Food Processing

Overview

Historically named the “breadbasket of Central America”, Nicaragua is known for its ideal climate and fertile soils with optimum conditions to produce a wide variety of agricultural products, from quality forestry plantations in the Atlantic region to shrimp cultivation and industrial fishing operations in the coastal areas of the Pacific and the Caribbean.

The country has more than 3.5 million hectares of forestry potential, with approximately more than 19,000 km² of economically valuable natural forests apt for sustainable management projects, the majority of which are found in the Atlantic region. Over 1.8 million hectares of land are suitable for forest plantations of species with commercial value, including royal cedar, mahogany, pochote, teak, eucalyptus and melina.

Additionally, Nicaragua has diversified its exportable offer in the last few years, which has become a dynamic engine for economic growth in the country, representing 46 percent of the country’s total exports of goods in 2014. Its main export products include: meat, coffee, shrimp, sugar, tobacco and cigars, dairy, peanuts, edible oils, beans and lobster.

In 2013, the agribusiness sector was of great socio-economic importance for Nicaragua, contributing approximately 60 percent of total exports value, excluding free zones.

Nicaragua is divided into four major regions with distinct characteristics of climate, soil types and topography:

The Pacific region: home to some of the most fertile soils in the country, where the majority of fruits, vegetables and tubers are grown. The northern Pacific region, known as Northwest Nicaragua or Occidente, is home to the majority of the industries related to the production of oil seeds, meat and shrimp. The departments of Managua, León, and Chinandega comprise most of Nicaragua's agribusiness and food industry activities.

The Central region: home to 50 percent of the country's cattle farming and is the main zone for dairy exports.

The Northern region: the most mountainous region of the country, with the coolest temperatures in Nicaragua (24⁰ C / 75⁰ F annual average). This zone is the main coffee-producing and exporting region of the country. The region also has a lot of potential for the cultivation of vegetables and ornamental plants.

The Caribbean Coast: is characterized by precipitations between 2,500 and 5,000 mm per year. The region has great potential for forestry plantations, as well as the cultivation of products such as cacao, African palm and other crops.

Investment Opportunities

Nicaragua produces a wide variety of raw material that could be processed such as meat, fruits, and vegetables, cocoa, coffee, sugar, corn, seafood, beans, plantains, among others. The country also currently processes cookies and snacks, instant coffee and rum.

Some food processing opportunities in Nicaragua include:

• Corn-based products: tortillas and snacks
• Cereals: roasted and ground cocoa and coffee
• Baked products: cookies and biscuits
• Fried goods: plantains, cassava, potato, and malanga
• Vegetables
• Candies, jellies and canned food
• Beverages
• Fresh and dehydrated fruit
• Sauces, pickled vegetables and condiments

Renowned international companies such as Kraft Foods, Parmalat, Cargill, Nestlé, Hortifruti (Wal-Mart), Precious Woods and Numar have established operations in Nicaragua due to the advantages the country offers. 

Competitive Advantages

Nicaragua has made important progress in the diversification of exports and in the industrialization of its productive sector. Agro-exports have become one of the most dynamic sectors in the economy. Consumer products such as snacks and cookies, and fruit and vegetable juices have become lucrative markets for new business opportunities. The expansion of supermarket chains and the growing demand for food products in the region continue to attract important investment in the agro-export sector. In addition to this, we have the growing demand of bio-fuels and the enormous amount of underutilized land with forestry potential. 

Generous Fiscal Incentives

• Tax Concertation Law (Law 822): This law grants fiscal exemptions to the export of goods and of services provided abroad and also establishes several fiscal benefits to certain productive sectors of the economy with the purpose of fostering their growth and development. Read more.

• Temporary Admissions Law (Ley 382): This law establishes a system that allows the entry of goods into national customs territory and local purchases of the same without payment of any duties and taxes. Companies that export directly or indirectly at least 25% of their total sales are eligible for this scheme. Read more.

• Free Zones Law (Decree 46-91): Nicaragua offers significant tax incentives under free zones regime for those companies interested in establishing export-oriented operations, in compliance with World Trade Organization regulations. Read more.

Qualified Labor Pool at a Competitive Cost

The agricultural sector represents the main source of employment in Nicaragua. Most of the jobs come from cattle raising and farming industries, and to a minor extent, in the forestry and fishing industries.

There is a large pool of qualified labor for middle and upper management. Close to 5,000 university students graduate each year with titles in business management, agro-engineering, zoology, agribusiness, biology and veterinary science, among other fields.

Nicaragua has the most competitive agricultural labor costs in the region, as shown in the following graph:

This benchmark shows fully-loaded market wages in the region for agribusiness and forestry sector. Fringe benefits in Nicaragua include: social security, holidays and vacation leave, severance, Christmas bonus and contribution to the National Training Institute (INATEC).  

Nicaragua is characterized by having a young, qualified and productive labor force. The country possesses a solid university system and centers of technical education in areas related to agribusiness and the forest industry.

Companies find that cost-saving benefits, along with qualified, productive human resources, contribute to improve their company's competitiveness. The Nicaraguan labor force is recognized for being highly productive, with a fast capacity of learning and by its stability.

Market Access

Nicaragua has signed Free Trade Agreements (FTA's) with the United States, Mexico, Dominican Republic, Taiwan, Panama, Chile and most recently with the European Union (ratification pending). Additionally, Nicaragua is part of the Central American Common Market, which confers with the free movement of capital, services and human resources in the region, and is constructing the Central American Customs Union. At the moment, the country is negotiating Free Trade Agreements with Chile, Canada, CARICOM and is working on the FTA signed with Mexico and other Central American nations. 

Additionally, Nicaragua already counts with preferential access to the Canada, Norway and Japan through Generalized System of Preferences (GSP). Also they are negotiating GSPs with the countries of the ALBA and Mercosur.

The Free Trade Agreement with the United States, known as DR-CAFTA, entered into force in 2006, consolidating Nicaragua's advantageous position as an export platform to this important market. Under DR-CAFTA, Nicaragua was provided:

• Free and immediate access for 95 percent of agricultural and industrial goods, including: fruits, vegetables, preserved fruits and vegetables, shellfish and seafood, processed foods, forestry products, furniture and wood products, handicrafts, and leather goods, among other things.
• Access through special quotas for all other agricultural goods, including sugar, peanuts, peanut butter, meat and dairy products (cream, yogurt, cheese, ice cream and other products).

Testimonial

Mangosa (Frozen Fruit)

Mangosa has invested US$30 million, with plans of continuing to do so in the following years to increase its production. Also, during 2012, Frozen Fruits made a second investment to improve its infrastructure and the technology of its equipment. “The Government of Nicaragua has created infrastructure to facilitate and improve the access road to the farm, and has created tax incentives that apply directly to the production and export of our products. The process of importing equipment and exporting our products is efficient and without complications, and has improved in the recent years”, mentioned Jorge Figueroa, CEO for both companies.

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