Exploring the Possibilities for Agribusiness in Central America, Mexico
2 August 2022 Central America is a diverse agricultural area, with its countries making up the SICA Block (The System for Central American Integration), with the addition of the Dominican Republic. Bordering Mexico in the north and Columbia to the south, Central America consists of seven countries: Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama.
With two planting seasons: Primera (Apr.—Sept.) and Postrera (Aug.—Dec.), tropical climates dominate the region with high humidity and temperatures with growers focusing on high-value crops. Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua export four staple products: bananas, coffee, cotton, and sugar. Other leading crops include corn, sorghum, rice, peanuts, and palm oil.
Central American countries have an average primary gross domestic product (GDP) of 7% for agriculture. From the region’s total GDP percentage, Nicaragua (32%) and Guatemala (24%) are the most dependent on agriculture. El Salvador, Costa Rica, and Honduras together total 10% of Central America’s total GDP.
The agricultural sector generates 20% of the jobs in the SICA Block. This has been exponentially stimulated by agri-food exports, which exceeded 50% of total international commerce, with an accumulated value of $11 million for SICA. Guatemala is the region’s leading exporter with 28%, Costa Rica represents 24%, and Honduras 16%. These three countries account for 69% of the agricultural exports of the SICA block, according to the 2022 SICA report.
In the last two decades, Guatemala increased its production cultivating 394,000 hectares.
In 2020, Guatemala was the main importer of insecticides, herbicides, and fungicides at $197 million, but decreased imports by 11.53% in 2021.
CentralAmericaData reported most Central American countries increased imports of insecticides, herbicides, and fungicides from 2020-2021, with Nicaragua (12.49%), El Salvador (25.42%), Panama (6.20%), Costa Rica (1.69%), and Honduras (5.11%), with paraquat, glyphosate, atrazine, and 2,4-D as the most imported active ingredients for the region.
For fertilizer, Central America imports around 1.4 million mt with the top three highest importers being Guatemala, Honduras, and Costa Rica. During the fourth quarter of 2021, Central American countries spent $520 million on fertilizers with 28.94% from China, 23.71% from Russia, 8.14% from Canada, and 6.54% from the United States.
The major crop protection companies in Central America include Agrosolutions Group International (Panama), Bayer CropScience (El Salvador), FMC (Costa Rica), Syngenta (Guatemala, Panama), and BASF (Costa Rica, El Salvador, Guatemala, Nicaragua).
Challenges in the Region
The Northern Triangle countries (El Salvador, Guatemala, and Honduras) and Nicaragua are seeing some of the highest murder rates in the world outside of war zones. Growers have felt the effects of organized crime, and there has been a steady migration of citizens leaving the countries due to violence. The Central American Regional Security Initiative (CARSI) is creating reformation through training prosecutors and police as well as anti-gang and anti-narcotics efforts.
Another challenge in the region are extreme weather conditions. In 2020, Hurricane Eta and Hurricane Iota, caused infrastructure damage, destroying crops in Central America, specifically for Honduras and Nicaragua, with both countries rebounding in 2021.
The region also faces soil degradation and loss of organic matter. Biological applications to fertilize, stimulate and protect are being used in some areas of the SICA block.
Mexico Update
With Mexico being the fifth largest country in the Americas. The total sum of land from the countries that make up the SICA Block equals a little less than half the Mexican territory.
Mexican agriculture uses agroclimatic variety (microclimates), to cultivate 21.2 million hectares for agriculture, which makes Mexico the 11th largest agricultural producer in the world. There are 371 crops with export value that Mexico can or is offering internationally.
Mexican agricultural exports broke a record in 2021, worth $44 million and an increase of 12.44% compared to 2020, which meant $39 million dollars. The agri-food trade balance is positive, reporting a surplus of $7 million dollars.
Mexico and the SICA countries embrace technology from the Dutch, French, Spanish, Israelis, North Americans, and Canadians, as well as Mexican and Central American companies that provide formulations in a “tropicalized” matter with agronomic specifications for many specific microclimates in the regions.
Protected Agriculture
In Mexico, protected agriculture exceeded 70,000 hectares at the end of 2021. Production of berries took up 51% of the extension in five regions of the country with the use of passive technologies such as the micro-tunnel. Five percent of the extension is dedicated to flowers, ornamental plants, or plants of pharmaceutical value, with the remaining 44% for produce vegetables.
Protected horticulture is found throughout the country, but the central western region serves as the leading extension and growth corridor for international exports, encompassing Jalisco, Michoacán, Guanajuato, Querétaro, Aguascalientes, and Zacatecas. The Pacific corridor, where Sinaloa, Sonora, and Nayarit participate, has a strong presence in the winter-spring markets, but with the disadvantage of having 6- to 8-month cycles depending on the crop.
The outstanding regions for berry production are the south of Jalisco, Michoacán, Guanajuato, Baja California, and the north of Sinaloa. Their exports will exceed $3 billion by the end of 2022, and with the opening of new regions, the commercial window will expand to nine months.
Another high-value crop is the avocado, with a production of 2.45 million tons and a sustained annual growth of 2.5% per year on average.
It also projected to exceed $3 billion in foreign sales.
According to the Association of Greenhouse Builders of Mexico, Mexico is a decade ahead in innovation and technology, over SICA, but the gap is closing quickly, where vegetables gain more ground in hydroponics technologies, and the dynamic and automated components, are increasingly present, allowing for highly productive and efficient operations.
Challenges in Mexico
Soil degradation and the loss of organic matter have reached alarming levels in Mexico in the past 10 years. There are also favorable conditions for pests and diseases to proliferate, which makes crop protection the greatest agronomic challenge.
Mexico has now fewer chemical groups, due to resistance issues. It is also deficient in the regulatory practice. Unlike Brazil, where there are efforts to release and authorize patents that can contribute to the global emergency, in Mexico, delays are caused by bureaucracy.
Several companies specializing in biosolutions confirm that obtaining a registration can be delayed between 16 to 24 months, and with studies of effectiveness, analysis, and official registration (COFEPRIS), the costs averages around $20,000 per product.
Even with these delays, Mexico is demanding biosolutions as a necessity and effectiveness has been validated. There are 20 formal players, with gross annual sales, which are between $1.5 to $11 million, who together have achieved sales in 2021 of $140 million.
Imports, Logistics and Workforce
In 2021, Mexico imported 62% of its fertilizers, of which 27% were Russian, and with the first month of war, the price of fertilizers increased by 37%.
The increase in the cost of sea freight, adding to the large demand for inputs from international markets, especially those of Chinese origin, has caused an exponential rise in the four generic herbicides that are mostly imported by SICA and Mexico (glyphosate, 2,4-D, paraquat, and glufosinate ammonium), noting an increase ranging from 12% to 60%.
Inflation raised supplies up to 300%.
Inland logistics are now a complex challenge, not only because of increased expense, with an annual increase of 16% post-COVID, but vehicles are also limited and cause significant delays in the perishable’s distribution chain.
Maintaining a workforce has become a main regional challenge as well. Mexico achieved important goals in terms of social justice, regularizing the workforce of agricultural workers in accordance with the country’s labor laws, and increasing salaries that in some cases exceed 40% compared to the end of the last decade. Even with these changes, many people are no longer enthusiastic about working in the field. There are berry producers who cannot harvest up to 25% of the production, due to inconsistency in the workforce.
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