U.S. companies hear the Caribbean calling

In a global search for low-cost customer service, AOL considered call centers in India and other popular locations -- then settled on the tiny island of St. Lucia.

In choosing the Caribbean island, AOL, a unit of Time Warner Inc., joined other U.S. companies that have made the region a new global hub for call centers.

Plunging communication costs, workers who relate easily to American customers and the region’s famed hospitality are attracting American corporations, boosting the workforce in the “nearshore” service industry in the Caribbean.

Jamaica is one of the leaders, with about 14,000 employees in the sector. In the Dominican Republic, 18,000 agents, many of them bilingual, are handling calls in English and Spanish. Customer service call centers have also opened in Barbados, Trinidad and Dominica.

“The islands all seem to be really positive, as opposed to the surly attitudes you have in some of the other places. It’s cheery weather, it’s cheery people,” Robert Goodwin, the AOL manager who chose the St. Lucia site, said from his company’s headquarters in Dulles, Va.

AOL still uses call centers in India, which has large numbers of workers with technical and advanced degrees, and elsewhere for technical support and other services.

But the Caribbean is becoming increasingly competitive in the call-center industry, with island governments offering tax breaks and other incentives to lure companies to their shores. Jamaica, for example, granted call centers “free zone” status that allows owners to repatriate 100% of their earnings tax-free.

The Caribbean has taken only a tiny share of the market from still-hot India and the Philippines, but the effect is huge on islands with tiny populations, said Philip Cohen, an industry consultant based in Sweden.

In Montego Bay, a resort area on Jamaica’s north coast that accounts for about half the island’s call-center jobs, developers have rapidly built thousands of concrete, single-family homes to accommodate the workers.

“You put a call center with 100 people in Barbados and that’s a God’s gift. With 100 people in India, you can’t even see it,” he said.

The industry owes much of its success to a telecommunications liberalization that began sweeping former British colonies in the Caribbean about six years ago. As suppliers have challenged the monopoly of Britain-based Cable & Wireless, lower prices have allowed the region to compete.

The collections and call-center firm KM2, which holds the AOL contract in St. Lucia, opened a site in Barbados and owner David Kreiss said he was looking to expand again as telecoms installed fiber optic cable.

“Whichever island they go to, we follow,” Kreiss said from his office in Atlanta.

The number of people working at Caribbean call centers has increased to 55,000 today from 11,300 in 2002, with an annual economic impact of $2.5 billion, according to Philip Peters, chief executive of Coral Gables, Fla.-based Zagada Markets.

Peters, whose company surveys the call-center industry around the world, said the Caribbean had set itself apart with high service, a quality he attributed to cultural similarities and the influence of the tourism industry.

“They have a history of troubleshooting with Americans without getting upset,” he said.

Large American companies including Verizon Communications Inc., AT&T; Inc., Delta Air Lines Inc., American International Group Inc. and Nortel Networks Corp. have used Caribbean call centers, while often keeping operations in Asia or elsewhere in case of a hurricane or other disaster, Peters said.

While much of the profits go to U.S.-owned operators, the islands welcome the business to diversify their economies and counter high unemployment.

In Jamaica, where the vast majority of 18 call centers are owned by people outside the island, the starting wage is $2.75 to $3.20 an hour, according to Christopher McNair of Jamaica’s investment promotion agency. “In Jamaica it’s quite an attractive salary,” he said. In Puerto Rico, a U.S. territory subject to the federal minimum wage of $5.85 an hour, about 4,000 people work in call centers.

One leading advocate is Dominican President Leonel Fernandez, who says call centers are key to transforming his nation from a low-end assembly center to a knowledge-based economy.

“I see the digital economy as the best opportunity we in the Dominican Republic have ever had of leapfrogging to a new level of economic development,” Fernandez told a business conference recently.

Many of the jobs involve simple, repetitive tasks, such as handling phone orders, but governments seek to gradually evolve to offer more demanding services.

One Jamaican firm, E-Services Group, began as a data entry operation but now also provides a range of support including help building websites and processing insurance claims.