Like a bear waking up from a long hibernation, a trading block of Latin American countries enters the 21st Century hungry.

“Sales opportunities in the food market are significant,” said Frank Coolidge, agricultural counselor, Foreign Agricultural Service, USDA.

Coolidge, who keeps tabs on economic development in Guatemala, Honduras and El Salvador from his Guatemala headquarters, says changes in Latin America make the region a prime target for U.S. agricultural marketing efforts.

Jaime Malaga, assistant professor at Texas Tech University and an expert on countries in the “Andean Group,” says growth potential in that region also creates marketing opportunities.

Coolidge and Malaga discussed market potential in South America during an International Trade conference in San Antonio recently.

“We need to consider Central America as one market,” Coolidge said and added that it is the fastest growing market for U.S. agricultural goods. “Producers and exporters need to get involved in this growing market, and FSA is already established (in the region) to help.”

He said the three countries have a gross domestic product of more than $40 billion from more than 25 million consumers. “Growth in the hotel, restaurant and institution sectors tops 14 percent per year. That's a $1 billion market.”

U.S.-based stores in the region, Coolidge said, are required to import U.S. goods “to fulfill franchise agreements. Still, some trade barriers exist, including high duties on some products.”

The opportunities, however, appear significant. “The region has more than 300 supermarket outlets and consumers buy more than 30 percent of food from supermarkets, up from 15 percent just five years ago. Supermarket sales represent $1 billion per year. Convenience stores account for another $150 million.

“The supermarket sector is growing better than 10 percent per year. Also, the food processing industry is expanding at 12 percent annually, a $700 million per year industry, double the level of six years ago.”

Coolidge said U.S. agricultural producers should find ready markets in meat processing, dairy, baking, snack foods and beverages. “The possibilities are endless.”

He said the United States has some marketing advantages in the region.

“Importers like to trade with the United States because they view U.S. goods as high quality, making the United States the biggest trader. Also, shipping costs are competitive.”

Trade obstacles include competition for growing markets, including producers from within the region. “Lack of proper storage also inhibits growth. Labeling requirements and high duties also pose challenges. The most significant limitation may be price sensitivity in a region where incomes are low.”

Malaga said challenges may be more pronounced in the Andean Region. “They already have bi-lateral trade agreements with Mexico and China. Also, long-term trade integration could be difficult, although they have made progress in the past few years.”

Currently, the United States holds the top spot in exports to South America, he said. “Brazil comes in second, but a distant second. The European Union has become the biggest investor in the region, recently displacing the United States.”

The Andean Group imports some $40 billion of agricultural products from the United States, 32 percent of its total. The European Union provides 16 percent and Japan 5 percent.

“Chile and Mexico are increasing export activity into the area by 15 percent per year as the U.S. share declines by 4 percent,” Malaga said. The market is large, more than 119 million people and a $78 billion GDP.

Other potential trade problems, Malaga said, include political instability, social unrest, and differing levels of market liberalization.

Price bands also create trade barriers. “Price bands represent a range within which commodity prices must move. If it goes outside that band, governments impose a duty. That makes it difficult to export into the region.”

“We see some growth in the region, about 1.9 percent per year.”

The region is a net exporter of oil and has “immense natural gas resources for export. Large mining prospects and vast fishing resources help support the economy. Malaga said the region needs investment.

rsmith@primediabusiness.com