Latin America: Climate Change
20 July 2011 Regulatory measures, trade agreements and weather concerns are at the top of the list for Latin America’s agrochemical and agriculture industries in 2011/12.
While the objectives of some of the policies and agreements are to help or protect their country or region of origin, they fail to foster the development of larger commercial markets, says Fernando Vera, president of ALINA.
A decline in sales volume, currency concerns and unfavorable weather are having strong effects on international prices. However, despite current trends, the agrochemical industry could finish with sales numbers very close to those seen in 2010, Vera says.
■ Central America
Central America has experienced a mountain of regulatory changes in recent years. The most recent regulatory changes are intended to allow more widespread use of generic agrochemicals.
The government of Honduras recently authorized the registration of generic agrochemicals, which have been restricted since 2006. The ultimate goal of this change was to break monopolies that affected farmers’ production costs, Vera says.
“Within the problems of agricultural activities in Central America, we can generally find which have to do with the agricultural policy,” he says. “Low subsidies in production, market access restrictions, as well as customs barriers tend to distort the market and have strong effects on international prices.”
While Guatemala has taken the lead in the export of fruits and vegetables to North America and the European Union, it has experienced a significant increase in exports. The country has made recent advancements in technology and agricultural practices. Agriculture continues to play a major role in the country’s economic growth, directly contributing 13.3% to its $38.9 billion GDP, according to the USDA Foreign Agricultural Service.
“This growth is important for the socioeconomic development of the region,” Vera says. “Jobs are generated, which consequently brings an increase in the economic standard of living for the people and helps transform it into being highly competitive.”
For countries such as Costa Rica, sustainability has become more prevalent. Organic farming and ecological agriculture are becoming more common with the country’s main export crops, which include bananas, coffee, pineapples, papayas and mangos.
“Combined with the growth of ecological products and the increase of commerce with direct field products, buyers can directly acquire from the producers with a reduced amount of intermediaries,” Vera says.
Central America has a diversity of climates, sufficient arable land, and a good supply of quality water, all of which contribute to it being a very competent zone for agricultural production. However, the increase in the atmospheric temperature and of the sea, the reduction of precipitation, an increase of the sea level, and intensification of extreme meteorological phenomena will have an impact on the region in the future, he says.
■ Mexico
In terms of foreign trade in the year 2010, Mexico’s food exports reached about $17 billion, a 12.8% increase over 2009. Imports also saw growth, increasing 13.4% from the previous year. This signals the beginning of an economic recovery for the United States, a main importer of Mexico’s agriculture products, Vera says.
“The preexisting conditions of 2011 make the prediction that the increase in food exports and imports will continue,” he adds.
“Although imports will grow at a faster pace, this – along with the relatively higher prices of the imported assets and the exchange rate behavior due to the strengthening of the peso – will result in a bigger commercial deficit of about 4 trillion pesos.”
Over the last few months, the expectation of growth for Mexico’s economy has improved. The current estimates point to a 4% to 5% increase in GDP.
Freezing temperatures at the beginning of the year damaged about 600,000 hectares of corn, 300,000 hectares of sorghum, 200,000 hectares of beans and 100,000 hectares of wheat, representing a total loss of about 6.5 million tonnes. Mexico’s government recently established a support program for farmers to recover up to 1.5 million tonnes of grain.
High price levels and the volatility occurred because the many factors that triggered the food crisis of 2007/08 are still present, Vera says.
• Tomato Production Costs Rise in Mexico
“Those would include the economic and population growth in emerging economies, the use of agricultural goods for the production of bio-fuels, the elevated price of petroleum, the depreciation of the dollar and the speculation in future markets, and the relatively low inventory levels of grains worldwide,” he says.
■ ANDEAN
The Peru Trade Promotion Agreement (PTPA), the free-trade agreement the country signed with the United States in 2006, continues to make an impact on the its agriculture and pesticide industries. The United States’ two-way trade with Peru was $8.8 billion in 2009, with US exports to Peru valued at $4.8 billion, the most recent figures available through the Office of the United States Trade Representative.
• Brazil’s Market Recovery
The Andean Trade Promotion and Drug Eradication Act, which gave the US tax incentives to import from Peru, Bolivia, Ecuador and Colombia, expired in February 2011. Now that ATPDEA has expired, a variety of food export crops from Colombia and Ecuador are being taxed.
“Some crops such as broccoli are being charged with 14% of CFR value,” says Fernando de la Puente, executive vice president, INTEROC S.A. “Others like ornamentals are being charged with 5%. This may affect exports and thus the agrochemicals markets in both countries.”
Bolivia’s food inflation hit 18.5% in March, according to FAO. Export restrictions placed on the country’s farmers have affected the oilseed market. Imports of sugar and corn increased 68% in 2011 to alleviate food shortages caused by both drought and severe flooding. The country’s government ended gasoline subsidies at the end of 2010, which further inhibited the country’s agricultural market, according to news reports.
The agrochemical industry has grown steadily in the past year, mainly in Ecuador and Peru, despite drought at the beginning of the year, according to de la Puente. Bananas, Ecuador’s leading export crop, are declining in price as demand decreases.
Despite the variety of factors affecting the ANDEAN, the agrochemical industry in the region is still estimated to increase at a rate of 5%, de la Puente says.
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