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Cablegate: Cafta-Dr Success Stories for Nicaragua - Fruits And

VZCZCXRO8262
PP RUEHLMC
DE RUEHMU #0065/01 0222234
ZNR UUUUU ZZH
P 222234Z JAN 08
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 1942
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 03 MANAGUA 000065

SIPDIS

SIPDIS

USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN
3134/ITA/USFCS/OIO/WH/MKESHISHIAN/BARTHUR
STATE PASS USTR

E.O. 12958: N/A
TAGS: ETRD ECON PREL NU
SUBJECT: CAFTA-DR SUCCESS STORIES FOR NICARAGUA - FRUITS AND
VEGETABLES

Summary and Introduction
------------------------

1. Trade data suggest that the Dominican Republic - Central America
- United States - Free Trade Agreement (CAFTA-DR) has spurred only
modest export growth for Nicaragua. USITC reports that Nicaraguan
exports are up 2.5 percent for the first ten months of 2007,
compared to the same period in 2006, from $1.286 to $1.318 billion.
However, these data mask changes at the microeconomic level that
demonstrate CAFTA-DR's transformative potential. This report, the
first in a series of three, provides examples of businesses and
cooperatives that have taken advantage of the trade agreement to
increase exports of vegetables and root crops to the United States.
In many cases, these firms have made new investments, or have plans
to do so, and they have increased employment.

2. CAFTA-DR has motivated individual growers, cooperatives, and
local companies to increase cultivation of fruits, vegetables, and
root crops for export to the United States. For the first ten
months of 2007, Nicaragua exported $31 million worth of such
agricultural products to the United States, according to USITC data,
up from $23.3 million during the same ten-month period in 2006.
Plantain exports to the United States, featured in the success
stories that follow, went from $35,000 in the first period to
$718,000 under CAFTA-DR. Other success stories listed below include
exports of root crops to the United States, which increased from
$5.6 to $7.3 million for the ten-month period; beans, which
increased from $2.8 to $3.2 million; and peppers, which increased
from $592,000 to $1.9 million.

Chinandega and Rivas Farmers Exporting Plantains
--------------------------------------------- ---

3. CAFTA-DR has encouraged a cooperative in Chinandega to improve
production methods and sell plantains in the increasingly profitable
U.S. market. The La Esperanza cooperative, which grows
approximately 346 acres of plantains, currently sends two containers
to Miami each week and already has plans to increase exports
further.

4. Plantain growers in Rivas report that CAFTA-DR has stimulated
trade within Central America. The growers, who participated in a
USAID-sponsored workshop to discuss CAFTA-DR opportunities, report
that the treaty has boosted regional trade by simplifying export
requirements. Four different associations of plantain producers
from the department are currently exporting to markets in Central
America and the United States, with more producers to join them in
the coming year.

5. MCC assistance has enabled three additional plantain
cooperatives from Chinandega to take advantage of these simplified
export requirements and export to nearby El Salvador. Until
CAFTA-DR was enacted, they had only exported in small quantities to
Honduras and served local markets. MCC is helping producers develop
business plans and install micro-irrigation systems on their
farmlands to increase yields. In addition to plantains, some
Chinandega farmers plan to export plantain cuttings for
propagation.

Matagalpa Cooperatives Exporting
Root Crops and other Vegetables
--------------------------------

6. Under CAFTA-DR, a Matagalpa cooperative, Cosfrunic, has exported
containers of root crops to Florida on a monthly basis, including
80,000 pounds of dasheen (taro) in March 2007. The first year
CAFTA-DR was in effect, they exported 22 containers of various
products such as green beans, eggplant, pickles, squash, and okra.

7. Cosfrunic, financed in part by the Inter-American Development
Bank's Rural Development Institute (IDR), was founded in 2004 and
now includes 69 active members. While the official IDR project
ended in 2006, members of the cooperative have continued to put into
practice the skills they learned in the production, processing, and
export of nontraditional products. Cosfrunic is also working to
develop strategic alliances throughout the Matagalpa region so that
they may offer their processing services to local producers who are
not members of the cooperative.

8. Another farmers' cooperative in Matagalpa is now able to supply
the U.S. market and take advantage of CAFTA-DR thanks to a
USAID-financed processing plant that benefits the 43 producers of
the Jorge Salazar Cooperative as well as another 100 producers who
will use the modern facility. The farmers also receive technical
assistance, client contacts, training, and administrative
assistance.

9. The first year of CAFTA-DR, the cooperative exported $1.2
million worth of root crops, primarily malanga and quequisque, to
the United States; in the first four months of 2007, the cooperative
exported 33 containers worth $312,000. These activities have
generated 80 new jobs, most of which have been filled by women who
wash, cut, and pack the vegetables. The president of the Jorge
Salazar Cooperative attributes the group's recent success to
improvements its members have made in the quality of their products,
allowing them to take full advantage of the export opportunities
offered by CAFTA-DR.

10. Thanks to CAFTA-DR, growers in Matagalpa have seen 120% export
growth. The growers joined forces to create an export association
known as APAC that currently export five containers per month of
root crops to the United States. Members of the association report
that they began exporting in September 2005, but experienced a
significant increase in demand with CAFTA-DR's reduction in tariffs
and simplification of export/import requirements.

11. According to the marketing manager at APAC, CAFTA-DR "is an
excellent treaty that has opened doors to the U.S. market and forced
us to become more competitive and innovative." APAC recently
expanded and modernized its processing plant, which is located in
the municipality of San Ramon. It has also hired additional staff
and added new members to increase production and fill new orders.

Large Coffee Grower Diversifies Product Line
--------------------------------------------

12. A coffee exporter now exports red beans thanks to CAFTA-DR.
Since 1952, CISA Exportadora has been one of the leading coffee
producers and exporters in Nicaragua. Due to the volatility of
international coffee prices, and seeking to make use of CAFTA-DR,
the company has diversified production and is currently exporting
red beans as well as the root crop dasheen. CISA has exported more
than 1 million pounds of red beans to Central America and the United
States each year since 2003, but it has noticed significant export
growth over the past two years. Its buyers include both retail and
wholesale companies located in California, New Jersey, Florida, and
Texas. Meanwhile, since October 2006 CISA has made weekly shipments
of more than 1.2 million pounds of dasheen and other root crops to
customers to Florida and Puerto Rico.

13. While maintaining its core business in coffee, CISA has
generated 80 new jobs, including 30 direct employees who are
involved with red bean exports and 50 indirect employees who support
the processing of root crops. CISA officials note that since
CAFTA-DR entered into force, they have found more interest on the
part of U.S. customers in their products. For example, in 2007 they
met potential new U.S. importers during a commercial trade mission
to Miami organized by Nicaragua's Center for Export Promotion, also
known as NICAEXPORT.

Leon Farmers Export Cassava and Plantains to
El Salvador and the United States
--------------------------------------------

14. Thanks to CAFTA-DR, cassava growers now export to El Salvador
and to the United States. In Leon, there are approximately 3,000
cassava growers who harvest approximately 7.5 million pounds of the
root crop per year for sale in local and international markets. In
January 2007, MCC's Rural Business Development Project began
connecting farming cooperatives in Leon with clients in El Salvador.


15. One such client, DIANA Food Products, agreed to purchase a
trial order of 44,000 pounds from Las Brisas, a small Leon cassava
cooperative of 66 producers. By exporting the Nicaraguan producers
earned almost three times the local price for their crop. Following
this initial success, the cooperative has entered into a joint
venture with a local processor, Technoagro, and to date they have
exported seven containers of 46,000 pounds to the United States.
The cooperative selects first grade cassava and delivers it to the
processing plant and the processor adds value by washing and waxing
the cassava, which is then packaged and exported. DIANA is also
making weekly purchases of plantains from MCC supported cooperatives
in the Tonala-Chinandega region totaling three containers of 60,000
units each per week. In addition to marketing assistance, MCC has
also provided significant assistance to growers in meeting
international market quality standards.

16. As the demand for international cassava exports steadily
increases, the number of local employment opportunities in the
industry is also increasing. Access to U.S. markets had been
limited prior to CAFTA-DR by an 11.3% ad valorem tariff. MCC plans
to finance a feasibility study for the construction of a cassava
processing plant in Chacraseca, Leon that would further support
export growth in this sector.

Nicaraguan Coffee Exporters Getting Connected Online
--------------------------------------------- -------

17. CAFTA-DR has raised awareness of Nicaraguan products, improving
a coffee company's internet sales to U.S. consumers. Cafetalera
Castellon has exported Nicaraguan coffee to the United States for
more than three years and is eager to expand its reach by selling
its products online. Although coffee entered the United States
duty-free before CAFTA-DR, company officials report that the
agreement has created interest among U.S. buyers for all Nicaraguan
goods. Cafetalera Castellon is currently exporting 4,000 pounds of
ground and roasted coffee per month to buyers in Pennsylvania,
Miami, and Texas, but they expect to sell up to 10,000 pounds per
month online through a new website. Company officials are also
negotiating a contract with a large retail chain in the United
States, which would increase their sales by up to 75,000 pounds of
coffee per month. This contract will allow the company, which
currently employs 55 permanent workers, to triple production and
hire additional staff.

Lower Okra Duties Result in Higher Okra Exports
--------------------------------------------- --

18. According to a small farmer from Chinandega, since CAFTA-DR
entered into force he has increased his production by 130%. The
first 12 months the treaty was in effect, he exported 517,500 pounds
of okra, up from 225,000 pounds the 12 months before. Before
CAFTA-DR, the tariff for okra produced in Nicaragua and exported to
the United States was $0.85 per 15-pound box. Under CAFTA-DR, this
product enters duty free. This drastic increase in production has
generated $9,800 in additional revenues for him and his family.

19. The producer from Chinandega is currently exporting okra and
guar beans (an ethnic Indian product) to buyers in California and
Florida. He has four permanent employees and up to 220 temporary
employees during the harvest season, up from 100 prior to CAFTA-DR.
He has also improved his production process by upgrading his
irrigation system and packaging plant to improve product quality.

Farmers in Madriz Exporting Mini-Vegetables
-------------------------------------------

20. CAFTA-DR market access has been critical to the success of
growers in the Department of Madriz who are cultivating a variety of
mini-vegetables for export to the United States. The project is
generating between $2,000-$3,000 in revenue for each crop cycle, and
there are typically three crops per year. Some of the
mini-vegetables currently exported include green zucchini, zucchini
patipan, zumbor zucchini, Hindu eggplant, Thai eggplant, baby-corn,
and carrots. They plan to cultivate additional products such as
Chinese okra, Thai okra, and cucumber, as well as other ethnic
products with niche markets in the United States. Producers from
nearby departments have shown interest in replicating their
success.

Nicaraguan Pepper Producers
Work with USDA to Reach the U.S. Market
---------------------------------------

21. Nicaragua was the first country to export peppers to the United
States under CAFTA-DR. Following the publication of an Animal and
Plant Health Inspection Service rule on the import of fresh peppers
from Central America to the United States, Nicaragua worked closely
with USDA to develop a work plan to address pest and disease
problems that had previously halted exports. Completion of the work
plan, along with a USAID-sponsored Regional Pepper Training
Activity, allowed Nicaragua exporters to meet U.S. phytosanitary
requirements.

Spice Producer Increases Export
-------------------------------

22. Spice grower and exporter Jose Benito Ubeda has been exporting
cardamom and lemon grass to the United States for three years now,
but he has seen demand for his products increase dramatically since
CAFTA-DR was adopted. This small producer, who leads an 82-member
cardamom farmers' cooperative in San Rafael del Norte, launched his
business Rio Grande Organics with support from USAID. Ubeda
currently exports to the United States and Europe under his own
name, but he hopes to register the Rio Grande Organics brand
officially within the next year. He has invested in a new
processing line to meet heightened consumer demand under CAFTA-DR,
and he employs 10 full-time workers. Ubeda exports 22,000 pounds of
cardamom and 8,800 pounds of lemon grass to the United States each
year, primarily to an aromatic and medicinal herb processor in
Nevada.

TRIVELLI

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