Nearshoring: From a Smart Option to a Necessity

After the worldwide pandemic, proximity became one of the most profitable advantages as a production model. With vast experience working with big brands such as Navent, Jeep, Holcim, American Express, Coca Cola, Unilever, Santander Rio, Fabiana Casal, CFO of Togetherwith shares some tips to boost profits with this practice. 

The disruption of global business brought about by the pandemic forced many multinational corporations to rethink (or in some cases to accelerate the rethinking) of their production models due to cost increase, especially those who had business operations in Asia. Faced with the need to change the way of production, or at least to diversify it, the options of reshoring and nearshoring emerged. 

The former, reshoring, in most cases means to give up several economic advantages. However, the latter, nearshoring or near relocation, offers a wide variety of economic advantages that, beyond the pandemic, prevail in a world where proximity became a profitable option as business model of production:

• Shorter time zone difference than the traditional offshoring
• Fewer cultural and linguistic differences
• Reduction of transport costs and travel expenses 
• Shorter time travel to meet with business partners, foreign branches, clients, etc
• More profitability 
• Working in the same time zone makes coordination and collaboration easier and more efficient 
• More shared cultural to enhance business agreements

In the case of the United States, the advantages of nearshoring with Latin America are very clear:

• Physical proximity enables clients to travel to have face to face meetings
• It shares similar time zones with Latin America
• There are more cultural and language similarities 
• Besides, the region has matured and qualified talent that can offer a good service at a low cost (due to currency exchange and cheaper cost of life mainly)
• Costs savings of about 60%

This model represents a great opportunity for Latin America. Even more, for the industry of economic knowledge, an activity that is at the third position of the export ranking in Argentina and that during 2020 it represented 5,850 million of dollars, generating about 420,000 posts, according to the data of Luis Galeazzi, CEO of Argencon.

The countries of the region, as they are emerging economies with geographic proximity to consolidated markets, are in a good position to profit from the advantages of nearshoring.

Throughout my career and my work with brands that require rigorous internal audits in order to make this practice a reality (such as American Express, Unilevel, Santander Rio, among others), I have had first-hand experience that allows me to see how effective nearshore solutions can be for these companies. A small change can make a great difference in margin in a short period of time: at least, there is a 35% cost reduction of staff, which is reflected directly in the OP.

But, historically, there has been resistance to work with teams remotely. Before the pandemic, among the challenges of the solutions based in nearshoring included working in different geographical places remotely with different teams, technology and workplace behaviour.

These barriers have disappeared mainly with the pandemic. Today, Zoom, Teams or Google are omnipresent. Their presence has extended to homes and most people are familiarised with them.

Nearshoring can allow companies to boost profits. It is time for CFOs to take advantage of this situation and to foster the margin to short and long term.

Tips to take into account:

• Qualified talent
• Competitive currency exchange
• Commercial agreements that benefit taxes
• An attractive place to travel

With credentials that place it among the most creative markets, Argentina is a great cover letter if we talk about creativity. Its talent is well-known and sought after at a global level. Besides, Buenos Aires is considered one of the most attractive places thanks to its cultural richness and cosmopolitan people making it an ideal place to work, visit and live; besides, having a great development in the creative industry, with global talent in advertising, software development, digital marketing, to name a few. In addition, Argentina offers convenient costs, creating a cost quality relation which you cannot get in other countries. 

Having a full time team in Argentina represents one third of what it may cost in other markets such as the United States for cost of living and currency exchange. Besides our idiosyncrasy, working for a company abroad represents an extra motivation for teams.

In this sense, considering Argentina as an option for nearshore is a guarantee of global quality and competitive prices, with a cultural understanding and minimum time zone difference. On the other hand, companies save costs of overhead, which represent 60% of the direct cost of having an in-house team, as well as the risk of having salaries claims. 

In our specific case, in Togetherwith, we have not only a strong and prepared structure due to the experience of professionals that alongside their career have put into practice this way of working with first level brands, but we can also offer a mix of creativity and ideas with technology and software development solutions; while our presence in strategic markets like Buenos Aires, Mexico and the United States, allows us to invoice from three different places, which optimises the tax costs and adds as added value to the understanding of different cultures.