Multisectoral Value Chain Analysis ‘Connecting Central America’ Commissioned by The Centre for the Promotion of Imports from developing countries (CBI) Profound with support from CATIE October 2018 About the ‘Connecting Central America’ project CBI’s “Connecting Central America” initiative aims to strengthen 60 Small and Medium sized Enterprises (SMEs) and cooperatives from Central America, between 2018 and 2021, in becoming (more) competitive on the European market. The initiative is part of the Central American Regional Economic Integration (INTEC) project, a project financed primarily by the European Union, and coordinated by SIECA, which aims at strengthening the economic integration in Central America and maximizing the benefits of the implementation of the Association Agreement between the European Union and Central America by reducing regional constraints to competitiveness and diversification in Central America. One of its components aims particularly at strengthening Central American capacity to trade in goods and services. Within the context of this component, CBI executes the initiative "Connecting Central America". The "Connecting Central America" initiative consists of three stages: 1. The preparation stage (August 2017 – June 2018): including the selection and analysis of selected value chains (the current report is the result of this analysis), the final sector selection, and the selection of local partners. 2. The Promotion & Export audit stage (July – December 2018): including promotion and training activities for potential project participants (companies), a call for company applications, and the company selection, including export audit visits by European experts and financial audits by Central American financial experts. 3. The implementation stage (January 2019 – September 2021): including – at micro (company) level - training and individual coaching activities, a European market orientation mission, the development of export marketing plans and corporate social responsibility road maps by and for project participants, and European trade fair participations. This stage also includes – at meso (sector) level facilitation, coaching and training activities to address export bottlenecks or opportunities at meso (sector) level, that require collective action. This publication has been produced with the assistance of the European Union. The contents of this publication are the sole responsibility of CBI and can in no way be taken to reflect the views of the European Union. 2 Contents About the ‘Connecting Central America’ project .............................................. 2 1. Introduction ...................................................................................... 7 1.1. Context .................................................................................................... 7 1.1.1. Institutional background .................................................................................. 7 1.1.2. CBI’s experience in Central America .................................................................. 7 1.2. Methodology ............................................................................................. 8 1.2.1. Team composition and responsibilities ............................................................... 8 1.2.2. Action Plan ..................................................................................................... 9 2. Management Summary ..................................................................... 11 2.1. Context and structure of the VCA document ................................................11 2.2. Main findings and conclusions ....................................................................11 2.2.1. Specialty coffee ............................................................................................. 11 2.2.2. Cacao and derivatives..................................................................................... 13 2.2.3. Fresh fruit and vegetables ............................................................................... 16 2.2.4. Processed fruit and vegetables ........................................................................ 18 2.2.5. Fish and seafood ............................................................................................ 20 2.3. Final conclusions and value chain selection ..................................................23 3. Specialty Coffee Value Chain ............................................................. 25 3.1. Key European market characteristics and Central America’s competitiveness on the European market .........................................................................................25 3.1.1. Supply from Central America ........................................................................... 25 3.1.2. European demand .......................................................................................... 27 3.1.3. Market trends ................................................................................................ 29 3.1.4. Competition .................................................................................................. 31 3.1.5. Benchmarking ............................................................................................... 32 3.2. Structure, governance and sustainability of the value chain ...........................32 3.2.1. Structure ...................................................................................................... 32 3.2.2. Governance ................................................................................................... 35 3.2.3. Intra-regional trade ........................................................................................ 40 3.2.4. Sustainability of the value chain....................................................................... 40 3.3. Value chain bottlenecks, risks and opportunities ...........................................42 3.3.1. Bottlenecks ................................................................................................... 42 3.3.2. Opportunities ................................................................................................ 45 3.4. Possible solutions and support actions ........................................................47 3.4.1. Solutions and support actions .......................................................................... 47 3.4.2. Possible participants for the CBI programme ..................................................... 50 3.4.3. Risk mitigation strategies in sustainability performance ...................................... 51 4. Cacao and derivatives Value Chain ..................................................... 52 4.1. Key European market characteristics and Central America’s competitiveness on the European market .........................................................................................52 3 4.1.1. Supply from Central America ........................................................................... 52 4.1.2. Current demand in Europe .............................................................................. 55 4.1.3. Market trends ................................................................................................ 57 4.1.4. Competition .................................................................................................. 59 4.1.5. Benchmarking ............................................................................................... 60 4.2. Structure, governance and sustainability of the value chain ...........................60 4.2.1. Structure ...................................................................................................... 60 4.2.2. Governance ................................................................................................... 62 4.2.3. Intra-regional trade ........................................................................................ 65 4.2.4. Sustainability of the value chain....................................................................... 65 4.3. Value chain bottlenecks, risks and opportunities ...........................................67 4.3.1. Bottlenecks ................................................................................................... 67 4.3.2. Opportunities ................................................................................................ 70 4.4. Possible solutions and support actions ........................................................71 4.4.1. Solutions and support actions .......................................................................... 71 4.4.2. Possible participants for the CBI programme ..................................................... 74 4.4.3. Risk mitigation strategies in sustainability performance ...................................... 75 5. Fresh Fruit and Vegetables Value Chain .............................................. 76 5.1. Key European market characteristics and Central America’s competitiveness on the European market .........................................................................................76 5.1.1. Supply from Central America ........................................................................... 76 5.1.2. European demand .......................................................................................... 79 5.1.3. Market trends ................................................................................................ 83 5.1.4. Competition .................................................................................................