Production of high quality cocoa beans and their derivatives for export
Production of high quality cocoa beans and their derivatives for export
Business Model Description
Invest in the production of high-quality cocoa beans and their derivatives for their national and international commercialization.
Expected Impact
Investment in the production of cocoa for export would foster employment in marginalized sectors and their contribution to economic growth.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Panama: Western Region
Sector Classification
Food and Beverage
< 3% is the agricultural share of Panama's GDP, which is well below the average of 5% for the region (LAC). Food security is of paramount interest to all governments, so they will always seek to promote investment in the productive agricultural sector in order to achieve self-sufficiency, thus moderating imports.
>33% of the population lives in rural areas. Agriculture represents the main economic activity in indigenous provinces. 15.7% of the EAP works in primary sector (9% of female workers, and 20% of male workers), and little presence from young population. 63% of producers are over 45 years old. An agricultural sector with low productivity cannot guarantee an adequate service (national/foreign).
In Panama, due to the particularity of its economic structure (oriented towards services), it has directly impacted the agricultural or primary sector, where it is characterized by a high sectoral dependence on subsidies, weak capacity to offer for exports and lack of a State policy to follow.
Food and Agriculture
< 3% is the agricultural share of Panama's GDP, which is well below the average of 5% for the region (LAC). Food security is of paramount interest to all governments, so they will always seek to promote investment in the productive agricultural sector in order to achieve self-sufficiency, thus moderating imports.
>33% of the population lives in rural areas. Agriculture represents the main economic activity in indigenous provinces. 15.7% of the EAP works in primary sector (9% of female workers, and 20% of male workers), and little presence from young population. 63% of producers are over 45 years old. An agricultural sector with low productivity cannot guarantee an adequate service (national/foreign).
In Panama, due to the particularity of its economic structure (oriented towards services), it has directly impacted the agricultural or primary sector, where it is characterized by a high sectoral dependence on subsidies, weak capacity to offer for exports and lack of a State policy to follow.
Agricultural Products
Pipeline Opportunity
Production of high quality cocoa beans and their derivatives for export
Invest in the production of high-quality cocoa beans and their derivatives for their national and international commercialization.
Business Case
Market Size and Environment
> USD 1 billion
< 5%
5M tons are produced worldwide with a price range of B/.2,500.00 - B/.2,800.00.
In the 2017/2018 agricultural year, Panama had an availability of 10,560 quintals of cocoa for export and for the national market, availability that can increase to 54,768 quintals in a period of five years, which will lead to greater growth in the sector.
Panama produces cocoa beans, paste, butter, powder and bars, however, 72% of the exportable amount is for cocoa beans and with an average of $3MM in recent years as a whole.
Indicative Return
> 25%
Few countries have ideal conditions for fine cocoa, placing Panama in a privileged position which maintains certification of a high-quality producer, obtaining higher income from production. After the project begins to produce optimally, it can generate more than 45% annual profitability/hectare.
Investment Timeframe
Medium Term (5–10 years)
A cocoa plant produces approximately 2 kilos of fruit per year, however, at least a gestation period of six (6) years is required for the first harvest with a productive life expectancy of 20 years.
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Market - High Level of Competition
Impact Case
Sustainable Development Need
9.9% unemployment in Panama at the end of April 2002 and informality within the economically active population increased by 0.6%, remaining at 48.2%.
According to the Ministry of Economy and Finance (MEF) of Panama, almost 40% of the rural population lives in conditions of poverty.
Gender & Marginalisation
>15% of the EAP works in the primary sector (9% of female workers, and 20% of male workers), according to data from the World Bank and with the characteristic of little presence of the young population.
Expected Development Outcome
Continue strengthening the source of income for more than 2,000 small producers, cocoa producers and their families. These are mostly part of vulnerable groups in these rural areas.
>33% of the total population of Panama lives in rural areas and agriculture represents the main economic activity in the indigenous provinces and regions.
Gender & Marginalisation
Increase the proportion of female labor force participation by at least 5% more by 2030.
Primary SDGs addressed
8.2.1 Annual growth rate of real GDP per employed person
According to the Comptroller of the Republic of Panama for April 2022, the unemployment rate stood at 9.9% compared to October 2021 with 11.3%, but emphasizing that informality registered a slight increase. This decrease in the unemployment rate is consistent, if we take into account the GDP growth of the first quarter of 2022 with 13.6% in relation to the previous year.
The real GDP Per Capita of Panama for 2019 amounted to more than $14 thousand and that for the year of the 2020 pandemic experienced a decrease to $11 thousand with a recovery by the end of 2021 of 12.2 thousand and with better prospects for the year in course 2022
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Indirectly impacted stakeholders
People
Outcome Risks
A negative externality could occur with the international price, which falls due to overproduction or another exogenous element.
Impact Risks
Low production projected by diseases or fungi to the cocoa stem, which would reduce the expected benefits.
Loss of production due to unforeseen and uncontrollable weather events such as; Hurricanes, excessive rains, droughts, etc.
Impact Classification
What
Continue encouraging investment in the agricultural sector, which will have an impact on reducing the percentage of unemployment in that rural area.
Risk
Projected low production due to diseases or fungi to the cocoa stem, which would reduce the expected benefits.
Impact Thesis
Investment in the production of cocoa for export would foster employment in marginalized sectors and their contribution to economic growth.
Enabling Environment
Policy Environment
The regulatory entity for this investment opportunity is the Ministry of Agricultural Development, which is in charge of coordinating, promoting and strengthening the objectives established in Law 485.
Financial Environment
Financial incentives: The State Bank for Agricultural Development (BDA) has financing for the item with different types of loans, low interest and grace periods.
Panama has a wide offer of banking financial institutions of the private sector with competitive rates, less the subsidy granted by the government of 4%.
National Directorate for the Promotion of Exports, Certificate of Promotion for Agro-exports (CeFA)
Regulatory Environment
Law 485 will promote the production, increase and quality of the crop, will encourage research, development, innovation, transformation, marketing and consumption of cocoa, will encourage the participation of the item in the food agro-industry and will provide support to the cocoa sector.
Law No. 82 of December 31, 2009, creates the Program to Promote the Competitiveness of Agricultural Exports and Decree No. 65 of March 25, 2010.
Marketplace Participants
Private Sector
Panama has a wide range of banking financial institutions in the private sector with competitive rates minus the State subsidy.
Government
Ministry of Agricultural Development (MIDA) and Cooperativa de Servicios Múltiples COCABO, RL with headquarters in Almirante, Bocas del Toro
Target Locations
Panama: Western Region
References
- (1) Estrela of Panama, 08/18/2021, https://www.laestrella.com.pa/economia/210818/aproveban-ley-impulsar-produccion-cacao
- (2) MIDA 08/18/2021, https://mida.gob.pa/aproveban-ley-para-impulsar-la-produccion-de-cacao/
- (3) panamàon.com, 08/19/2021, https://www.panamaon.com/noticias/economia/89938-aproveban-ley-para-impulsar-la-produccion-de-cacao.html
- (4) The Star of Panama, 12/17/2021, https://www.laestrella.com.pa/economia/211217/cacao-panameno-gana-bronce-cocoa-of-excellence-awards-2021-italia
- (5) MIDA, Sep/2021, https://mida.gob.pa/sancionan-ley-que-incentiva-la-produccion-de-cacao-en-panama/
- (6) https://cambioclimatico-regatta.org/index.php/es/instituciones-clave/item/instituto-interamericano-de-cooperacion-para-la-agricultura-sede-central-iica
- (7)INTELCOM, 2021, https://intelcom.gob.pa/incentivos,incentive program for exporters.
- (8) PANAMA, SEPT 2021, https://www.mapa.gob.es/es/ministerio/ministerio-exterior/america-central-caribe/fichasectores_pa1_tcm30-543059.pdf