The story of agriculture in Costa Rica is a familiar one, with coffee, rice, and bananas looming over everything else. The country has been unusually open to free trade in the last few decades, and while bananas are still its largest produce export, it has not only built up a more diverse export portfolio (including pineapple, mangos, papayas, and melons) but has focused its attentions on its largest trading partner, the United States.
Increasing exports
Costa Rica is a net exporter to the United States, shipping out $892 million in produce against agricultural imports of $482 million, and has been substantially increasing its export infrastructure. Many Costa Rican pack houses contract with small growers, and the government has invested heavily in technology to provide a sophisticated regulatory structure that ensures better prices for quality products complying with food safety standards.
The completion of a vast new port facility, the Moin Container Terminal at Puerto Limón on the country’s east- central coast, is expected to generate over $4 billion a year, create 10,000 new jobs, and quadruple the country’s shipping capability by opening it up to the Caribbean.
Maykool López is the director of Procomer, a major trade association in Costa Rica, and he is optimistic not only about the port and the country’s strong balance of open trade and environmental protection, but of its role in the global produce economy. “Costa Rica has a significant export sector, of which agricultural exports represent around 20 percent—we have significant advantages as an exporter of fresh produce,” he says.
Advantages
The advantages include favorable soil and climatic conditions all year long, excellent working conditions, and a strategic geographic location, which the addition of the Moin Container Terminal will only enhance, making it competitive with the Panama Canal.
“This is a country with a friendly atmosphere, excellent harvest and packaging techniques that apply good agricultural practices, and clean production methods,” López points out. Better yet, he contends, “Costa Rica is beginning to be recognized as a country that meets the standards of quality of the most demanding international clients.”
Other Promising Markets
Though it’s handy when putting together a theme, the economic development of South and Central America isn’t limited to countries that start with the letter C. Another surprising turnaround has taken place in Nicaragua, which is an emerging force in Central America and Costa Rica’s neighbor to the north.
Nicaragua
Nicaragua has had contentious struggles with the United States, many revolving around President Daniel Ortega. Decades later, Ortega is still president but Nicaragua is very different: democracy is in full sway, business is thriving, and its 6 million citizens are enjoying unprecedented growth.
Three emerging markets in Central and South America allow companies in the United States and Canada to source key commodities and exotic produce year-round. But each country—Chile, Colombia, and Costa Rica—presents unique challenges as well as opportunities for the perishables industry.
‘C’-zing Opportunity
While the United States is still a cornucopia of fresh produce to the rest of the world, it remains a net importer of fruits, particularly from Central and South America. This is hardly a new development; North America has long looked southward for fruits and vegetables. This dates as far back as our country’s founding, encompasses our century-plus partnership with Mexico, the activities of the United Fruit Company in the Caribbean and elsewhere, and the U.S.’s often-fraught relationship with Cuba.
But recent developments have made it even more important, more necessary, and more profitable to do business with these regions. The impetus includes new technologies and faster shipping for off-season fruit imports, favorable exchange rates, increased demand driven by changing demographics, and, of course, free trade agreements. The latter benefits both importer and exporter, meeting demand in North America and providing Central and South American countries access to the world’s most lucrative markets.
Thanks to these and other developments, our profiled three ‘Cs’—Chile, Colombia, and Costa Rica—have become particularly important to the produce trade in the Western Hemisphere.
Chile
With a population of just over 18 million spread out over a long, thin strip of 291,930 square miles of western South American coastline, Chile is one of the most stable governments in South America today.
After notorious difficulties during the rule of the dictator Augusto Pinochet, the country has settled into a modern and capable economic power, and in its last six elections has become a hallmark of democracy and good governance. A surge in the early 2010s made it one of Latin America’s fastest growing economies, but recent slowdowns in mining and reduced tax revenue have led to higher unemployment and slower GDP expansion—but both are expected to correct within the next few years.
An established partnership
Chile’s status as a trading partner with the United States is well established. Rich in all manner of fruits and vegetables, it has a particularly solid relationship with North America, and is a significant exporter to Canada and the United States.
Each year, Chile ships almost a million tons of fruit, much of it coming during the country’s winter growing season. The bounty includes grapes, which account for almost half of this total, with berries, cherries, and stone fruits (usually thought of as a summer product farther north) accounting for the rest. Despite its unpredictable climate and remote location, Chile has had a long history of productive agriculture, and has been sending its fruits and vegetables to Europe for more than two centuries.
One company that does extensive business with Chile is Driscoll Strawberry Associates, which maintains major berry growing operations from its headquarters in Chillán, about 250 miles south of the capital of Santiago. The majority of the company’s acreage is located within 100 miles of the office, allowing personnel to monitor production and maintain contact with growers. It’s also only 60 miles from the busy ports of Concepción.
Ups and downs
According to Brie Reiter Smith, general manager of Driscoll’s South America operations, in general Chile has good relationships with its trading partners, though there can be roadblocks along the way. One such speedbump began in the winter of 2013 when the United States imposed fumigation requirements in some growing areas after the discovery of the European grapevine moth. Throughout the infestation, the U.S. Animal and Plant Health Inspection Service has worked with Chile’s Agricultural and Livestock Service to clear and release the affected areas.
Otherwise, says Smith, the partnership with Chile is ideal. The growing regions have good soil, for example, as well as clean water, and a perfect climate, all of which aid the production of high-quality fruits. Then there’s plentiful labor, modern food safety protocols, and the exchange rate.
“The exchange rate is favorable, and producers have traditionally had financial results that allow for reinvestment,” Smith notes. “Because (Chile) is so far away from other markets, there is a very impressive network of state-of-the-art pack houses and coolers. And because of the country’s history, there is a heightened awareness of compliance with international worker welfare standards and food safety.”
Colombia
Located on the northwest coast of South America, Colombia’s 440,831 square miles are home to almost 50 million people. It’s an ecological treasure trove including grasslands, rainforest, coastal areas, and mountains that give it the most biodiverse terrain in South America.
The country’s economy has been booming lately, buoyed by the Trade Promotion Agreement with the United States that began in 2012, along with rising commodity prices and productivity rates and a tolerable inflation level. The big question mark for Colombia, however, is whether peace between the government and powerful rebels will endure after decades of well publicized and prolonged internal conflict. A peace accord, the result of several years of negotiation, failed at the polls in October, but a revised version was ratified by legislators in late November.
Promoting trade
Despite political unrest, Colombia’s trade with the United States has enjoyed primacy for sheer numbers with the two swapping agricultural imports and exports in great quantities: Colombia sends $1.8 billion in products north each year, and the U.S.A. sends $2.4 billion back. The United States is Colombia’s largest trading partner, while Colombia ranks ninth on the U.S.’s list of exporters.
Luis Germán Restrepo of ProColombia, the Colombian trade association, cites the Trade Promotion Agreement as a major factor in why these numbers are likely to increase in the coming years. “The agreement eliminated over 80 percent of tariffs right away, with the remainder phased out gradually over the next decade.”
Further, he explains, the agreement “has removed artificial barriers to imports and exports, expanded trade significantly between our countries, and promoted economic growth at a time when it is badly needed,” Restrepo adds. “It’s especially important for the agricultural market, as more than half of current exports became duty free immediately, including almost all fruit and vegetable products.”
Andres Galvis, president of Garden Herbs, knows these products well. His is one of the largest growers and packers of fresh-cut flowers, herbs, and produce for export in Colombia, and he has seen immediate results from the trade agreement. “The agreement had an almost instant effect on our ability to export products to the United States. We’ve seen the value of fruit exports in Colombia more than triple from 2012 to 2016,” he says.
Climate and commodities
Colombia’s climate is ideal for fruit production, especially during the North American off-season, for which demand is constantly increasing in the United States. And while the backbone of the export trade has always been bananas and plantains, other fruits are gaining ground each year, especially avocados, Persian limes, and passion fruit. “There are few countries on Earth that have the range and quality of fruits and vegetables that Colombia can offer,” shares Galvis.
Costa Rica
Tucked away in the middle of Central America, Costa Rica is a small country, taking up only 19,653 square miles and acting as home to just over 4.5 million people. Despite its size, though, it is growing into one of Central America’s most dynamic economies.
Economic growth
One of the few success stories in a region with a history of turmoil, Costa Rica’s economy has grown steadily since the 1980s—due in large part to the country’s tendency to welcome outside investment, lean towards trade liberalization, and promote highly progressive environmental laws. The latter have protected Costa Rica’s agricultural production while allowing for expansion and diversification into other areas such as tourism, services, finance, and pharmaceuticals.
Considered one of the greenest countries on the planet, it has pioneered ecological protection and development to promote biodiversity and conservation, and is the only country in the world to reverse the deforestation that plagues so many tropical nations. Costa Rica also managed to ride out the global recession of 2008 with relative comfort, and if it continues on its current path, is likely to become a powerhouse within the region.
The story of agriculture in Costa Rica is a familiar one, with coffee, rice, and bananas looming over everything else. The country has been unusually open to free trade in the last few decades, and while bananas are still its largest produce export, it has not only built up a more diverse export portfolio (including pineapple, mangos, papayas, and melons) but has focused its attentions on its largest trading partner, the United States.
Increasing exports
Costa Rica is a net exporter to the United States, shipping out $892 million in produce against agricultural imports of $482 million, and has been substantially increasing its export infrastructure. Many Costa Rican pack houses contract with small growers, and the government has invested heavily in technology to provide a sophisticated regulatory structure that ensures better prices for quality products complying with food safety standards.
The completion of a vast new port facility, the Moin Container Terminal at Puerto Limón on the country’s east- central coast, is expected to generate over $4 billion a year, create 10,000 new jobs, and quadruple the country’s shipping capability by opening it up to the Caribbean.
Maykool López is the director of Procomer, a major trade association in Costa Rica, and he is optimistic not only about the port and the country’s strong balance of open trade and environmental protection, but of its role in the global produce economy. “Costa Rica has a significant export sector, of which agricultural exports represent around 20 percent—we have significant advantages as an exporter of fresh produce,” he says.
Advantages
The advantages include favorable soil and climatic conditions all year long, excellent working conditions, and a strategic geographic location, which the addition of the Moin Container Terminal will only enhance, making it competitive with the Panama Canal.
“This is a country with a friendly atmosphere, excellent harvest and packaging techniques that apply good agricultural practices, and clean production methods,” López points out. Better yet, he contends, “Costa Rica is beginning to be recognized as a country that meets the standards of quality of the most demanding international clients.”
Other Promising Markets
Though it’s handy when putting together a theme, the economic development of South and Central America isn’t limited to countries that start with the letter C. Another surprising turnaround has taken place in Nicaragua, which is an emerging force in Central America and Costa Rica’s neighbor to the north.
Nicaragua
Nicaragua has had contentious struggles with the United States, many revolving around President Daniel Ortega. Decades later, Ortega is still president but Nicaragua is very different: democracy is in full sway, business is thriving, and its 6 million citizens are enjoying unprecedented growth.
Nicaragua’s economic success has been a surprise to many. Despite high poverty rates, global recession, and political turmoil, the country has maintained fiscal discipline, propelling steady growth since 2008 with minimal inflation or rising prices, and has gradually expanded exports—including over $550 million in agriculture and produce—and invited foreign investment.
While it has not embraced free trade agreements as much as some countries, controls have steadily loosened, and imports from Nicaragua to the United States are up 170 percent since 2005. The government has focused on long-long-term development plans, such as poverty reduction, agricultural sustainability, and balancing rural aid with an increasingly urbanized and educated population—all qualities that make its export trade more attractive.
As with most Central American countries, bananas and plantains are the kings of Nicaragua’s produce trade. Like other exporters, the country’s suppliers have diversified and found new markets for high-demand fruits (avocado, melons, citrus, and pineapple), tropical favorites (passion fruit, guava, mango, and papaya), and emerging Latin exotics (guanabana, mamey, and pitaya).
Mario Arana, general manager of APEN (Association of Producers and Exporters of Non-Traditional Products), notes that Nicaraguan produce exports to the United States climbed 11.2 percent since 2014, positioning it for the first time above Costa Rica, El Salvador, and Venezuela. And in the last decade, the country has enjoyed sustained economic stability, high safety standards, and competitive land and labor costs.
Arana admits, though, that there’s still work to be done: “We face the challenge of having to improve our productivity and technological capabilities. More agro-industrialization for our products is required,” he says. The country has, however, taken full advantage of the Central American Free Trade Agreement. “Standard trade practices and clear rules of the game are well-established here.”
Ronnie Cohen, vice president of sales at New Jersey-based Vision Import Group, has been doing business with Nicaragua since 1992, and provides his own perspective. While logistics, cultural differences, currency changes, and financial risks are universal in dealing with any foreign country, Central and South America offer the advantage of easy access to counter-seasonal produce as well as fruits and vegetables unique to the region.
“Each country has its own requirements and protocols that are often commodity-specific, and there are legal challenges to doing business,” Cohen admits. “We find the most important thing is to establish a relationship by visiting vendors to meet their teams and families, so we can understand their needs. We also encourage them to meet with our sales teams, so both sides know what we’re up against. The bottom line,” he stresses, “is it’s all about the relationships you establish.”
New Trade: Due Diligence
When doing business with a foreign country, buyers are faced with new cultural and economic realities. Even in the era of free trade, every country has its own customs and laws, and there can be additional roadblocks from language barriers and funding issues to disputes and disagreements.
Matias Araya, a founding partner of the law firm of Araya & Cia in Santiago, Chile specializes in agribusiness dispute resolution and says there can be difficulties in establishing new trade, but ample opportunity to build mutually profitable relationships. Though most North American companies might consider language the top impediment, Araya disagrees. “Any Chilean company that wants to sell produce in the United States, or anywhere in the world for that matter, knows it will need to carry on all negotiations in English.”
Grower-shippers that would like to export product to the United States or Canada, but do not speak English, often sell only to local markets “because they lack the distribution channels that can be developed through networking with native English speakers.”
Araya does caution importers about the “informality” of the Chilean market, warning U.S. or Canadian businesses to only give preseason advances secured with collateral, due to the high-risk nature of dealing in perishables. And when it comes to disputes, the most common mirror those north of the border—arising over price, generally associated with consignment sales. Araya says Chilean exporters often question sale prices below prevailing market rates, while U.S. sellers cite quality issues and the need for a fast sale.
Concluding Thoughts
The Latin world is one of the most dynamic emerging markets in the world, and its proximity to the markets of the United States and Canada make it highly attractive. While the region’s economic history has been unpredictable, recent developments, ongoing stability, and the unprecedented access offered by free trade agreements have increased the viability of Chile, Colombia, and Costa Rica, as well as beyond our selected three Cs to Nicaragua and a number of countries waiting in the wings (such as El Salvador, Panama, and Bolivia).
López of Procomer describes Costa Rica’s exports as “exotic by nature” and the perfect complement for North American markets. “There’s a lot more to us than bananas and pineapples.”
Images: Jiang Hongyan, Paulo Vilela & naluwan/Shutterstock.com
