Multisectoral value chain analysis ‘Connecting Central America’
Who:
EU-financed Central American Regional Economic Integration (INTEC), European Union and the Netherlands Ministry of Foreign Affairs, the Centre for the Promotion of Imports from Developing Countries (CBI), ProFound – Advisers In Development and the Centro Agronómico Tropical de Investigación y Enseñanza (CATIE)
Service:
where:
Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, and Panama.
PROJECT DESCRIPTION:
The main objective of this study was to discover the potential of a multisectoral programme in Central America; what are the key European market characteristics and what is central America’s competitiveness in the European market?
How are the value chains structured, what are their risks and opportunities and, also, how are they governed and how sustainable are these?
achieved goals
Results
The team ran into some interesting findings regarding the five value chains that were included in the report, such as the potential for the coffee sector, and the risks involving Fish and Seafood.
Also, according to this study, each sector has the potential to increase European exports and sustainability performance by Central American SMEs, in different ways and at a different pace.
Cacao
The cacao sector in Central America is reviving, driven by a growing international market and support from European companies like Ritter Sport and Chocolats Halba, especially in Nicaragua and Honduras.
With cacao being grown in agro-forestry systems by small cooperatives, there’s significant growth potential, particularly as coffee producers diversify. However, challenges include low productivity, limited quality bean supply, and gender inequality.
Opportunities for sustainable practices and regional collaboration exist, particularly through the AMACACAO association. To boost the sector, focus on capacity-building, local processing, improved market access, and promoting gender inclusion.
Bottlenecks
The cacao sector in Central America encounters significant challenges that hinder its growth and competitiveness in the international market. Cadmium has emerged as a non-tariff trade barrier, restricting access to European markets.
Additionally, low production and productivity levels fail to meet the increasing demand for cacao, while quality issues stemming from post-harvest processes further diminish the export potential. There is also a concerning lack of diversification and knowledge regarding export markets, coupled with insufficient managerial capacities at the cooperative level. These factors collectively complicate efforts to add value to cacao products, as the sector grapples with mismatches between supply and demand.
Opportunities
Central American cacao is increasingly recognized for its exceptional quality, making it a sought-after product in international markets. This presents a valuable opportunity for coffee producers to diversify their crops and enhance their income.
The sector is also benefiting from various projects and private investments that aim to bolster production and market access. Local initiatives are creating positive social impacts, fostering community development and resilience. While there is significant potential for value addition in the cacao sector, the market still requires further development to fully capitalize on these opportunities.
Additionally, regional collaboration and the establishment of quality standards are essential for enhancing competitiveness and ensuring the long-term sustainability of cacao production in the region.
achieved goals
Recommendations:
Inclusion of small producers into export chains
The cacao sector in Central America faces constraints that hinder its growth, notably low production and productivity levels that fail to meet rising demand, as well as quality issues stemming from post-harvest processes that diminish the export offer.
However, there are also significant opportunities to explore. Cacao can serve as an effective diversification strategy for coffee producers, allowing them to enhance their income and mitigate risks.
Local initiatives aimed at promoting cacao cultivation not only bolster economic prospects but also create meaningful social impacts within communities, fostering development and resilience.
Organize buyers’ missions in Central America
The cacao sector in Central America grapples with certain limitations including low diversification and insufficient knowledge of export markets. Additionally, value addition efforts are challenged by mismatches between supply and demand, along with quality issues arising from post-harvest processes that can negatively impact the export offer.
There are promising opportunities to leverage. Central American cacao is highly sought after for its exceptional quality, presenting a strong foundation for market growth.
While the potential for value addition exists, further development of the market is essential to fully realize this opportunity and enhance the sector’s competitiveness.
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Mapping the risks and solutions for cadmium
Cadmium acts as a non-tariff trade barrier that limits access to European markets. Despite this challenge, there is a notable opportunity for the region, as Central American cacao is highly sought after for its exceptional quality.
By addressing the cadmium issue, producers could unlock greater market potential and capitalize on the demand for high-quality cacao in international markets.
Development of quality protocols, harmonization of quality
Quality issues usually come from post-harvest processes, affecting its competitiveness in the global market. However, there are substantial opportunities to leverage, as Central American cacao is highly sought after for its quality.
Establishing regional organization and quality standards can enhance product consistency and improve market positioning.
By addressing the quality challenges, the sector can better capitalize on its strengths and meet the growing demand for premium cacao.
Mapping of cacao varieties and flavours
The establishment of regional organizations and quality standards can help enhance product consistency and strengthen market presence.
Establishing regional organization and quality standards can enhance product consistency and improve market positioning.
Digital directory of tools and best practices
The cacao sector in Central America struggles with low production and productivity levels that fail to meet rising demand, along with quality issues resulting from post-harvest processes.
Central American cacao stands to benefit from various projects and private investments aimed at enhancing its production capabilities. Additionally, local initiatives not only support economic growth but also foster positive social impacts within communities.
Trade fair participation and regional representation
Low diversification and a limited understanding of export markets can affect the growth potential of cacao in Centralamerica. Value addition efforts are challenged by mismatches between supply and demand.
However, there are notable opportunities to build upon, as Central American cacao is highly sought after for its quality.
Moreover, while there is potential for value addition, the market still requires development to fully realize this opportunity.
Fresh fruit and vegetables
The fresh fruit and vegetable sector is crucial for rural development in Central America, largely shaped by government policies. Production and exports are concentrated in Costa Rica, Guatemala, Honduras, and Panama, while Nicaragua and El Salvador face challenges due to infrastructure and productivity issues.
The European market offers growth potential for exotic and organic fruits, though strict quality and certification standards must be met.
Bottlenecks
The fresh fruit and vegetable sector in Central America faces several challenges that limit its growth and competitiveness.
These include inconsistency in quality, limited implementation of certifications like GAP, social, and organic standards, and a lack of managerial capacities among cooperatives and SMEs.
Producers often have restricted access to finance and insufficient attention is paid to logistics and cold chain management. Additionally, there is limited knowledge of the European market, low volumes of exports with little consolidation, and a lack of connection to food industries.
Phytosanitary controls frequently impede exports, and the absence of harmonized food safety measures across the region further complicates the situation.
Opportunities
Technical cooperation and capacities are strong at the regional level, and national initiatives for the sector can be optimized through the identification of niche markets and new segments.
achieved goals
Recommendations:
Support technical and scientific exchange in Central America
The fresh fruit and vegetable sector in Central America faces significant constraints, including inconsistency in quality, limited implementation of certifications like GAP and social standards, and a lack of managerial capacities at the cooperative and SME levels. However, there are notable opportunities for improvement, as technical cooperation and capacities are strong at the regional level. By leveraging these strengths, the sector can enhance its quality and certification practices, ultimately boosting its competitiveness in international markets.
Technical assistance for certification
Technical assistance for certification is essential. This can be effectively supported by the region’s strong technical cooperation and capacities. Additionally, optimizing national initiatives for the sector can further enhance certification efforts, ultimately improving the quality and competitiveness of regional products in international markets.
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Participation in trade fairs and guided visits
Participation in trade fairs and guided visits can help address key constraints in Central America’s fresh fruit and vegetable sector, such as insufficient attention to logistics and cold chain management, as well as limited knowledge of the European market.
These events provide valuable opportunities for producers to identify niche markets and explore new segments, ultimately enhancing their competitiveness and market presence.
By fostering direct connections with international buyers, trade fairs can also drive improvements in logistics and cold chain practices essential for successful exports
Sector strategy for logistical improvement
By enhancing infrastructure and streamlining processes, this strategy can boost efficiency, improve product quality, and increase competitiveness in international markets.
Establishing regional organization and quality standards can enhance product consistency and improve market positioning.
By addressing the quality challenges, the sector can better capitalize on its strengths and meet the growing demand for premium cacao.
Tailored market studies
Tailored market studies are vital for addressing constraints such as insufficient attention to logistics and cold chain management and limited knowledge of the European market in Central America’s fresh fruit and vegetable sector.
These studies can help identify niche markets and new segments, providing producers with valuable insights to enhance their competitiveness and better meet international demand.
Management training and dissemination of best practices
Management training and the dissemination of best practices are essential to overcome the lack of managerial capacities at the cooperative and SME levels in Central America’s fresh fruit and vegetable sector.
By equipping stakeholders with the necessary skills and knowledge, these efforts can optimize national initiatives for the sector, ultimately improving efficiency and competitiveness in both local and international markets.
Support the regional harmonization of phytosanitary control
Supporting the regional harmonization of phytosanitary controls is crucial to addressing the challenges that halt exports and the lack of unified food safety measures in Central America.
By standardizing these controls, the sector can enhance export reliability and safety, facilitating smoother access to international markets and boosting overall competitiveness.
Support a pilot on volume consolidation at the regional level
Supporting a pilot project for volume consolidation at the regional level is essential to address the challenges of low volumes and limited consolidation in Central America’s fresh fruit and vegetable sector.
This initiative can also help tackle the lack of harmonized food safety measures and controls. By optimizing national initiatives, the pilot can enhance collective capacity, improve market access, and strengthen competitiveness across the region.
Processed fruit and vegetables
The European market for processed fruits and vegetables, including juices and canned products, offers significant opportunities for Central American suppliers, especially those providing natural, additive-free options.
To meet strict European standards, companies must adopt advanced food safety management systems. Harmonizing national standards would simplify compliance and boost trade.
Improving access to finance and fostering collaboration with producers can help SMEs achieve the scale needed for competitiveness. Niche markets provide further potential, especially for those meeting CSR standards, enhancing value and market access.
Bottlenecks
SMEs in Central America’s processed fruits and vegetables sector face significant barriers to entry, including high volume requirements, substantial investment costs, and high labor costs for raw materials. Additionally, unreliable access to competitively priced supplies, expensive transportation, and limited access to finance hinder market entry.
Many SMEs lack knowledge of the European market, struggle with compliance to international standards, and are unaware of corporate social responsibility (CSR) practices, while an underdeveloped legal framework for exports further complicates their challenges.
Opportunities
Technical cooperation and capacities are strong at the regional level, and national initiatives for the sector can be optimized through the identification of niche markets and new segments.
achieved goals
Recommendations:
Strengthening collaboration between producers and processors in clusters
By working together, SMEs can overcome high volume requirements, reduce high raw material costs, and ensure a reliable, competitively priced, and high-quality supply of raw materials.
This collaborative approach presents opportunities for waste stream valorization and market development for fresh fruit and vegetable producers, ultimately enhancing competitiveness and sustainability in the sector.
Improving access to finance.
Improving financial literacy and implementing risk-sharing mechanisms will empower SMEs. Also, investing in transportation infrastructure and logistics hubs, along with adopting technology for efficiency, can lower shipping costs and time. These combined efforts create a supportive ecosystem for SMEs, driving innovation and economic growth.
Improving coherence in food safety standards.
Developing clear guidelines, providing training for food producers, and fostering collaboration between government and industry will ensure consistent adherence to safety standards, ultimately boosting export potential and consumer confidence.
Supporting certification of food safety management
Enhancing access to certification programs will help ensure adherence to global safety requirements.
Reduction of bureaucracy.
Reducing bureaucracy is vital for improving the underdeveloped legal framework for exports. Streamlining processes and simplifying regulations will enhance efficiency and facilitate smoother export operations.
Capacitating certifiers and laboratories.
Capacitating certifiers and laboratories is essential to improve compliance with international standards. Enhancing their skills and resources will ensure more effective and accurate food safety assessments.
Providing guidance on more advanced quality management.
Providing guidance on advanced quality management is crucial to improve compliance with international standards.
This support will help organizations implement effective practices and enhance overall food safety.
Improving market knowledge.
Improving market knowledge is essential to address the lack of understanding of the European market.
By enhancing insights into consumer preferences, especially for natural, healthy, and convenient foods, businesses can better capitalize on the growing European demand
Supporting companies to improve social responsibility performance.
Supporting companies in enhancing their social responsibility performance is vital to address the lack of CSR knowledge among producers.
By promoting best practices, businesses can differentiate themselves from competitors and leverage organic certification as a valuable market opportunity.
Fish and seafood
The fish and seafood market in Central America includes artisanal and industrial production, with most exports coming from industrial aquaculture, especially shrimp, rock lobster, tilapia, and yellowfin tuna. Honduras and Nicaragua are the largest exporters, while Panama, Costa Rica, and Guatemala also contribute.
Opportunities in the European market vary; Central American shrimp targets high-end markets but competes with cheaper Asian products.
Sustainability issues, particularly in fisheries, involve illegal overfishing and unsafe working conditions, although aquaculture is more regulated. Regional trade is limited and often illegal, but there is potential to connect local fisheries to a value chain for European exports.
Bottlenecks
Production in Central America does not meet demand, and small producers are often excluded from export markets.
The artisanal sector faces quality and food safety issues, while fishing companies show limited interest in the European market.
There is a lack of sustainability certification in fisheries, weak support for market information, and inadequate financial services and governmental support. Additionally, sectoral strategies for fishery and aquaculture are insufficiently implemented.
Opportunities
Strengthening trade between Europe and Central America involves enhancing regional ties, including options for small producers in export chains.
The industrial segment maintains high compliance with certification and health standards, supported by existing Fishery Improvement Programs (FIPs). Additionally, there is a focus on developing aquaculture cultivation and diversification.
achieved goals
Recommendations:
Strengthening collaboration between producers and processors in clusters
The fish and seafood sector faces several constraints, including production not meeting demand, exclusion of small producers from export market chains, and quality and food safety issues in the artisanal sector.
There is a need for improved financial services and governmental support.
However, there are opportunities to include small producers in export chains, and compliance with certification and health standards is high in industrial segments, which can help address some of these challenges.
Participation in trade fairs in Europe.
The fish and seafood sector faces constraints such as a lack of interest from fishing companies in the European market and the exclusion of small producers from export chains.
However, there is an opportunity to strengthen the trade framework between Europe and Central America, which could enhance market access for these producers.
Support the regional strategy for European market entry and consolidation.
There are opportunities to strengthen the trade framework between Europe and Central America, as well as to enhance regional ties within Central America, which could improve the overall sector.
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Support to the implementation of Fishery Improvement Projects (FIPs) and certification in fisheries.
The lack of sustainability certification in fisheries limit the growth of this sector. However, there is an opportunity to leverage existing Fishery Improvement Programs (FIPs) in Central America to address this issue and enhance sustainability practices.
Tailored market studies and import intelligence for Central American species.
there is an opportunity to strengthen the trade framework between Europe and Central America, which could help address these challenges and improve sector performance.
Specialty Coffee
Bottlenecks
The specialty coffee sector in Central America faces several challenges, including insufficient technical assistance for quality and productivity improvement, and a strong presence of intermediaries that negatively affects quality and traceability.
Producers have limited access to credit and a lack of knowledge about international and European markets. Additionally, there is a deficiency in managerial capacities at the cooperative and SME levels, disconnected initiatives at the national level, and branding issues in some Central American countries.
Opportunities
Cooperatives in Central America help create scale and build capacities for small producers, contributing to several successful market positioning cases.
There is an existing platform for regional collaboration in Central American coffee, which is a priority on the international cooperation agenda.
Additionally, effective soil management is crucial, and Central America has valuable experience in this area.
achieved goals
Recommendations:
Inclusion of cooperative-exporter partnerships in the Export Coaching Programme (ECP).
The coffee sector in Central America faces constraints such as insufficient technical assistance for quality and productivity improvement, a strong presence of intermediaries that impacts quality and traceability, limited knowledge of the international and European markets, and a lack of managerial capacities at the cooperative and SME levels.
However, cooperatives in the region present an opportunity to create scale and build capacities for small producers, helping to address these challenges.
Technical training and dissemination of best practices.
The coffee sector in Central America faces significant constraints, primarily due to a lack of managerial capacities at the cooperative and SME levels.
Additional challenges include insufficient technical assistance for quality and productivity improvement, a strong presence of intermediaries that affects quality and traceability, and limited knowledge of the international and European markets.
However, there are notable opportunities, such as cooperatives that can create scale and build capacities for small producers, several successful market positioning cases in the region, and an existing platform for regional collaboration in Central American coffee. Additionally, Central America has valuable experience in soil management, which is crucial for sustainable practices.
Support regional participation at SCAE; support the involvement of PROMECAFÉ.
The coffee sector in Central America faces constraints such as branding issues in some countries and disconnected initiatives at the national level.
However, there are opportunities for improvement through regional collaboration, which has an existing platform for Central American coffee, and several successful market positioning cases in the region that can be leveraged to enhance visibility and competitiveness.
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Organize buyers’ missions in Central America.
The coffee sector in Central America faces several constraints, including branding issues in some countries and insufficient knowledge of the international and European markets.
Additionally, there is a more indirect challenge related to insufficient technical assistance for quality and productivity improvement. However, an opportunity exists through regional collaboration, which has an established platform for Central American coffee, potentially enhancing market presence and competitiveness.
Digital directory of tools and best practices
The coffee sector in Central America faces constraints such as insufficient technical assistance for quality and productivity improvement and disconnected initiatives at the national level.
However, there are several opportunities to enhance the sector, including regional collaboration through an established platform for Central American coffee, numerous successful market positioning cases, and strong emphasis on coffee in the international cooperation agenda.
Additionally, Central America has valuable experience in soil management, which can further support sustainable practices in the industry.
Read the full study here:
Carrying out an integrated value chain analysis on 5 different value chains, in 6 different countries, was an enormous challenge. At the same time, it allowed the project team to understand the agro-industrial context in Central America from a wider scope, including potential cross-learnings and collaboration for European market access.