Panama’s agricultural sector is dominated by a small number of key crops, namely bananas, cocoa beans, coconuts, coffee beans, melons, pineapples, beef, chicken, shrimp, corn, potatoes, rice, soybeans, sugarcane, and timber. Over 250,000 people are directly employed in agriculture, or 6.5% of the total population, down from 18.2% in 2004. Many more are employed indirectly—estimates put the total number at 914,000. The high numbers reflect the fact that many Panamanian farmers operate at subsistence level, and below the poverty line. The challenge for the government is to raise the industry to new levels of international trade and ensure its workforce feels the benefits of this more widely. However, Panama’s climate and geology combine to pose severe constraints on the industry’s expansion. Due to an arid climate in the east, bordering the Pacific, an overly wet climate (bad for arable crops) in the more mountainous west of the country, and dense tropical jungle in between, only around 10% of Panama’s land is rated suitable for arable farming, although just over 42% is classified as farmland, in one way or another. Of this, a substantial area is given over to banana, coffee, and cocoa plantations, and the rest is pastoral, mainly for the rearing of cattle. The government is increasingly willing to support farmers via subsidies, in order to protect domestic agriculture production from cheaper imports. Agriculture is overseen by the Ministry of Agricultural Development, which has actively intervened to support Panamanian producers of rice and other staple crops struggling to compete with foreign rivals. For a country with such a strong tradition in farming, it is perhaps surprising that Panama today is reliant on importing 62% of all its foodstuffs.
Exports of tropical fruit have been rising since 2000, and king of the crop is the banana, fresh or dried, and including plantains, exports alone were worth $97.9 million in 2015. Indeed, bananas account for 4% of all Panama’s exports. This is up 4.1% in 2014, and demand for bananas is holding steady worldwide as the most popular fruit internationally, although this is down on the 8.63% YoY increase recorded in 2013. In that year, banana exports reached a peak of 14.3 million boxes, largely on the back of big increases in exports to Europe, exports of which have increased by 44.89%, or more than 14.1 million boxes, since 2012.
Yet all is not well for the Panamanian banana industry in 2016, as an old adversary looks set to return to haunt the sector. The so-called Panama disease, a fungal virus, completely eradicated the Gros Miquel, the Panamanian banana all over Central and South America in the 1950s. The Cavendish, a new variety of banana that is much more resistant to disease, then became by far the most widespread banana sub-species worldwide (accounting for 95% of bananas worldwide), and has out-competed the local varieties hitherto widely cultivated.
In 2015, Chiquita and Fyffes (headquartered in Ireland) announced a merger that saw them transformed to become the world’s largest banana distributor with a workforce of 32,000, almost $5 billion in annual revenues, and a market value of more than $1 billion. The new company controls 14% of the global market for bananas.
Average melon yields per hectare have halved since 2008, from 40,700 kg per hectare to 19,110 kg per hectare, with overall production dropping from 16.2 million kg to 6.1 million kg in 2014. A similar story is true of pineapples and watermelons, both of which have suffered dwindling levels of production. Land pressures are partly to blame for the fall, along with changes in climate that have resulted in a succession of cooler summers since 2008.
As demand around the world rises, so Panama’s coffee industry shows ever-greater potential. Production reached 10,677 tons of coffee beans in 2014, up from 10,100 tons in 2013. And Panama is well suited to their cultivation—and to the crop’s expansion. The Chiriqui highlands of western Panama yield the country’s finest coffee, and the region is famous for its full-flavored beans. The area has a near-ideal mild and showery micro-climate, is at a high altitude of between 700 meters and 1,070 meters, and has rich and well-drained volcanic soil, combining to make all but perfect growing conditions. Panama cultivates 82% Arabica and 18% Robustica varieties, with 63% of the total crop destined for the US in 2014. Increasingly, Panama is gaining a reputation for gourmet varieties of coffee such as the geisha, originally from Ethiopia, of which the country now grows more than 10,000 hundredweights a year.
Rice is a staple of the Panamanian table, and yet its production has fallen sharply this century, from 341 million kg in 2003 to 268.4 million kg in 2015. In January 2016, the Panamanian Food Safety Authority published figures confirming that imports of rice have risen from 65,917 tons in 2014 to 71,000 tons in 2015. At the same time, the land area devoted to rice paddies has fallen by 50%, from 56,000ha to 28,000ha. Some say that climate changes are adversely affecting their ability to successfully harvest crops, while others blame cheap imports. Either way, the Ministry of Agricultural Development stepped in to reassure farmers in 2015, guaranteeing to raise the price paid to producers to $24.50 for every hundredweight of rice produced in the country.
Beef exports have increased every year since 2009, reaching a net worth of $27.2 million in 2014. Similarly, poultry production has also increased YoY since 2003, amounting to 132 million kg in 2014, while egg production has declined slightly from its 2002-08 heyday of 500 million units, dropping to 459 million laid in 2014.
Following a painful contraction of 21.2% in just one year in 2011, the industry expanded by 19.6% in 2014, following healthy YoY growth for each of the intervening three years. By year-end 2014, the industry yielded some $169 million in sales. The growth in fisheries over the past five years has largely come from a big surge in demand for exports, with Panama being better placed than many other countries in the region to fulfill orders from abroad. The sector in 2015 contributed 0.5% to GDP.
In light of sluggish agricultural output and an increasing trade deficit, the government has embarked on a number of measures to revive its agricultural sector, once a major contributor to its GDP. One such measure is transforming Panama into a regional hub for food distribution. The project, still in its infancy, was initiated at the end of 2015, following the signing of a contract with an undisclosed North American company to package and re-export rice. “Last December a ship with 7,000lb of rice came to Panama; we put it into 100lb bags and shipped it out in containers,” explained Jorge Arango Arias, Minister for Agricultural Development. Of the 420 containers exported, 280 were shipped to Saudi Arabia and the remaining 140 to the Dominican Republic and other Caribbean islands. “We plan on doing that with 60 ships this year because it was so successful,” the Minister continued. The project will be expanded to include other agricultural products that would first be shipped to Panama for processing or packaging before reaching their final destination, capturing economies of scale. The project would function like a Free Zone focused exclusively on food. “Excess production from the Dominican Republic, Uruguay, or Chile would come to Panama and from here we would distribute to the rest of the world,” the Minister added. Panama is currently in talks with other countries and embassies to get them on board. “Our main target is to take advantage of 15,000 ships that go through the canal.” According to the Minister, many of these ships leave for Asia unloaded, creating this new opportunity for Panama. The project counts on the support of the Ministry of Commerce and Industry (MICI), the Vice-Ministry of Commerce (VICOMEX) and the Panamanian Association of Business Executives (APEDE). It is deemed a strategic project for the agricultural sector in Panama. Its other advantages include reduced freight cost for importing perishable goods to increase the number of refrigerated products, benefiting producers and lowering consumer prices.The Food and Agricultural Organization of the United Nations (FAO) had previously announced its plans to strengthen its presence in the country and convert Panama into its regional food hub. The FAO has been in talks with the Panamanian government as part of wider strategies to eradicate poverty outlined in the CELAC Plan for Food Security, Nutrition and Hunger Eradication 2025.