5.1.- Introduction
This final chapter will be the combination of results as drawn up in this study and developments taking place in international horticulture defining future scenarios. First of all, a characterization of the countries will be given, indicating how their strengths can be used as a tool for future expansion of their respective horticultural sectors. After each country characterization, a number of sector scenarios have been worked out to demonstrate in what way country opportunities could be translated to business opportunities for Dutch suppliers, investors and / or importers for a specific sector. Finally, to finalize this report a description of activities to be taken on a Central American level to further develop the agricultural sector will be presented.
5.2.- Countries
5.3.- Central America
Central America is a small region with a very strategic global position and a very attractive geographic position. Central America is the bridge between North and South America and the passage from the Atlantic to the Pacific Ocean. Proximity to Europe with sea freight has been reduced to 2 weeks. North America, Miami, is only 2 – 3 days away. Airline connections to Europe (Holland) are about to improve significantly now that KLM has announced to start with regular direct flights to Panama starting in March 2008. Connections (transit freight) with other Central American destinations are possible as well since KLM works together with Copa Airlines.
The climate for agricultural produce is in most countries very favourable and the land, due to its volcanic activity, very fertile in most countries. Water is available in large quantities and quality is good. Low lands are available in virtually each country and high lands, for more moderate crops, predominantly in Guatemala and Costa Rica.
The political situation in most countries is stabilizing although Nicaragua is still a question mark. The economy is spurred by growth of exports, increased foreign investments, increasing local consumption and the implementation of DR-CAFTA (except for Costa Rica) in recent years. Numerous international banks start focusing on the region. Panama is the leader on attracting foreign capital but most other countries play their role as well.
Safety is the major concern of the region. Less corruption and more equality on income are considered to be triggers to tackle this problem in the correct way. More business, more international trade.
If Central America manages to promote itself as a region as an attractive alternative for booming markets like China, India and Brazil, the future looks very bright. Costs of production are low, proximity to nearby markets is an advantage which is still underestimated and most other factors influencing production can be considered as good in Central America.
5.3.1.- Joint Central American efforts to increase horticultural ties with
Holland
Actual Situation
Central America as a region (including Panama) has a population of around 40 million persons. If Central America would be regarded as one single market, it would become an interesting opportunity for international horticultural supply companies and for investors. Until now, this interest has been limited for the following set of reasons.
First of all, there are no of open borders. Import processes are different in each country making it costly and time consuming to be active in each separate country. For many (Dutch) supply companies, the individual Central American countries are just too small to justify an active sales policy in each separate market.
Secondly, the interest from the Netherlands in Central America has historically been limited except for the sectors propagation material of ornamental plants, leather leaf and tropical fruits. These sectors have not needed Dutch technology because of the fact that production is open field (ornamentals and fruits) or in shade houses which have a very basic set up.
A third reason is that the region has faced many internal conflicts and dictatorships leading to little commercial interest but a lot of political interest. At first, international ‘help’ was given to try to solve problems and to initiate democracy. Later on, political assistance transferred more in the direction of development aid programs. The Dutch embassies in Guatemala and Nicaragua still have a strong focus on development aid and put limited effort in trying to increase commercial activities which can contribute to more sustainable and less dependant societies. This last aspect is rapidly changing in recent years and, amongst many others, the Dutch approval of PSOM and PESP programs for four countries in this region, underlines this statement.
Finally, the region has done little to promote Central America itself as a market. Costa Rica has promoted its nature and awareness of environmental issues, Guatemala starts to become an important tourist hotspot based on (colonial) architecture, nature and ancient history, Panama has its Canal and its financial sector. But Central America as a region has had very little attention from both regional governments themselves as from international companies.
Future scenario
Central America is slowly working on more political and economic ties to stimulate joint growth and to initiate an open border policy. Citizens can now freely travel between Guatemala, Honduras, El Salvador and Nicaragua. Costa Rica makes no part of this treaty. Awareness occurs that a joint market, having the European Union as an example, would be profitable for all nations involved. The first joint meeting with that same European Union about a possible free trade zone will take place in October 2007 in Costa Rica although it has to be noted that Costa Rica itself is the only country which has not formally confirmed its aproval on this issue yet.
On a horticultural level, numerous opportunities can be found if forces are to be joined. Representatives of most governments are strongly in favour of more joint activities to stimulate the horticultural sector within Central America. Joint participation to the biggest horticultural exhibition worldwide, the HORTIFAIR in Amsterdam, would be a big step forward. Plans are being made to realize this. The presentation of this study on the 11th of October 2007 can be regarded as the kick off for joint participation in the year 2008.
As a second step, a scenario which has become realistic in recent years is a rotating horticultural exhibition in Central America. Based on the existing AgriTrade in Guatemala, collaboration could be initiated between Ministries of Agriculture and Trade Promotion organizations aiming at March 2009 to have the first joint event. Such an event would definitely attract large international attention but it would also strongly stimulate contacts between countries and companies as such. One of the conclusions to be drawn up being part of this report, is that knowledge on developments in neighbouring countries within Central America is rather limited.
What is lacking in Central America is not just one product or one service. What is really lacking is the establishment of strategic alliances. Dutch companies joining strengths with local companies based on key words like added value, chain management, sustainability, traceability and certified produce. In order to get more acquainted with each other, it would be a big step forward to create possibilities for professional matchmaking during horticultural events.
To realize both step 1 and step 2, the Netherlands Embassy in San Jose has taken the initiative to apply for funds for the realization of business meetings to be organized in April, 2008 in both Guatemala and Costa Rica. Based on the assumption that these funds will be granted, 10 Dutch companies have already confirmed their interest by means of a LOI to participate in these events which will be organized by Reflex Horti Consultancy b.v. and Ideavelop S.A. All relevant Central American organizations have already signed LOI’s to support this Central American effort to stimulate horticultural business between Central America and the Netherlands. In case of approval, the month of December will be used to inform growers and exporters about the contents of this report and the business meetings to be organized in April by means of a meeting in each separate country. These meetings will also be used to obtain more detailed information on the results of Chapter 4, the opportunities to be detected for each crop.
After the Central American meetings in December, meetings are planned for the second half of January 2008 in Holland for the ornamental sector as well as for the fruit and vegetable sector. These meetings will also focus on the contents of this report and on the opportunities for participants in Central America. In other words: why should Dutch companies participate in the business meetings in April 2008?
The meetings in April will have an expected audience of approximately 20 - 25 Dutch companies and 100 – 150 local companies, meaning El Salvadoran, Honduran and Guatemalan companies at the event in Guatemala, and a similar number of Nicaraguan, Panamanian and Costa Rican companies during the event in Costa Rica.
During all phases, Central American governments and Trade Promotion Organizations will be strongly involved. It is expected that in these months, negotiations will decide whether Central America will pay a counter visit, visualized with a joint booth at the Hortifair, to the Netherlands. Possibilities exist that such participation could partly be covered with funds from Eurocentros in Central America. Europe is putting strong emphasis on the need to collaborate within Central America. Even more, it has been set as a precondition for negotiations with Central America on a Free Trade Agreement. Therefore, it can be assumed that Brussels will be interested in joint Central American initiatives aimed at increasing mutual (horticultural) trade.
A logical final step would be the joint organization of a rotating horticultural exhibition enabling international participation to meet a Central American public and to get to know other countries during the years. If successful, it is likely that such an exhibition will also attract a much broader Latin and North American public. An ideal scenario would be to have the first edition of such an event in March 2009, the date that actually Agexport plans to organize its own Guatemalan Agritrade.
5.3.2.-Demonstration project Dutch Horticulture
Actual Situation
Central America as a region is moving forward in non-traditional agricultural crops. More focus is given to added value and certified produce. As a result, the demand for innovative supply products and services is increasing. Central America has a geographically very interesting position towards markets like the USA / Canada but also towards Europe. These opportunities could be spurred if ‘a Dutch bridge’ would be created for Dutch supply companies to develop their sales in the Central American market. A Dutch demonstration project informing local producers on developments in Europe on both a production level as on a market level, could have a great impact on future mutual business. A big advantage would be that automatically, more knowledge would become available on market demands and requirements as there will be more Dutch (European) companies active in Guatemala / Central America.
Future scenario
The Dutch PESP program could be an interesting tool for Dutch companies (organized in Plantum, AVAG, VGB or possible other sector organizations) to investigate possibilities to set up a Demonstration Project aimed at increasing sales of supply materials from Holland but also aimed at the realization of more joint projects between Dutch companies (investors) and local (Central American) companies. A feasibility study could also define which Central American country would be most suitable to set up such a project.
A demonstration project would fit perfectly in the actual demands of horticultural Central America. It would also stimulate trade between Europe and Central America. It can be recommended to initiate the set up of the project on a Central American level so the impact will be regional and not just national. The impact on Dutch participation will also be bigger.
A detailed description of this opportunity, including its feasibility and possible counterparts to be involved, would be a first necessity (to be covered with PESP). The first organizations to take such steps would probably be the local embassies (Guatemala, Nicaragua and Costa Rica) and sector organizations in both Central America as well as in Holland. During the rest of the year 2007 and the year 2008, various events will be organized (see 5.3) which can work as a platform for discussions on this issue.
In case feasibility of this project is proven, it would be recommendable to work out a detailed business plan and discuss with organizations like the EVD or Eurocentros if subsidies might be available for the set up of the project.
5.3.3.-Strategic partners
Probably the biggest challenge for Central America and the main opportunity for Dutch companies, is the need for ‘omnipotent’ strategic partners that can complement the local company and can create added value to their products. The needs of local companies are knowledge on production and marketing, finance, and access to high tech materials. Therefore, it can be considered as ‘incorrect’ when this survey discusses opportunities for just investors. In fact, there is a need for companies who can add more than just financial assets. The key word for the Central American needs in the non-traditional agricultural sector is the strategic partner.
Like one of the interviewed persons said: Sometimes we are fighting for the biggest part of the pie in Central America, but we should be fighting for the biggest pie with the rest of the world! There is an increasing tendency amongst Central American companies to broaden their view and to start thinking global. This change of attitude certainly opens doors for new alliances with Dutch companies with or without the possible support from programs like PSOM which recently have become available in Central America (Nicaragua and Guatemala since 2005, El Salvador and Honduras since 2007).
Central America is likely to become a key player in the non-traditional agricultural sectors fruits, foliage and plants and to a lesser extent in flowers and vegetables taking into consideration that safety has to be taken care of and that the region will have to develop a joint strategy to work together and to promote Central America as a potential region for (agricultural) investments.
