Slowly But Surely, Growth in Central America

U.S dairy export value to Central America rose 2 percent in 2013 to $138 million.

Central America is not cut out to be a massive dairy im­porter. The seven countries that comprise the region—Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama—are, geographically speaking, about the size of Yemen. Its population is nearing 44 million—a little less than Tanzania. The economies, dairy and food industries, and dairy appetites vary signifi­cantly from market to market.

But, as a whole, Central America is a slowly but steadily growing U.S. dairy export market that offers the benefits of proximity, advantageous market access and pockets of opportunity that any dairy supplier would appreciate.

“The gradual tariff reductions and tariff rate quota expansion offered by the U.S.-Central America Free Trade Agreement and U.S.-Panama free trade agree­ment (FTA) give U.S. dairy suppliers an edge that is critical in a very price-sensitive market,” says Rodrigo Fernandez, USDEC’s representative for Mexico and Central America. “Both FTAs have been essential for U.S. growth.”

Indeed, although U.S. dairy export value to Central America rose 2 percent in 2013 to $138 million, volume dipped because international commodity prices were significantly higher than intra-regional prices.

“Keep in mind that the countries in the region have zero tariffs between them, and Costa Rica and Nicaragua are surplus milk producers with strong and growing export operations,” says Fernandez.

Within such a framework, U.S. opportunities lie and are expanding.

Market by market

If asked to name one product category that offers uni­versal opportunity among all the countries of the region, it would be cheese. U.S. cheese shipments to Central America grew seven of the past eight years, reaching 16,611 tons in 2013, seven-fold more than 2005.

“In Panama, our largest market in the region, the United States has built a dominant 85 percent share of cheese imports,” says Fernandez.

Region-leading economic expansion for the last four years has spurred overall dairy consumption and im­ports in Panama. U.S. exports of major dairy products to Panama jumped 17 percent to 11,646 tons in 2013.

Costa Rica is financially stable and has one of the highest dairy consumption rates in all of Latin America. Although its healthy dairy industry makes it a strong regional supplier, its dairy and food manufacturing sectors also make it the best market in the region for high-value dairy ingredients.

Panama and Guatemala (the most populous nation in Central America) boast rapidly expanding supermarket and foodservice sectors, and growth in food manufactur­ing is creating ingredient opportunities, particularly in WMP.

With the U.S. moving more seriously into WMP over the last two years, Central American demand and U.S. supply could be well aligned for expansion. Through the first six months of 2014, U.S. WMP exports to Central America grew 260 percent to 1,108 tons, already more than the full-year total in four of the last five years.

“We’ve seen some good success from the United States on both the cheese and ingredients sides,” says Fernandez. “Companies like Agri-Mark, Schreiber Foods and Tropical Foods LLC have developed labels in Spanish and invested a lot of time and resources to get into Central America via trade shows, trade mis­sions and agreements with local distributors.”

Given such commitment, as FTA phase-outs proceed and greater volumes of U.S. product benefit from preferential access, U.S. suppliers will slowly but surely reap further benefits.

(This article first appeared in the September 2014 edition of Export Profile.)

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The U.S. Dairy Export Council is primarily supported by Dairy Management Inc. through the dairy farmer checkoff that builds on collaborative industry partnerships with processors, trading companies and others to build global demand for U.S. dairy products.