4.1.- Introduction

How to define the opportunities for Dutch companies in a specific sector in a certain country depends on various preconditions to be set. First of all, the current position of a sector has to be verified. Based on the previous chapters, this identification has been done and the results have been summarized in the Business Ideavelopment Chart (BIC). This method is based on the market share of a certain country in comparison to the other countries in the same region, and related to the competitiveness of the country for each product or sector.
Market share  (horizontal axis)
The BIC defines the horizontal axis as the exports of each specific country related to the total Central American exports of a certain product based on export data of 2006 (see Appendix F). This percentage has been used to define the position of the product on the horizontal axis having 16.6 % as its centre point, assuming that if all countries would have a similar market share, they would all end up in the middle. Furthermore a logarithmic scale has been used to emphasize differences between market shares. It has been assumed that all six Central American countries could potentially be equal in market share for a certain product.
Business competitiveness (vertical axis)
The vertical axis is based on the results described in chapter 3. The relevance of each of the 16 parameters is weighed for each sector. For example labour will play an important role on a labour intensive crop The availability of investment capital will determine the competitiveness of a country in a sector where high initial investments are necessary. Therefore, the sectors and/or products which on a Central American level have a total exported value of over US$ 5.0 million will be presented separately in the BIC. Subsequently, the Business Competitiveness is an indication on competitiveness per sector based on the mentioned aspects in chapter 3 combined with interviews with key persons in each sector.
Product life cycle phase
In the BIC, the phase of the sector/product in the product life cycle can be determined. Each sector/product goes through all four phases after which it will gradually disappear or will be upgraded to a new product starting a new lifecycle. The following 4 phases have been defined:

Figure 4.1 Business Ideavelopment Chart (BIC) and its life-cycle phases
Introduction
For a new product much time will be spent by the organisation to create awareness of it presence amongst its target market. Profits are negative or low because of this reason. Characteristics of a product in the introduction phase are:

Growth
If the target market accepts the product, the organisation will see a period of rapid sales growth. Characteristics of a product in the introduction phase are:

Maturity
Rapid sales growth will not last forever. Sales slow down as the product sales reach peak as it has been accepted in the target markets. Characteristics of a product in the introduction phase are:

Decline
Sales and profits start to decline, the organisation may try to change their pricing strategy to stimulate growth, however, the product will either have to be re-modified, or replaced within the market. Characteristics of a product in the introduction phase are:

Business opportunities
Based on the position of a particular sector in the Business Ideavelopment Chart, business opportunities have been defined for Dutch companies (exporters, importers, and investors).

For exporters, the categories defined in chapter 2 will be used. Importers (companies that buy products from their suppliers with a strict business to business relation) and investors (capital investors with no involvement in the business) will be mentioned separately.

For investors, it is important to mention that focus should be on the left top corner square where country attractiveness is high and market share likely to increase (green). Most importers will focus on the right side of the BIC (high market share: yellow) unless they are actively looking for new potential suppliers or products for niche markets. Dutch exporters (products and services) can find potential markets in all of the quadrants of the BIC (blue). Independent of the product life cycle the sector will need supplies and services.

Figure 4.2 Areas of business opportunities for investors, importers and suppliers visualized in the BIC.

 

4.2.- Countries

4.2.1.- Costa Rica

4.2.2.- El Salvador

4.2.3 .- Guatemala

4.2.4.- Honduras

4.2.5.- Nicaragua

4.2.6.- Panama

4.3.- Central America

4.3.1.- Pineapple in Central America

Figure 4.9 Business Ideavelopment Chart pineapple.

For pineapple, the actual situation is quite clear. Costa Rica is the biggest supplier in the world for fresh fruits and still increasing. The image of Costa Rica as a producer of high quality pineapples is still very strong. The harvested area in Costa Rica is still expanding and prices for land acquisition reach levels which have no precedent.
Nevertheless, other countries in the region are starting to produce as well as numerous countries in (predominantly) West Africa. The competitiveness of Costa Rica is still high but other regional countries like Panama, Honduras and Guatemala show similar perspectives. Land is cheaper, labour is available but there is no ‘positive image’ yet for these countries in the world market as a pineapple producer. On top of that, it still has to be proven that at least similar quality (compared to Costa Rican) pineapple can be produced.
Costa Rica is already starting to focus on niche markets like Fair Trade and organic produce. In that respect, the pineapple sector in Costa Rica is preparing itself in a much more pro-active way for future competition than Costa Rican sectors like melon and watermelon. On the other hand, Costa Rica will have to invest in ‘positive news’ on pineapple production about social responsibility and environmental issues. The first worrying articles have already been published in magazines and newspapers and the pineapple sector will have to show they are doing a good job to prevent similar situations like the ones which have occurred in banana.
Pineapple is the strongest agricultural export product and it is likely that this situation will remain that way in the near future. Opportunities certainly exist in other Central American countries as the world wide market for pineapple is still expanding. Central America as a region should inform itself in detail on developments in Africa is the real threat on competitiveness comes from that continent, as well as from Brazil.

4.3.2.- Melon in Central America

Figure 4.10 Business Ideavelopment Chart melon.

Melon is a crop which still has Costa Rica as its main player although Panama starts to become a mayor competitor. However, doubts exist on the reliability of the export stats used for Panama which come from a different source than the other five countries.
Besides that, Guatemala has a substantial bigger share in Central American exports than the chart indicates. The reason for this is that exporters in Guatemala are known to put lower figures on their invoices to avoid taxes.
Taking all this into consideration, melon is a crop which is pretty much spread over Central America. Costa Rica still has the best image, not just for its quality but also for its reliability as a producer and exporter. The sector can be regarded as more professional and ready to fulfil European demands than their competitors in Guatemala, Honduras and Panama.
Nevertheless, it is likely that especially Costa Rica will start facing pressure on its sector due to rising costs and increasing problems with costs and availability of labour. New markets for private label, organic produce, Fair Trade or niche varieties are only developed on a very small scale which can be seen as a threat for the future of melon in Costa Rica. The same can be said for watermelon, although to a lesser extent.
Panama shows probably the best opportunities for melon and watermelon due to the fact that there already is an established sector and the role of the government is very proactive in attracting (foreign) investments in these sectors.
Guatemala can start playing a bigger role as well but focus will have to go to Europe which means that requirements in Europe will have to be met. So far, this is hardly the case.
Honduras has a steady production of melons in the Southern part of the country with three main exporting companies. There is no real growth to be observed in the past years and is not be expected in the near future because of the lack of interest from (foreign) investors.

4.3.3.- Foliage in Central America

Figure 4.11 Business Ideavelopment Chart foliage.

The market for foliage in Central America is based on Costa Rica and Guatemala. Costa Rica is the main supplier of leather leaf world wide but competitiveness is decreasing rapidly. Some growers in Costa Rica have made efforts to upgrade their produce using modern technology in growing (e.g. greenhouses) and packing methods but with limited success. Certification starts to pick up in the year 2007 due to the Fair Flowers Fair Plants label.
Foliage is not consumed like vegetables and fruits and is considered to be a half product, used in mixed bouquets as a filler. In other words, certification like Fair Flowers and Plants is only interesting for a rather small segment of the total market. All other produce will have to compete with countries like Guatemala which have lower costs.

Guatemala can be regarded as the biggest threat for Costa Rican produce due to the fact that it can be seen as the only country in Central America with a similar (suitable) climate for foliage as Costa Rica and with more favourable production conditions like substantially lower costs. Nevertheless, it should be taken into consideration that the poor security in the country is a major reason of concern and an additional cost to protect the farm.

Other countries hardly play a role although Nicaragua might develop into a potential supplier. This will primarily depend on developments in the near future on a political level, meaning that confidence of investors will have to be regained.

Other foliages than leather leaf play a minor role in the Central American leaf market but can be an interesting niche (e.g. tree fern, phoenix leaves, etc.) as a complementary or substitute product for leather leaf.

4.3.4.- Pre-finished potplans in Central America

Figure 4.12 Business Ideavelopment Chart pre-finished pot plants.

Production of pre-finished pot plants is probably the most interesting growth market for the Dutch target group as it creates opportunities for suppliers of services, suppliers of products, investors and importers. Besides that, pre-finished pot plants can regarded as an enormous potential growth market with sales opportunities not just in Europe but also in the USA due to the fact that this market starts to open its borders for a wider range of substrates and therefore possibilities for added value products.
Most countries, except for Panama and Nicaragua, show good opportunities for this crop, each country for a different set of reasons. Costa Rica has a big established ornamental sector and based on available knowledge and experience, it will be a rather small step to upgrade their produce to pre-finished pot plants. Nevertheless, even in Costa Rica it is likely that most of such projects will be based on strategic alliances between Dutch companies and local companies. The actually existing projects prove this assumption. Market access and market information are required in this market as well as profound knowledge on cultivation aspects in order to produce quality which can compete with European (Dutch) produce.
Guatemala, Honduras and El Salvador are all already exporting pre-finished pot plants and various new projects are being set up. Besides that, it is a well known fact that the overall tendency is to upgrade ornamental plants from plant material to pre-finished pot plants making opportunities only bigger.
If pre-finished pot plants can be upgraded to finished pot plants, which is already possible with Sansevierea, Beaucarnea, Areca, Cycas, Zamiaculca, etc., the need for a Dutch counterpart taking care of sales in Holland / Europe will increase even more. The big question is which entities will be playing this role in the future (growers, importers, auctions or wholesalers).

4.3.5.- Vegetables in Central America

Figure 4.13 Business Ideavelopment Chart tomato, cucumber, pepper and eggplant.

Vegetables should be divided in open field and protected produce. For Dutch suppliers of products and services, the most interesting market is production of vegetables in greenhouses. Outdoor production is mainly interesting for Dutch seed companies. Central American vegetables for export have North America as their main destination besides neighbouring countries within the region.

Due to a more open policy from the USA towards the imports of vegetables, new opportunities appear for quality produce to predominantly the east coast of North America. Mexico is a large existing producer of, amongst others, tomatoes, sweet peppers and cucumbers but focuses on central parts of the USA and the west coast.

The climate and the cost level are very favourable in countries like Honduras and Guatemala and to a lesser extent, El Salvador and even Nicaragua. Knowledge is lacking so Dutch support on services and supply products (greenhouses, etc.) could be a trigger to accelerate this development. Honduras, Nicaragua, El Salvador and Guatemala all have one or more vegetable greenhouse projects focussing on exports to North America quite some of them supported with Israeli management and / or finance.

Dutch investors or exporters focussing on the North American market will find new opportunities in Central America due to improving market conditions in the USA, increasing transport possibilities and an improving local infrastructure in Central America for the set up of new projects.

4.3.6.- Countries in Central America

Figure 4.14 Business Ideavelopment Chart Central America.

If this figure would have been drawn up five years ago, most of the countries would have ended up much lower on the vertical axis than nowadays. Exceptions on this are Costa Rica and possibly Nicaragua. Nevertheless, the general conclusion for Central America is that region starts to show itself to the rest of the world as a region with more open borders and less bureaucratic hassle, while most of the individual countries are showing progress on their competitiveness for investors, suppliers and importers with an interest in vegetables, fruits and / or ornamentals. For the individual countries, the following can be said.

Nicaragua has, together with El Salvador, the lowest export market share but also shows the lowest business competitiveness. Unfortunately, the land of the everlasting opportunities seems to remain that way for some time more. Access to the Caribbean Sea, stable politics as well as a stable juridical system, would change the agricultural face of Nicaragua drastically.

El Salvador is a country of services without a dominant agricultural sector. Nevertheless, the country shows interesting opportunities for international supply companies to set up subsidiaries or to start alliances with Salvadorian companies. It can even be considered for some sectors to set up their own production facilities.
Another interesting option for El Salvador is the set up of specialty produce supported by innovative and international minded local companies. The first examples of such companies are starting to initiate projects at this very moment.
Honduras is, as mentioned before, frequently referred to as the ‘forgotten country’ and that says it all. Safety is a major problem in Honduras but not any worse than in Guatemala or El Salvador. Besides safety, most relevant aspects for producing either commodities or specialties are good or at least acceptable. Nevertheless, international interest has always been very limited for Honduras and there are no real signs that this situation is likely to change.

Panama is in one word booming. Spurred by the new investments related to the Canal, the international world has picked up Panama as a future financial and logistic hub to the Americas. Besides the enormous investments taking place, this statement can be proven by the great interest of Dutch companies in business meetings organized and the fact that KLM will start flying directly to Panama from March 2008 onwards. The agricultural sector is likely to benefit from all these developments, also because the government is quite aware of the importance of rural areas in stabilizing the country in a social and economic way.

Guatemala is torn apart by internal conflicts but is definitely on the way up and the Berger government has shown quite some progress in all kinds of levels. The agricultural sector is active and broad and climatologic conditions are very favourable for various crops. Foreign companies are already present in Guatemala and their number is increasing. Safety is not under control and is one of the main issues which this government has not managed to tackle. Nevertheless, Guatemala is a country to be taken into count in the near future.

Costa Rica is by far the biggest exporter of fruits, vegetables and ornamentals but has to start watching its steps. Bureaucracy is fierce, state ruled institutes still exist in many sectors (telecommunications, insurances, etc.) and costs in the agricultural sector are increasing rapidly due to high costs of labour and land  as a result of  competition with the construction sector and tourism. Availability of labour is a concern for the near future as well.
Like one of the interviewed persons said: ‘Costa Rica has never been hungry or had to face internal problems’. The time has come to use its strengths to assure its competitiveness.