Evaluating international agricultural trade in Central America: Three analyses
A case study framework was used to study the competitiveness of Honduran coffee with major importing partners, along with an import demand analysis. Several important points summarize the findings. First, trends in green coffee supply and consumption continue to depress world coffee prices, making the production of coffee less attractive. Since small coffee producing countries, like Honduras, cannot affect the international price, they must improve efficiency, productivity, employ cost reduction techniques, and rely on the promotion of specific product attributes to remain competitive. Second, increased market share of Honduran coffee in major importing markets, Germany, Japan, and the U.S. was found. A significant improvement of the Honduran market share of coffee in Germany and Japan was found. Third, because of a significant response of import demand of Honduran coffee with respect to a positive shock in income of Japan and the U.S., Honduras has the potential to capture an increased percentage of its partner's imports. Additionally, price strategies to gain market share in Germany can be implemented. Fourth, product quality is currently a key element in improving the competitiveness of Honduran coffee. Production, distribution, and marketing tactics are not well developed and resources are not used in an advantageous way. Therefore, the probability that Honduran coffee can be viewed as a superior product from other producing countries of the region is very low.
Export demand for Costa Rica, El Salvador, Guatemala, Honduras and Panama were estimated to determine the effects of changes in income and relative export price when trade occurs among Central American countries (CAC). Results indicate that trade among CAC can be a powerful engine of growth, as indicated by significant positive responses of value of exports to a positive shock in income levels. However, relative export price plays an important role in promoting export revenues for El Salvador and Honduras only. The export response to a shock in income for El Salvador and Honduras lasted fewer periods and was lower compared to those from Costa Rica, Guatemala and Panama.