Lack of incentives and drought affect local agroindustry

The deliberate importation of products, the lack of incentives and the prolonged drought due to the El Niño phenomenon are the main causes that are affecting the production of food and beverages (agroindustry) in Panama. This has made the production of tomato, milk and meat to drop in recent months, which has led to derivatives (pastas, sausages, cheese, etc.) to be produced in smaller amounts. Of nine agroindustrial activities that are carried out in the manufacturing industry, according to the Comptroller General, four have plummeted in their production in the first two months of this year, compared to same period in 2015. (Sauces and pastes) tomato-based production fell by 18%, going from 2 million 133 thousand kilograms produced in February 2015 to one million 748 thousand kilograms in the same period in the year 2016. Meanwhile, the production of natural milk used in the manufacture of derived products fell 7.3%, going from 29 million 246 thousand kilograms produced in 2015 to 27 million 117 thousand kilograms produced in February 2016. The slaughtering of cattle decreased in 9.4%, after falling from 63 million 402 thousand kilograms produced in February 2015 to 57 million 469 thousand kilograms in the same month of this year. Meanwhile, pasteurized milk production grew by 2.6% in February, falling 5.3 percentage points compared with same period of 2015, when it grew 7.9%. The contribution of the manufacturing sector to the gross domestic product (GDP) of the country in 2015 fell 1.3%, according to figures from the Comptroller General. On the other hand, in 2014, GDP grew only 0.9%; in 2013, it did in 1.3%, and in 2012, it did in 7.9%. This decline is associated with low agricultural production which is underway in the country and is negatively affecting the contribution of this sector to the National Treasury. For Ricardo Sotelo, President of the Union of Industrialists of Panama (SIP), the prolonged drought in the country besides the lack of incentives are the main causes that are affecting the manufacturing of food products for domestic consumption. Sotelo said that the fall is linked to the problem that industrialists have to obtain the raw material to produce their products. He added that the industrialists need incentives to make the investment be directed to this sector. According to the Superintendence of Banks of Panama (SBP), loans for this segment last year fell 4.7%, going from $2 million 199 thousand 306 in 2014 to $2 million 95 thousand 889 last year. This reflects a decrease in loans of about $103 thousand industrialists 417 in 2015. For his part, Juan Francisco Kiener, President of Productos Kiener, S.A., highlighted that what is affecting Panamanian agroindustry has relationship with the drought that the country is going through, which makes the availability of raw materials to produce more difficult. He added that milk production has been heavily affected by this situation, like the horticultural cultivation of grains (corn and rice), as well as the slaughtering of cattle. He stressed that due to the lack of raw material to produce, some industries have risen the cost of their products because they have to invest more to obtain them. This coincides with the variation shown in the index of prices to the consumer (CPI) in March, which showed an annual increase (March 2015-March 2016) of 0.6%, according to the Comptroller General. As for the lack of incentives, Kiener said that the same situation exists for the industry, but the authorities have no interest in making them effective. For his part, Olmedo Estrada, President of the Association of Economists of Panama, said that in the absence of policies directed toward the agroindustrial sector, the affectation is patent. He stressed that this situation will result in the products that they manufacture to increase in price. He said that the Government should seek ways to provide greater support to this sector and enable it to improve its production and so that Panama does not have to rely on imports. Meanwhile, Pedro Acosta, President of the National Union of Consumers, noted that if there is no input in Panama that the industries need to produce thus making them to have to pay more to get them, there will be greater costs which are always transferred to the end customer. He said that they as businesspeople will always want to profit.