discussion

indicates that profound institutional changes have been undergoing in Colombia, which are likely

to drive the growth of the outsourcing and offshoring industry.

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Table 1: Institutional and agglomeration economies related factors facilitating and

inhibiting the growth of the Colombian outsourcing and offshoring industry

Facilitators Inhibitor

Institutions Colombians have a neutral accent that allows them to assimilate other Spanish accents and they are very good English speakers

Top reformer country in the region

Free trade zones for BPO

BPO as a priority area: Government investments and tax incentives

Trade associations playing important roles

Adoption of International

Financial Reporting Standards

Negative publicity about guerrilla, drug cartels and high crime rates has slowed investments by corporations.

Agglomeration economies

Low cost

Externalities generated by well-

developed textile fabrics,

apparel and fashion industries

Colombian clusters are characterized by a low degree of firm-level specialization and poorly-developed enterprise networks. (Pietrobelli and Barrera, 2002)

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