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Why Indian outsourcing firms’ visa troubles in the US may be good news for Mexico

October 29, 2013
October 29, 2013

Indian outsourcing giant Infosys said in its quarterly filing earlier this month that it had set aside $35 million for “visa related matters.” That’s a nice way of saying it’s expecting a whopper of a fine for misusing America’s visa system by bringing in full-time foreign workers on visas for businesspeople instead of the more cumbersome—and expensive—H1B visas for employees. The Department of Homeland Security will announce the fine tomorrow (Oct. 30), reports the Wall Street Journal (paywall), though an Infosys spokesperson told India’s Economic Times newspaper that no final resolution has been made.

Whatever the timing of the fine, one thing is clear: the debacle leaves everybody looking bad. American immigration laws, especially on employment, are needlessly restrictive. They may harm the American economy more than they help it. The US issued only 65,000 H1B visas this year, a quota that was filled within five days. Moreover, the visas costs over $7,000 including legal fees. By contrast, the business visas used by Infosys costs a mere $160. (Critics who argue that Indian firms should just employ more Americans forget that there is an acute shortage of IT workers in the US.) But by breaking the law, Infosys, which along with the rest of the Indian technology sector has been lobbying furiously for easier immigration rules, has lost the moral high ground.

In the absence of reform, however, America’s shortsightedness may be Mexico’s gain. Infosys opened its first Latin American office in Monterrey, Mexico, in 2007. Other Indian outsourcers quickly followed suit. Mexico may not be the most obvious choice, but it’s a sensible one. Firms such as Infosys still develop products in India, but their staff need to visit their clients for set-up, training and support. Keeping the client waiting while you fly someone over from India is probably not the best way of ensuring satisfied customers.

An office in Mexico isn’t the ideal solution, but the relatively short travel time, synchronous time zone and lower cost of living make it the next best choice. (The spicy food can’t hurt employee morale either.) The loss, then, is America’s: More H1B visas would mean more highly-skilled workers paying more federal and state taxes. Instead, it is Mexico that reaps the rewards.

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