One of the testiest exchanges between U.S. presidential candidates Sen. John McCain (R-Ariz.) and Sen. Barack Obama (D-Ill.) during the debates preceding the election involved Colombia. McCain called a proposed trade agreement with the country a "no-brainer" and urged Obama to visit it, reported Reuters. "Maybe you ought to travel down there and visit them and maybe you could understand it a lot better," he said.

"Actually, I understand it pretty well," Obama responded, according to Reuters. "The history in Colombia right now is that labor leaders have been targeted for assassination on a fairly consistent basis and there have not been prosecutions."

President George W. Bush has supported expanded trade with Colombia and other Latin American countries during his two terms in office. He signed the Central American Free Trade Agreement – a trade pact including Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua – into law in 2005 and has been lobbying hard for passage of the proposed agreement with Colombia as he prepares to leave office.

Such agreements promote greater stability in the region and should further boost its profile as an outsourcing destination, said Peter Ryan, head of Datamonitor’s contact center outsourcing practice. Dynamic political leaders, including former Mexican President Vicente Fox and Colombian President Alvaro Uribe, have done "tremendous work" to create a business-friendly climate in Latin America, he said.

And their work appears to be paying off. HP employs some 5,000 workers at a support center in Costa Rica that serves such major clients as Procter & Gamble. Experian just announced plans to open its fourth Latin American office, also in Costa Rica. Genpact, which has operations in Mexico, earlier this year added a delivery center in Guatemala.

Expanding into Guatemala allows Genpact to "tap into a bigger global talent pool than we had previously," said Steve Rudderham, business leader for Genpact Latin America. The company is also considering a facility in Brazil, to serve that country’s large and insular local market as well as global clients seeking services in Portuguese. "It’s difficult to do that elsewhere in Central America or out of our Eastern European hub," said Rudderham.

Genpact was more concerned with hurricanes and other harsh weather conditions than with local politics when it moved into Guatemala. Thanks to its relatively high altitude, hurricanes rarely hit at full force.

"The city and the country have built the infrastructure to handle the rain," said Rudderham. "When you go into Latin America, you have to take into account not only the political environment but the natural environment and make sure you’ve got a strong business continuity plan. That’s perhaps why we haven’t seen more outsourcing in areas like Jamaica that take the full brunt of tropical storms."

Still, many people associate the region with drug cartels and kidnappings rather than burgeoning business activity, said Ryan. This is a shame, he said, as much of the region is investing heavily in infrastructure, education and other areas in an effort to attract more international companies.

Latin America does have a higher rate of violent crime than other regions of the world. According to a paper prepared for a July 2007 conference at Harvard University’s John F. Kennedy School of Government, deaths due to violence in the region are 200 percent higher than in North America, 450 percent higher than in Western Europe, and 30 percent higher than in Eastern Europe.

Some countries have managed to slash crime rates in recent years, however. Thanks largely to the efforts of President Uribe, the number of homicides in Colombia fell by 43 percent from 2002 to 2006. Bogota cut its homicide rate from 80 murders per 100,000 people in 1994 to 18 murders per 100,000 people in 2006.

Perceptions of the area continue to improve, thanks in no small part to a booming tourism trade with the U.S., said Chris Disher, a retired management consultant and co-founder of the International Association of Outsourcing Professionals. The entry of companies like HP, Experian and Genpact has also helped raise the region’s profile. Prompted by its membership, the IAOP launched a new Central American chapter in September.

Much of the early activity involves providing contact center services for America’s Hispanic market. "The U.S. Hispanic market is growing as a demographic, not just in volume but in purchasing power," said Ryan. Bilingual agents command a premium in the U.S., but they earn far less south of the border. While Mexico was the initial destination for such centers, companies are beginning to look elsewhere as both salaries and agent attrition rise in Mexico, said Ryan.

But interest in offering more sophisticated services, such as BPO, is increasing. That’s at least partly due to a shrinking pool of talent in India, Ryan said. Thanks to its growing middle class, demand for local products and services is growing. "So now the BPO sector, which once had the pick of the crop of fantastic university graduates, now has to compete with a whole bunch of other industries for employees."

Indian companies and multinationals like IBM have had to increase wages and benefits in India, making it a less cost-effective destination for outsourcing. Two Indian companies, Infosys and Wipro, last year opened software development centers in Monterrey, Mexico. Felipe Calderon, Mexico’s president, also paid a visit to India, hoping to convince more companies to establish operations in his country. During Calderon’s visit, government officials agreed to a goal of more than doubling trade between the two countries, to $5 billion by 2010, according to an Associated Press report.

Some countries are developing specialties, such as financial services in Uruguay and animation production in Guatemala, said Disher. "Engineering, architecture, legal services could all be done in the region," he said.

The BPO market in Guatemala is highly fragmented, with some 5,000 employees spread among roughly 50 providers, said Rudderham. Genpact hopes to create an early-mover advantage by partnering with universities to show students that "there is tremendous career growth" in BPO.

Outsourcing to Latin America rather than to more distant regions like Asia offers a number of key advantages for North American companies, said Disher. Among them: the ability to conduct business in the same or similar time zones, a close cultural affinity, ease of visiting facilities, and risk mitigation.

Addressing the latter point, Disher said, "You don’t have to put all of your eggs in one basket. Labor crosses boundaries easily, so you can set up shop and attract workers from multiple countries. It gives you added flexibility."

The region’s biggest challenge, said Ryan, is its relative scarcity of skilled labor. "Once you’ve drawn that labor pool down, it’s very difficult to find cost savings."

Companies representing 10 Latin American countries that attended the recent chapter launch agreed this was an issue, said Disher, along with a need to narrow the gap between a local university education and the skills required to work for a global company. "We’d like to see more certifications and things like that, which would make it easier and more attractive for companies to do business [in Latin America]," he said.