Why Nearshoring Is a Competitive Advantage for Businesses

5 minute read

written by Cápita Works

Jun 27, 2022

Latin America is a crucial player in the global economy. With its increasing population and expanding middle class, the region is projected to become one of the world's largest economies by 2050.

In addition to its fast-growing market size, Latin America has a large pool of highly skilled workers with advanced digital skills. As a result, it is a popular destination for companies with operations in Western Europe, North America, or the Asia Pacific looking to expand their business into the region at lower cost and risk.

Many manufacturing businesses may think of nearshoring as an option for reducing costs and growing capacity at lower-cost locations. Nonetheless, nearshoring is not limited to manufacturing and aiding the supply chain. Because of remote work, you can now nearshore remote employees as well!

Trying to keep up with client pricing demands can be challenging as customers want competitive prices while the government exerts pressure to raise the minimum wage. This is where Nearshoring comes into play as a way of saving on talent that can lower costs without disrupting business operations and meeting the needs of both parties.

What is Nearshoring?

Nearshoring is the transfer of business activities to a lower-cost country to maintain operations in their original homeland. For example, a US-headquartered company may decide to reduce costs by insourcing one of our virtual assistants to aid in social media management. Now they have a full-time employee performing social media management functions remotely while saving up on salaries.   

When a company decides to nearshore activities, it is motivated by cost reduction, which can also increase profitability. Profitability will increase by reducing payroll costs, renting office space, and associated costs.  

Why Nearshoring in Latin America is a Competitive Advantage for Businesses

Nearshoring in Latin America gives companies a cost advantage over competitors in the US, Europe, and other high-cost locations. By allowing businesses to hire qualified professionals in a nearby country without the high expenses associated with hiring in the United States. With Cápita Works, you can access a world of resources at a fraction of the cost by delegating to VAs and saving up to 70% on salaries.  

Other traditional practices like offshoring or outsourcing operations to countries like India or the Philippines can come with many disadvantages. For starters, working with a significant time difference can make communication difficult and result in a lack of attention. There are also language barriers and cultural differences that can lead to an inefficient workflow.

Key benefits of Nearshoring in Latin America 

  • Reduced Costs - The cost advantage of nearshoring in Latin America is the lower cost of doing business in the region. Compared to US salaries, you can save up to 70% when hiring with Cápita Works.   

Finally, taxes in many nations are also lower than those in high-cost locations, adding to the cost advantage of nearshoring.

  • Low-risk Investment - Another key benefit of nearshoring is that it offers low-risk investment for companies. Hiring through an employer of record reduces the legal liabilities associated with direct hiring.   

Because the investment is lower risk and lower cost, it makes more sense for companies to implement nearshoring as part of their growth strategy.

Which industries can benefit most from Nearshoring?

 The advantages of nearshoring in Latin America are primarily due to the lower costs of business in the region. This makes sense for industries like construction and manufacturing, which are highly capital intensive. Manufacturing and food products also have high spending on natural resources.  

Indeed, many industries can benefit from nearshoring, from law firms to marketing agencies and even the real estate industry. You can check out our guide to which positions a VA can cover in each sector. 

Challenges of Nearshoring in Latin America

Now you may consider particular challenges to hiring an employee in a nearby country. But we've procured to make this process for you as easy as it can be.  

We take care of the recruitment process to ensure a talented professional that best fits your company. Our virtual assistants are fully bilingual, avoiding language barriers. Because they are nearshore, they also work in your same time zone, ensuring clear communication, and if you wish, they can even visit your headquarters in the USA. Legal liabilities are also reduced, as VAs receive all benefits required by law and additional benefits as well as VA training.

Bottom Line   

In an ever-competitive world, lowering costs and meeting client-pricing demands can be challenging. In these cases, it is essential to think outside the box for solutions that you maybe hadn't thought of before, like nearshoring!

Even though nearshoring was mostly used for manufacturing operations, remote work has opened the doors to global talent. As current trends have shown, remote work is here to stay. So why not insource nearshore employees and benefit from the competitive advantage this offers?

If you wish to know more about our service, you can check out our offer or contact us.  


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