Mexico hopes for European Union banana breakthrough
As a banana producer, Mexico has long focused its exports on the U.S., but with the recent signing of a deal to lower the European Union import tariff for Latin American bananas, will the country finally be able to make an impact on the European market?
When the long hoped-for tariff treaty was finally reached between the European Union and 11 Latin American countries to lower the entry payment for bananas - an issue that has long been a bone of contention between the two sides for some 20 years - it may have escaped the attention of many in the fresh produce industry that among the signatories was Mexico.
This fact may at first not appear significant as Mexico is far from well-known as a banana exporter, substantially eclipsed by Ecuador, Colombia, Costa Rica and many other, better-known sources. However, Mexico is a major producer of bananas with around 75,000ha, of which 15,000 hectares are in the two main producing states, Chiapas and Tabasco.
Despite this, it should also be noted that Mexico only had a tiny share of the European Union's €2.855 billion (US$3.71 billion) banana market last year, selling just €4.7 million (US$6.1 million).
The figure further pales in significance compared with Mexico's total annual banana exports, worth an estimated US$72.8 million, of which around 80% goes to the U.S. Mexicans themselves are fairly big banana consumers, with only a quarter of production leaving the country.
Given the negative cost effects of the European Union banana import tariff and the fact that Ecuador and other rival producers dominate sales of Latin American bananas, it is perhaps little wonder that Mexico has long been a peripheral presence on the European market; only occasionally and intermittently benefiting from small gaps in supply from its rivals.
Could this situation change? According to Coliman banana sales specialist Audeé Ríos, there will certainly be greater possibilities for Mexican exporters to increase their business on the old continent once the tariff change takes effect.
At present, Coliman, which is a major producer and marketer of bananas and avocados among other products, only exports a tiny proportion – around 50 tonnes each year – of its total banana production to Europe, principally through the Dutch port of Rotterdam.
"We currently export bananas to the UK, the Netherlands and Belgium - not in the same percentage as the U.S., which is our main export destination, but we started in Europe about four years ago and have received a very good response in terms of the product quality," she says.
Although Ríos says it is unlikely Mexico’s banana producers will be able to compete on price with other Latin American countries, she does believe the country can compete when it comes to the quality and shelf-life of its bananas.
"There is a lot of competition, but the difference of our bananas compared with those from Central America is that ours have considerably more shelf-life," she claims.
"The region where we produce is also more stable with less extreme weather conditions, so we can almost guarantee supplies to clients."
With its banana plantations located in the north-western state of Colima, the "natural market" for Coliman's bananas has long been the United States, entering through distribution centers in San Diego and Phoenix.
However, with Coliman being one of the few banana producers to have attained GlobalG.A.P certification in Mexico - which Rios says is "practically a requirement in Europe" - increasing its exports to the European Union is becoming an ever more important consideration.
"Obviously, we have to take care of our main market first and then start to look at other possible markets, including Europe, but for 2013, we are hoping to increase considerably the volume that we export to Europe compared with previous years," she explains.
Ríos believes the recent E.U.-Latin America tariff deal could ultimately help Mexican producers to break into the European banana market by making their product "more attractive and a little more competitive".
However, Francisco Hueso, from Mexico’s National Council of Banana Producers, says there are serious challenges the Mexican banana sector needs to overcome before it can even consider becoming a rival for better-known Latin American banana sources.
He says oversupply in key markets like the U.S. and Europe has meant the sale of bananas from Mexico over the last 12 months has not been easy, while consumers' purchasing power has been dented by the ongoing effects of the global recession.
"This year has been difficult because we are not immune to the effects of the global market - all the South American banana producing countries have the U.S. and Europe as their main markets and those markets have been tough," he says.
The southern states of Chiapas and Tabasco continue to dominate production in the country, with the former producing around 250,000 tonnes of bananas per year over an estimated 7,000 hectares - a percentage of which is exported, mainly by Chiquita, to the U.S.
Tabasco, the second largest producing state, also exports mainly to the U.S. but in recent seasons has sent test shipments to Europe. The state has also begun to export a small proportion of its annual harvest to Russia, while Hueso reveals the possibility of starting exports to China is under investigation.
In total, there are currently an estimated 75,000ha of bananas cultivated in Mexico, not just in Chiapas and Tabasco, but also in Veracruz, Colima, Michoacán, Jalisco, Nayarit, Puebla and Guerrero, of which the Cavendish variety accounts for 50,000ha.
Seven years ago only 5% of the national production was exported, but Hueso says overseas sales have been steadily growing.
Until now, he says that the trade tariff has made exports to Europe "practically impossible", despite several efforts by the Mexican government to achieve a modest reduction.
Hueso believes the conclusion of negotiations to lower the tariffs means there are likely to be "more export possibilities for Mexican bananas".
However, to really benefit from the accord, he argues there needs to be greater regulation and consolidation within the sector. Hueso estimates that 70% of the total production area in Mexico's central Pacific zone - approximately 12,000ha - is divided up between small growers, meaning that quality levels in the plantations vary hugely. In Chiapas and Tabasco, by contrast, the presence of larger plantations generally means more quality control.
Hueso also argues that the Mexican government needs to act as an independent arbiter of the country's banana exports to have greater control over what fruit is shipped to clients overseas.
"The problem is that not all the sector has the capability to do things well, so if bad quality bananas reach consumers in Europe, it affects the image of Mexico as an exporter," he says.
"We have the quality of land and a good enough climate to be able to produce bananas that are as good as Ecuador or Costa Rica or Colombia – the problem is that we are many with not enough regulation."