Baking: Challenges for the Business

In Nicaragua, companies involved in the production of bread are facing several difficulties because of the increase in their operating costs, which derive from the rise in taxes and electricity tariffs.

Wednesday, July 24, 2019

The beginning of the year has been difficult for most of the productive sectors of the country and bakers are not exempt from this reality. On February 27, 2019, the amendment to the Tax Agreement Law was approved, which consisted of raising from 1% to 2% the income tax for medium sized companies with higher incomes. Another of the measures contemplated by the reform was to raise the income tax of large taxpayers from 1% to 3%.

In addition to the increase in taxes, there is the increase in electricity prices, since since June 1 there has been a 3% increase in the average selling price to the final consumer in the country.

This increase in costs has been coupled with the political and economic crisis. In this context, businessmen of the sector estimate that due to the complex situation that the country has been going through since April 2018, in the last months some 80 thousand jobs have been lost in the bakery industry.

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Ermis Morales, representative of the bakery industry, explained to that they still "... maintaining the correct readjustment of the prices of popular breads, but electric energy is becoming unpayable. For micro and SME’s, it is not the best moment of the last 40 years, this is the crisis that is taking place in Nicaragua."

CentralAmericaData reports indicate that during 2018 the main importer of bakery products in Central America was Guatemala, with $119 million, followed by Panama, with $83 million, Honduras, with $76 million, Costa Rica, with $73 million, Nicaragua, with $68 million and El Salvador, with $58 million.

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