4.2.1.- Costa Rica

Costa Rica is still by far the biggest agricultural producer of non-agricultural crops in Central America. Besides that, its image in the market is rather positive when it comes to quality and reliability compared to regional competitors. Nevertheless, Costa Rica will have to be careful not to end up in a decline of its agricultural sector. The Doing Business Indicator shows that the country is loosing competitiveness and now ranks as the lowest in Central America after Honduras.
The risk that the Dominican Republic-Central American Free-Trade Agreement (DR-CAFTA) is not ratified before the February 2008 deadline combined with the continued slow pace of economic reform and the persistence of bureaucracy can put pressure on future investments. Besides that, the shallowness of its financial system and the risks posed to macroeconomic stability by a large public deficit will continue to constrain its competitiveness in the future.
On the other hand, the actual size of the sector, the great number of supply companies (availability of products and competitive prices) and safety issues which are much more positive than in countries in the northern part of Central America, still create opportunities and a base for future development. Like one of the interviewed persons said: ‘Costa Rica has never faced internal problems, hunger or severe natural disasters. It is time that we learn how to be more pro-active and to defend ourselves in this globalizing world’.

Figure 4.3 Business Ideavelopment Chart Costa Rica.
*Tomato, cucumber, pepper and eggplant

4.2.1.1.- Pineapple

Pineapple is by far the most successful product of the Costa Rican fruit sector during the last 10 years. Costa Rica has become the world’s largest supplier of pineapple. The sector is still growing due to the very favourable climate combined with available knowledge and labour, as well as the presence of worldwide known companies such as Dole, Chiquita and Del Monte. However, conditions tend to decline due to primarily increasing labour costs and availability and cost of land.
Pineapple production can be found in two major zones. The first is the Caribbean Lowlands, stretching out from Siquirres towards Upala in the north of the country and the second zone is in the south Pacific, around Buenos Aires.
The sector consists of the three mentioned companies as well as various cooperatives and private growers. Costa Rica is known for its high quality product. Pineapple is a year-round crop and therefore less sensitive to issues like availability of containers, like mango, melon and watermelon are. Pineapple can be found in the beginning of the maturity phase and shows opportunities for new markets as organic produce (certification and methods to realize organic production) and production expansion initiated by new markets like Eastern Europe. Mechanization is already developed but innovations are needed to improve logistic efficiency.
Because of the competitive market, differentiation strategies like Fair Trade certification (in Costa Rica with both small producers’ organizations and private companies) and various (pilot-) projects of organic pineapple production are being realized.

Opportunities:

4.2.1.2.- Banana

Banana production is concentrated in the flat, fertile and humid Atlantic lowlands to the east, south-west and north of the country. Costa Rica is the world’s largest banana exporter after Ecuador (although the latter produces almost double Costa Rica’s volume). Costa Rican banana production is concentrated in the lowlands. The banana industry directly employs around 50,000 people. In contrast to the pattern of production in other Latin American banana-producing countries over 50% of banana production occurs on medium-sized farms. These farms sell most of their output to US-based multinationals such as Del Monte, Chiquita and Dole, which also own many plantations and control the profitable marketing of the product. A small, but growing, amount of the non-exportable quality production is processed locally. Growers have been facing difficult times since 1997, when a huge expansion of production in Ecuador, combined with EU measures to limit Latin American banana imports, produced a supply glut in markets open to Costa Rica, pushing down prices. Since 2002, banana prices recovered only marginally, but bananas still accounted for 64% of traditional exports in 2005.
The degree of competitiveness for bananas has been drastically altered by the EU market integration initiative and this has hurt the Costa Rican economy.
Banana is a crop which has been under some pressure from environmentalists and social movements. The major companies are making substantial efforts to put emphasis on aspect related to the environment and social working conditions.
Opportunities to be determined in banana in Costa Rica for Dutch companies are mainly to be found in this niche market, i.e. certification, market knowledge, market access and importers of social responsible bananas. The conventional production is creating fewer opportunities for Dutch companies than for niche produce.

Opportunities:

4.2.1.3.- Melon

Melon is a mainly produced on the Pacific side of the country in regions where tourism is rapidly expanding. Prices of land are increasing, it is becoming difficult to find unskilled labour and costs of labour are on the rise due to competition with the construction sector. Availability of container transport is a problem because of the high peak around the month of March. Reduction of costs is required. Options to do so are mechanization, increasing efficiency and productivity per hectare. Creating added value could be another solution though there is little interest to invest in new production methods. Only the bigger companies are able and sometimes willing to do so.
The sector has about five companies bigger than 300 hectares. Most other producers are between 50 and 300 hectares. Melon producers are forced to work together in terms of purchasing of materials and logistics.
Costa Rican melon has a significant market share in Central America but efforts will have to be made to remain competitive. Niche markets will have to be developed or costs have to be reduced. Both options will require a substantial change in the sector but do create opportunities for Dutch companies.

Opportunities:

4.2.1.4.- Watermelon

Watermelon in mainly being produced in the Central Pacific area around Parrita. Costa Rican watermelon is renowned for its good quality (sugar levels, taste). Watermelon faces the same difficulties as melons as far as labour, land and transport are concerned.
Watermelon is an extensive crop that requires little technology but efficiency in the post harvest can be improved. The production window for the European market provides a good opportunity for Dutch importers.

Opportunities:

4.2.1.5.- Mango

Mango is being produced in the Northern and Central Pacific zone of Costa Rica. The sectors being characterized by a relative large number of small farmers associated in growers’ associations and relatively few bigger farms. At this moment only one large farm is exporting to de US because of the necessary and costly certification for the quarantine organism the fruit fly. A hot water treatment, which is a costly installation and presence of an USDA –APHIS inspector are necessary to be able to export to the US. Costa Rica has experienced a revival of the mango export in the last years because of the exports of smaller growers being grouped by the growers’ associations. At this moment, one association of growers is certified Fair Trade. 

Opportunities:

4.2.1.6.- Cut flowers

Cut flower production is mainly focused on lilies. The production of tropical flowers (like Heliconia, Strelitzia, Ginger) has diminished. Other crops like Aster, Chrysanthemum, Gerbera and Roses show a steady market although chrysanthemum is loosing some acreage. Production is mainly exported to North America and Central American and Caribbean region.
Around five large companies are responsible for about 80% of all exports. Two of them produce lilies. Two companies predominantly export bouquets to North America and a small percentage to Holland. Most other companies are local producers with relatively small acreages producing for the local and regional market. Production is concentrated around Cartago (Llano Grande) and up in the mountains around Fraijanes and San Jose de la Montaña. Tropical Flowers are mainly produced in the Carribean Lowlands. Besides production in greenhouses, there is open field production of for example Callas on higher altitudes.
Due to transport costs which are competitive with flower producing countries like Ecuador and Colombia, mixed bouquets can be an interesting option for the sector. Costa Rica has to create added value to its flowers because of production costs which are averagely higher than previously mentioned countries. Mixed bouquets, produced under strict quality conditions are an interesting option for the future. To fill in this opportunity, a requirement will be to have intense collaboration between growers of various types of flowers and varieties.
Due to the high production costs in Costa Rica, mechanization is a clear opportunity for local companies to become more competitive. However, it is questionable if local companies are willing to invest as most companies are trying to reduce costs.

Opportunities:

4.2.1.7.- Young plants

The young plant sector in Costa Rica can roughly be divided in two sub-sectors. First of all, multinational companies which have subsidiaries in Costa Rica. Most of them produce for their sales in Northern America, some of them for exports to Europe as well and have between approximately 3 and 20 hectares of greenhouses. During the last 10 years, little investments have been done by these companies resulting in stable export figures. Nevertheless, the year 2007 starts to show a change due to the fact that some of the mentioned companies are considering reallocating their activities to other (Central American) countries.
Costa Rica is facing difficulties to remain attractive for above mentioned companies due to increasing costs, more stability in neighbouring countries, the lack of a proactive government creating incentives and the increasing pressure on labour. Nevertheless, opportunities can still be found in creating added value to young plants which are easier to produce in Costa Rica compared to most other Central American countries. Added value can be found in environmental aspects, traceability, certification and varieties which require specific knowledge and conditions to be grown successfully. Mechanization can still create a substantial reduction of labour costs at a number of companies.
The other sub-sector can be defined as much more extensive and run by local entrepreneurs or expats which have set up their business predominantly in the 1980’s. This sector is producing plant material for foliage plants such as canes and (un)rooted cuttings of crops like Dracaena, Palms, Schefflera, Crotons, Aglonema, Ficus and Yucca canes. Companies active in this sector are changing rapidly in terms of certification and creating added value in terms of upgrading part of their product range to pre-finished pot plants (see next paragraph). Production of young plants as such is facing strong competition from other Central American countries. Besides that, the European market is putting more emphasis on quality and reduction of costs continuously leading to more direct contacts between local Costa Rican growers and European buyers (importers and growers). The historic role of mainly Dutch importers is changing from being an intermediate to an active chain partner. Examples for this are backwards integration, new types of transport systems and realization of traceability systems together with suppliers. Young plants and canes for foliage plants is a market in which rapid changes are taking place.  Small growers are facing difficulties as they have no direct access to the market and are not able to invest in modern technology.

Opportunities:

4.2.1.8.- Pre-finished pot plans

Pre-finished pot plants is a new market which is developing rapidly. Due to increasing transport possibilities and investments in production techniques and materials, new opportunities appear for Costa Rican pot plant growers.  Greenhouses or shade houses are being constructed and an increase in the use of European plastic pots and peat moss can be detected. Plants are predominantly being sold to existing wholesalers which have been active in the market for many years. However, some growers sell directly to primarily Dutch growers or are investigating opportunities for direct sales to the European market. This final step with direct market access is still hard to take because most produce is sent to Europe as pre-finished, not as finished material.
The future for (pre)finished pot plants looks promising because of the increasing quality and the increasing opportunities in the European market. Many products still offer options to be developed and logistic solutions such as Danish Trolleys of ‘Container Centrale’ create a sustainable alternative for transport.

Opportunities:

4.2.1.9.- Foliage

Costa Rica is by far the biggest exporter of leather leaf in the world. Together with Costa Rica, Florida is the major producer of this type of foliage but due to increasing hurricane occurrence, its production is decreasing. So far, Costa Rica has not been able to take advantage of these changing market conditions due to an increase of competitive production (other types of foliage, other production regions like Guatemala) in the market and increasing costs in Costa Rica itself.

The total market is estimated at around 1.600 hectares and is mainly to be found around Cartago and on the volcano Poas, northeast of Alajuela. There are some companies which are large in size, measuring some hundreds of hectares of production in shade halls. One company near Cartago has around 40 hectares of high-tech greenhouses.

Due to the introduction of Fair Flowers and Plants, there is a recent trend amongst leather leaf growers in Costa Rica to certify their produce. This development could create new options to enter in a market which might be willing to pay for social and environmental guarantees. Besides that, leather leaf is a commodity crop, which makes it difficult to create of added value. As it is always used as a half-product, direct communication with the market is virtually impossible, with a strong influence of a few wholesalers in the Dutch market.

Opportunities for Dutch companies to be detected in the Costa Rican foliage market are production for new markets (a.o. FFP). Along come progressive cultivation systems such as IPM. In order to realize this and to increase the yield per square meter, crop consultancy could contribute to fulfil these opportunities.

Opportunities:

4.2.1.10.- Vegetables

Vegetables in Costa Rica are mainly produced for the local and regional market. Exports can be found most of all in crops like squash, cassava and carrots. There are hardly any exports of common crops like tomato, cucumber, sweet pepper or egg plant. The reason for this is that production is almost all open fields due to which no export quality can be reached.  Mini vegetables are being exported but so far on a small scale. Opportunities in this sector are reasonable although there is tough competition from Guatemala.
Vegetable production is, depending on the crop, spread all over the country. There are a large number of small, open field producers but also quite some large companies active in various crops. Recently, projects have started in Cartago, Guanacaste and in Zarcero to produce vegetables in greenhouses. These projects have been set up with financial (inter)national support and aimed at small growers. This development can upgrade the quality of local produce but it is unlikely that it will open doors to export markets.
There is a tendency to change the use of ornamental greenhouses (cuttings, leather leaf, flowers) to high quality vegetables. It is likely that the national demand for high quality vegetables (uniformity, packaging, no residues) will increase. Opportunities for Dutch suppliers may arise. New varieties and new cultivation techniques will be required.

Opportunities:

4.2.1.11.- Processed fruits

There are large orange tree plantations to the north of the country up to the Nicaraguan border, and Costa Rica is the second largest supplier (after Brazil) of citrus fruit concentrate to the US. Production of processed fruits (juices, concentrated, pulp, IQF - individually quick frozen, dehydrated) is being done with mainly second quality fruits as far as pineapple, mango and melon are concerned.

Opportunities:

4.2.1.12.- Potencial crops

Fruits
Papaya is a crop that is being produced mainly for the local and regional market. For export to the US the same phytosanitary requirements apply (certification and hot water treatment).
Several other pilot projects of fruits that are being produced for the local market (like rambutan, strawberries, black berries, guava and passion fruit) have been started but haven’t yet proven to be successful as an export crop. For example black berry and strawberry are rather big crops for Costa Rica but almost all produce is for the local market.
Mushrooms
Costa Rica imports around US$ 1.0 million of fresh mushrooms per year although there is no production. Mushrooms are currently being imported from Colombia. Production of mushrooms for local and regional markets can be a business opportunity, not only for Costa Rica.

4.2.1.13.- Sumary