Central America: Cultivation Central
7 July 2010 Central America is a growing market in Latin America, from the increasing production of fruits and vegetables in Mexico to premium coffee exports from Guatemala. In May, the Association Agreement between the EU and Central America (EU-CAAA) was finalized, allocating ag import quotas from Central America to the EU and taking another step toward a united Central American business region.
Free Trade
While it will take two to five years for EU-CAAA to fully take effect, Central American nations are not lacking for free trade agreements (FTAs). Mexico is part of NAFTA (North American Free Trade Agreement) with the US and Canada, and is an important trading partner to both. Of US vegetable imports, 60% come from Mexico, with a total fruit and vegetable value of more than $4.7 billion in 2009. Guatemala exported $120 million in vegetables to the US in 2009, followed by Costa Rica at $82 million and Honduras at $50 million.
Along with the US, nations that are part of the Central American Free Trade Agreement (CAFTA) are: Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua. Negotiations are still taking place with Panama and the Andean countries of South America. CAFTA offers protection of private property rights and investments in the region, as well as provides market-based competition and greater regional economic cooperation.
Belize: Although Belize has traditionally grown citrus, sugarcane and bananas, the country’s agricultural sector received a boost earlier this year when Taiwan announced its plans to make Belize into a rice production hub in Central America. Taiwan is even considering opening a large vocational training center there, expressing its confidence that the country can become a rice cultivation center in the region.
Most of Belize’s agricultural production is exported; only approximately 36% is consumed locally. Following the three main crops, corn, papayas, rice and beans are also grown. Belize’s ag sector has shown steady growth, and is shared by modern commercial, export-oriented farms and low-technology subsistence farms. The country encourages adoption of modern farming practices to help tighten the yield gap with the best performing nations, and is instituting the Agricultural Services Program to increase investment in agricultural research, innovation, extension and market development.
Costa Rica: The Costa Rican economy remained relatively stable in 2009, contracting only 1.6%. Around 505,000 hectares (ha) are arable or permanent cropland. Its primary agricultural export is bananas; a 2010 report from the National Banana Corp. forecasts a harvest of 1.93 billion tons on 43,784 ha, an increase of 380,000 tons over 2009. Recently, pineapples surpassed coffee as the No. 2 export, with sugarcane also a top crop. Growers also produce melons, corn, rice, beans and potatoes. Costa Rica is a producer of genetically modified (GM) cotton and soybeans, planting on fewer than 50,000 ha of each in 2009.
Costa Rica enjoys one of the highest levels of foreign direct investment per capita in Latin America, although it is highly bureaucratic and there’s some difficulty enforcing contracts. The country has a mostly open market, with tariffs ranging up to 15%.
Dominican Republic: Sugar, coffee and tobacco have long been the mainstay of agriculture production on this small nation that shares the island of Hispaniola with Haiti. The land is subject to severe storms from June to October, with occasional flooding. In the past, coffee crops have suffered major damage from hurricanes.
The State Sugar Council (CEA) accounts for more than half of sugar production in the country, with the rest of the mills and plantations privately owned. The nation seems to have found its niche with organic products, with exports of $36.4 million during the first four months of 2010 — $19.9 million more than the same period in 2009. Organic bananas, cacao, avocado, leaf tobacco, peppers, coffee, pineapple, tomatoes and cucumber are its most demanded products.
El Salvador: Major crops in El Salvador are coffee, sugar, corn and sorghum. The country has been somewhat lacking in its ag investments — a World Bank study showed that over the past two years, El Salvador has invested less than 1% of its GDP in agriculture. Officials have recently taken steps to remedy that situation; in February of this year, Brazil’s agriculture secretary met with trade officials to discuss a cooperation agreement to increase the scientific and technical development of small El Salvadoran producers to improve yield and production and create more commercial opportunities for the country’s agriculture industry.
In March, El Salvador’s minister of agriculture visited Texas A&M University in the US to look at a collaboration to improve his country’s agricultural sector, including research, technology, training and educational outreach programs. Funds from a US Department of Agriculture Food for Progress grant could go to the development of a Cattle Science and Technology Center, as well as sorghum production and improving agribusiness competitiveness.
Guatemala: Guatemala is Central America’s leading coffee producer, with its high-quality product usually sold worldwide at premium prices. Harvests have taken a hit this year, however, with 2009/10 production coming in at 3.38 million 60-kg bags, down from last season’s 3.79 million bags. Production forecasts for 2010/11 have been revised to 3.68 million bags, down from a previous estimate of 3.76 million bags, partly due to weather and a natural disaster. In June, the double strike from tropical storm Agatha and volcanic ash from the erupting Pacaya Volcano caused a loss of production nationwide, with production damage of 4% in the coffee sector. There’s still hope, however, according to Anacafe, the country’s coffee growers association; reduced fertilizer prices could increase production by 6% next year if applications are adequate.
The Chamber of Agriculture estimated crop damage from the volcanic ash at 5% to 10% across the country. Mangoes are expected to suffer a $25,000 loss, and the country’s ornamental and greenhouse production was affected as well.
Coffee, sugar and bananas are the primary crops in this nation.
Honduras: Bilateral agriculture trade between Honduras and the US reached almost $800 million in 2008, with Honduras’ main exports being bananas and coffee. The country’s ag sector will get a boost this year as the Inter-American Development Bank in Washington, DC, US, will loan $27 million to a program to promote agriculture projects in Olancho, El Paraíso, Colón and Gracias a Dios to provide technical support, training and financial resources.
Honduras is a biotech nation, growing less than 50,000 ha of GM corn in 2009. All seeds, pesticides, agricultural chemicals and veterinary products imported into Honduras must be done by an importer registered by the National Plant and Animal Health Service (SENASA).
Mexico: Mexico has the second largest economy in Latin America with an estimated 2009 GDP of $897 billion, second only to Brazil. Agricultural production in Mexico is subsidized through the PROCAMPO (Program of Direct Support to the Countryside), which supports the eligible crops of corn, beans, wheat, rice, sorghum, soybeans, cotton, safflower and barley. Only 11% of the land is arable, and agriculture is still based on small-scale production, with more than half of Mexican growers being subsistence farmers. More than 60% produce corn or beans on 5 hectares or less. Inadequate supplies of credit and poor infrastructure also limit ag production. The country is gradually coming back from the 2009 economic crisis, with agriculture the major growth sector, accounting for 4.3% of GDP in 2009 with 15% of total employment. The 2010 ag budget of $4.7 million from the Secretary of Agriculture, Livestock, Rural Development, Fishing and Food (SAGARPA) was increased by Congress to $5.7 million.
Main revenue-producing crops are corn, tomatoes, sugarcane, dry beans and avocados. Mexico grew 100,000 ha of biotech cotton and soybeans in 2009.
Nicaragua: Nicaragua is expected to benefit from EU-CAAA; conditions include zero tariffs for all the country’s agricultural goods, and the permanency of previous advantages Nicaragua enjoyed under the Generalized Preferences System (SGP Plus). The country currently shares a FTA with Panama, which is not a CAFTA member. Under the agreement, 90% of products can be exchanged with zero tariff between the two countries.
Coffee, sugar and bananas are the primary agricultural crops.
Panama: The Republic of Panama took several large steps last year to augment its agriculture sector. Loans of $30 million were given to promote Panamanian agriculture, and in May 2009, the country signed a FTA with Canada. Panama could see a FTA with the US finally come to pass as talks resumed in May this year.
Bananas, corn, sugarcane, rice, coffee and vegetables are the primary crops in this nation where agriculture makes up 6.2% of GDP. More than 3,000 ha will be reactivated for bananas this year, adding 20 million boxes to the current 12 million boxes it exports to Europe and the US each year.
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