While a group of manufacturing companies decided to reduce their operations in Costa Rica, arguing that local production costs are high, another group of companies in the sector decided to increase their investments.
According to the most recent official data, during August 2019 the growth of economic activity in the manufacturing sector was 2.5%, explained by increased external demand for products from special regimes companies, particularly medical implements and steel products such as bars and sheets. This contrasts with the decline in manufacturing activities for the domestic market. See report of the Central Bank of Costa Rica.
In Costa Rica, the pig farmers' association has filed a complaint alleging that importers such as Walmart, Cargill and Sigma Alimentos are manipulating pork prices in the local market.
The Costa Rican Chamber of Porculturists (Caporc) filed a complaint with the Consumer Protection and Advocacy Commission (Coprocom), arguing that "...three multinational companies make up 65% of total pork imports, and that this concentration demonstrates significant market power that undermines free competition and market transparency."
In 2016, regional maize imports totaled $763 million, 26% of which was imported by six companies in Costa Rica, El Salvador and Panama.
Figures from the information system on the the Corn Market in Central America, compiled by the Business Intelligence Unit at CentralAmericaData: [GRAFICA caption="Click to interact with the chart"]
The food producer plans to invest $30 million in the construction of a distribution center in Alajuela and $20 million on technology and computer systems.
The multinational and owner in Costa Rica of Cinta Azul and Pipasa Corporation, plans to start construction of distribution center in San Rafael de Alajuela in 2018, after finishing with the design process, procedures and permits this year.
This year the food producer plans to invest $50 million in its operations in Nicaragua, $20 million in Honduras and between $10 and $15 million in Costa Rica.
In Nicaragua the company will invest in building two plants and strengthening its distribution center, in Costa Rica it will be investing in improving logistics systems and in Honduras resources will be used for renewal of equipment.
Support is being given to sustainable agriculture programs to meet growing consumer concern about the origin of the raw materials of the products they consume.
From a statement issued by the Cosa Rican Foreign Trade Promotion Office (PROCOMER):
Cargill and Mondelēz International are promoting two programs to have a cocoa supply chain which is 100% sustainable by 2020.
Increased competition and rising production costs are causing firms in the sector to revive their production processes with new plants, equipment and electrical systems.
The three companies which dominate 92% of the market for chicken meat and its derivatives are making significant investments to modernize their production processes in an increasingly competitive world where consumption has maintained a steady upward trend.
In the past three years local consumption and exports have increased, however the number of companies selling abroad has been reduced.
According to figures from the Foreign Trade Promotion Office between 2010 and 2013 foreign sales of fresh and cultivated eggs increased 3.8 times, but were concentrated in the hands of a few. Some production companies which traditionally exported to the region have stopped doing so and managed to offset part of the loss of that market with increasing local consumption of eggs.
The company announced that the center will operate in a free trade area and will provide support to subsidiaries operating in other regions.
The food producer with a presence in the region will install a center for support and services called "Cargill Business Services (CBS), from where it will attend to approximately 50 of its own companies operating in North, Central and South America in areas such as information technology, human resources, finance, transportation, logistics and strategic sourcing.
Cargill and Copersucar are to create a new company to jointly market sugar globally.
From a press release issued by Cargill:
"Copersucar and Cargill announced an agreement to combine their global sugar trading activities into a new company which will have as its goal the generation, marketing and operation of crude and white sugar. The joint venture, in which both Cargill and Copersucar possess a 50% stake each, will have global presence. "
Loss of competitiveness in the region has been a constant factor in recent years due to problems in infrastructure, transportation and energy costs.
Although the sector's exports to Central America have maintained a relatively stable rate of growth, entrepreneurs say their products have lost competitiveness against the food industries in neighboring countries, due to the high costs of energy, transportation and infrastructure.
At least ten companies are competing in a market where the amount of tons sold between 2008 and 2013 grew by 24%.
In Costa Rica, the market for sausages is fought over by at least 10 companies, where Corporación Pipasa, a subsidiary of Cargill International, is the largest participant. Whereas in 2008 20.2 tonnes of sausages sold in, 2013, 25 tons were sold in the country.
Pollo Rey invested $20 million in moving its processing plants while Cargill is spending $25 million in a new distribution center.
The poultry division of Corporación Multiinversiones (Dipcmi), maker of Pollo Rey, moved its processing plant from San Carlos to its central headquarters in Coyol de Alajuela.
“Additionally, the company reported that for the second half of 2013 they will move another processing plant, also located in San Carlos, to a 1.000 m2 space in Barranca de Puntarenas”, reported Elfinancierocr.com.
The rising price of its main raw material has decreased profit margins of companies in the food industry, who are looking for alternative suppliers and using future hedge purchases.
Representatives of several companies in the food industry in Costa Rica noted that the escalating prices of wheat, corn and soybeans, the main raw material, are added to the U.S., the largest supplier of grains in the country, facing its worst drought,.
Four companies have a strong regional presence in the production and sale of veterinary drugs and animal nutrition.
Faryvet Laboratories is a company that has traditionally operated in the veterinary drug market, but through an investment of $1.5 million in a new premix plant in Barreal de Heredia, plans to triple its production, make the process 100% automated, and enter the field of animal nutrition and medicines for humans.
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