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Export & Business Opportunities in Central and South America

Export & Business Opportunities in Central and South America. Ricardo Vernazza-Paganini Director, Central & South America U.S. Meat Export Federation. General Overview. Population Growth. +53%. Per Capita Income Growth. +22%. Tourism Expansion in Central America. +131%.

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Export & Business Opportunities in Central and South America

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  1. Export & Business Opportunities in Central and South America Ricardo Vernazza-Paganini Director, Central & South America U.S. Meat Export Federation

  2. General Overview

  3. Population Growth +53%

  4. Per Capita Income Growth +22%

  5. Tourism Expansion in Central America +131%

  6. Driving force of Food Sales • The growth rate of the market share of Latin American supermarkets in only 1 decade was similar to that achived by US supermarkets in 5 decades.

  7. Beef and Pork Competitors in Central America

  8. Beef and Pork Competitors in South America

  9. Guatemala

  10. Overview • Population (largest country): 11 million • Per capita Income (1990-2002): +376% • Number of Tourists (1996-2002): +102% • Supermarket growth (1995-2003): +296% • Foodservice growth (1998-2004): +78%

  11. Opportunities & Challenges • Beef: + 96%

  12. Opportunities & Challenges • BEEF: - 10%

  13. Opportunities & Challenges • Beef: - Most opportunities: Beef cuts for the Foodservice - Current duties: 15% - CAFTA: Prime and Choice: 0% immediately - Very positive perception towards US beef

  14. Opportunities & Challenges • Beef: - Key players: 600 MT/year (37% imports) (1) Alimentos Campeon (CAB plant certification) (2) Grupo Buena: 1 of the 3 largest beef importers (features several US brands)

  15. Opportunities & Challenges • Value-added Beef: La Fragua (largest retail chain- 91 outlets and opening 5 outlets per year): - New strategic direction: to grow in the meat value-added/branded business, - Majority of meat companies lack know-how, technology and machinery to produce these products.

  16. Opportunities & Challenges • PORK: +100%

  17. Opportunities & Challenges • PORK: +117%

  18. Opportunities & Challenges • Pork: • Fresh/Frozen pork (phased out for 15-years) • Duty-free TRQ : 4,180 MT/year (+25% more than average export 1999-2003) • Bacon & offals: 0% tariffs immediately

  19. Opportunities & Challenges (1) Processing Industry: Embutidos Santa Lucia (4th largest): • Currently import (picninc, trimmings, bellies, etc) = 340 MT/year 150 MT/year (Cafta prices down) (2) Fresh Cuts and offals: La Fragua strategy to expand: • Cheap protein source (affordable for 100% population) • Cafta will eliminate the “monopoly scenario” of Empacadora Toledo.

  20. Opportunities & Challenges (3) Processed/branded business: Embutidos Santa Lucia (4th largest): - Joint venture to produce susages La Fragua: - New strategic direction: to grow in the meat value-added/branded business, - Majority of meat companies lack know-how, technology and machinery to produce these products.

  21. El Salvador

  22. Overview • Population (3rd largest country): 6.4 million • Per capita Income (1990-2002): +1900% • Number of Tourists (1995-2003): +170% • Supermarket growth (1995-2003): 57 outlets 134 outlets (+135%)

  23. Opportunities & Challenges • BEEF: +55%

  24. Opportunities & Challenges • BEEF: -58%

  25. Opportunities & Challenges • Beef: • Most opportunities: Beef cuts (striploins, brisket, inside and outside skirts & top blade) - Beef Cuts duties: 30% 0% immediately (CAFTA: Prime and Choice) • Positive perception towards US beef • Potential market size expansion for cuts 125 MT/year 55O MT/year (1999-2003)(+440%)

  26. Opportunities & Challenges • PORK: -15%

  27. Opportunities & Challenges • PORK: (1) Shortage in supply: (a) High Import Duties (40%) + (b) Hog Production -51%

  28. Opportunities & Challenges • PORK: (2) CAFTA: (a) Pork cuts (processing & fresh – basket D) Duty-free TRQ = 1,650 MT/year (100% more than 1999-2003) (b) Bacon, offals & skin O% immediately (3) Fresh pork consumption: - Lowest in C. America: 2.0 kg/capita/year (65% less than average) - Strong negative perception toward fresh pork - USMEF currently developing a campaign

  29. Opportunities & Challenges • PORK: - Potential market size expansion: 831 MT/year 2689 MT/year (1999-2003)(+324%) 2,400 MT (picnic, trimmings, skin, etc) 97 MT fresh cuts (riblets, ham and loins) 192 MT processed/branded pork

  30. Costa Rica

  31. Overview • Population : 4.1 million • Per capita Income (1990-2002): +392% • Number of Tourists (1995-2003): +144% • Supermarket share (1993-2003): +150% • Foodservice:

  32. Opportunities & Challenges • BEEF: (a) plant-by-plat inspection system (b) per capita consumption -31%

  33. Opportunities & Challenges • BEEF: +250%

  34. Opportunities & Challenges • Beef Cuts: it is a market “waiting to be developed”. - Beef Cuts duties: 18% 0% immediately (CAFTA: Prime and Choice) • Beef Quality perception: (a) Local awareness US quality is low (b) Very positive perception towards C. Rica beef (99% zebu; slaughter age >30 months) (c) Follow the same strategy as in Guatemala

  35. Opportunities & Challenges • Beef Offals: • Total import market size: 900 MT/year 3 main players were US (18% duties), Chile (0% duties), Nicaragua (0% duties) • CAFTA will level the field: 18% 0% immediately

  36. Opportunities & Challenges • PORK: +62%

  37. Opportunities & Challenges • PORK: • Processing Industry: - Canada duties : 33% (2001 CCRFTA) Canada price advantage: 15-20% - USA duties : 48-53% US price advantage: 33% - USA Duties CAFTA : 0% duties (TRQ: 1,100 MT)

  38. Opportunities & Challenges CCRFTA - 66%

  39. Opportunities & Challenges (2) Processed pork: (a) Costa Rica Pork Industry is strong and modern (b) US products will get more competitive (CAFTA): - Duties for bacon = 0% immediately - Duties for processed pork (D basket) = currently face 45% 36% (base duty)

  40. Thanks!

  41. Colombia

  42. Overview • Population (2nd in population): 43 million • Per Capita Income (1999-2005*): 9.9% • Inflation (1999-2005*): 43% • Unemployment (1999-2005*): 21% • Annual GDP Growth: -5% (1999)…..+4% (2005*)

  43. Opportunities & Challenges • BEEF:

  44. Opportunities & Challenges • BEEF: + 44%

  45. Opportunities & Challenges • Beef Offals: livers, hearts and stomachs - Highest quality (color, size, homogeneity and presentation) - US is very price competitive - Market size: 2,380 MT/year

  46. Opportunities & Challenges • Beef Cuts: more challenging a) Currently: US (80%) & Mercosur duties (20%) b) AndeanFTA: Prime & Choice (0%) c) Colombian beef most expensive of L. America: Colombian FOB prices >100% Argentina and 150% Uruguay d) Key partner (Frigorifico Guadalupe): - Largest Meat Packer (import & export) - Strong/modern processing/logistics/cold-chain capabilities - Joint venture: import carcasses/primals to be fabricated and packed by them (wage = $1.7/hr. vs $4-8/hr.)

  47. Opportunities & Challenges • PORK: - 64%

  48. Opportunities & Challenges - Big Challenge: Chile (comparable prices but better quality and service) 58%

  49. Opportunities & Challenges (1) Fresh pork market: (a) Structural changes: 2 main players: - thousands of small family-owned operations spread through the country (wet markets) - Inversiones Nacional Chocolate (supermarket): Redirecting Strategy - Focus on processed - Moving away from fresh market Open Opportunities: Small producer unable to meet the increasing demand of retail chains (products standardization, food safety standards, volume commitments, automatic inventory programs, etc.)

  50. Opportunities & Challenges (1) Fresh pork market: (b) Fresh pork is the cheapest of the proteins (90% population middle & low classes) (c) Low consumption: 5kg/capita/year (30% < than average in Central & South America) (d) Negative perception: USMEF campaign

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