Thanks to infrastructure modernisation projects and the ratification of numerous trade deals in recent years, the agriculture sector in Panama is poised for growth. Free trade agreements (FTAs) with the US and several Central and South American countries, as well as an association agreement with the EU, have opened international markets to exports. A government-sponsored overhaul of agriculture transport logistics, including the construction of a “cold chain”, is expected to boost national competitiveness.
In its Strategic Plan 2010-14, the government identified agriculture as one of four areas of the economy that would drive growth, along with logistics, tourism and financial services. This is part due to the sector’s ability to create jobs – it accounted for 17% of employment as of 2011, the most recent data available. Moreover, a number of developments in recent years have set the stage for expansion.
In June 2012 Panama, along with five other Central American countries – Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua – signed an association agreement with the EU. The agreement included trade liberalisation provisions expected to contribute to growth in the fruit, vegetable and nuts market, according to an independent report commissioned by the EU. Europe is Panama’s second-largest trading partner, after the US, and the biggest importer of Panamanian agricultural products.
Panama has also entered into FTAs with the US and the members of the Pacific Alliance: Mexico, Colombia, Chile and Peru. Panama’s FTA with Mexico is expected to be signed in spring 2014. All of these deals have reduced or eliminated agricultural tariffs, expanding the markets to which Panama’s farmers have access.
Major infrastructure projects will help the country take advantage of this market expansion. These include the Santa María irrigation system (at a cost of $200m), the La Villa dam ($200m), the Barú irrigation system ($140m), the San Pablo dam ($165m) and the Peralas dam ($105m). Additionally, the Ministry of Public Works has devoted substantial resources to improving roads in rural provinces such as Chiriquí ($60.3m), Veraguas ($42.7m), Los Santos ($41.1m) and Herrera ($40.6m).
The most important infrastructure project for the agricultural sector is the development of a cold chain, a continuous, temperature-controlled supply chain designed to preserve produce from harvest to market. It is an essential component of any modern agricultural industry, and one that has been missing in Panama. The cold chain, which will include refrigerated trucks, post-harvest treatment and storage centres, will initially be used to transport and store types of produce that are sensitive to changes in temperature and humidity, such as peppers, green beans, celery and cilantro.
In 2011 the government awarded a $75m contract to Consorcio Panamá Frío, a joint venture between Outsourcing of Venezuela and Mejores Acabados of Panama, to build four post-harvest centres. These are located in rural, agricultural regions in the towns of Volcán, Cerro Punta, Dolega and El Ejido. As of mid-2013, the government’s investment in the project, including the post-harvest centres, the distribution markets and other elements, totalled $287m.
The cold chain can be expected to significantly boost agricultural output and quality. According to Consorcio Panamá Frío, up to 40% of Panama’s agricultural output is lost to spoilage before it arrives at market. The lack of a modern, temperature-controlled supply chain has also reduced the shelf life and freshness of Panamanian goods. According to the government, the cold chain will guarantee food safety, quality and traceability and will bring Panama’s agriculture logistics and products into line with international standards such as the Codex Alimentarius, ISO 9000 and Food and Agriculture Organisation guidelines, making local goods more attractive to international buyers.
The government expects the cold chain to be fully operational by December 2013 and construction appears to be going to plan. As of mid-2013 distribution markets in David and Panama City had reached or nearly reached the final phases of construction, and Consorcio Panamá Frío had turned over two of the post-harvest centres to the government, meeting its deadlines. With the cold chain operational and markets newly opened to Panama’s produce, 2014 could be a year of significant growth for agriculture sector.
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