The European Union (EU)'s Association Agreement with the Central American (CA) countries of Honduras, Nicaragua, and Panama, which was signed in 2012, came into effect on August 1 2013, and is expected to eventually help bolster the countries' trade accounts. The agreement envisions the eventual inclusion of Costa Rica, El Salvador, and Guatemala, but these countries are still working through the 'internal procedures necessary for the application' of the agreement. Indeed, indications suggest the region will continue to aim to reduce its trade reliance on the US, although we caution that entry into the EU market will prove challenging, given the level of competition from other large exporters in that region.
Headline Industry Data (regional averages)
- 2013 per capita food consumption (US$) = +4.49%; forecast compound annual growth rate (CAGR) to 2017 = +4.57%.
- 2013 alcoholic drink sales (litres) = +5.58%; forecast CAGR to 2017 = +5.15%.
- 2013 soft drink sales (litres) = +5.80%; forecast CAGR to 2017 = +5.35%.
- 2013 MGR sales (US$) = +6.28%; forecast CAGR to 2017 = +6.60%.
Key Company Trends
Sustainable Fishing Initiative Launched in El Salvador: In August 2013, a project known as the Convention for Promoting Good Sustainable Production and Marketing Practices of Fishery Products was launched in El Salvador. The initiative is being spearheaded by the Association of Fishermen of Playa El Cuco, the US Agency for International Development (USAID) and the Mexico and Central America units of US retailer Walmart. A combined investment of US$100,000 has been made, which, according to USAID, will be used to 'promote a more sustainable use of coastal and marine resources in the region' and to help local fisherman 'enhance their business and improve their income'.
Regional Exports Continue to Strengthen: El Salvador is targeting overseas markets with its honey. During its 2012/13 harvest season, a substantial proportion of its harvest (which was in the region of 2,000 metric tonnes) was exported to Europe. For its part, Honduras continues to be a prominent force on the global banana market. To the end of July 2013, banana exports reached 22mn boxes with this figure expected to climb to 45mn by the end of the year.
Key Risks To Outlook
Energy Price Risks: Caribbean economies (covering Guatemala) are at risk of a sharp spike in energy import costs, as Venezuela is beginning to signal its growing discontent with supplying much of the region with subsidised oil. In the event that a dismantling of the Petrocaribe programme by the Venezuelan government occurs, already weak external positions would be further exacerbated and the risks of a number of balance of payments crises across the region would rise.