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Agribusiness SMEs, keys to achieving food security

Ending world hunger seems like an unattainable goal, but small and medium-sized businesses (SMEs) that participate in the agri-food system have advantages that they can take advantage of to offer solutions to this global challenge.

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Published by ConnectAmericas

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The opportunity to do it is now. In 2015, the United Nations (UN) adopted a set of precepts known as the Sustainable Development Goals (SDGs) to call for global action on key issues such as ending poverty and protecting the planet. One of these goals is to end hunger and achieve food security by the year 2030.

This means ensuring that all people have continuous physical and economic access to sufficient, nutritious, and safe food, according to the precepts of the Food and Agriculture Organization of the United Nations (FAO).

The UN argues that hunger and malnutrition are significant obstacles to sustainable development, as they make people more prone to diseases and less productive, making it challenging for them to improve their livelihoods. Therefore, ending hunger can positively influence the economy, health, and overall development.

Hundreds of millions of people worldwide suffer from hunger. The most recent FAO estimate of people without adequate food is around 768 million people, nearly a tenth of the world's population.

In Latin America and the Caribbean, the situation is concerning, as the prevalence of hunger is higher than the global average. Almost 268 million inhabitants experience food insecurity. In other words, four out of every ten people in the region regularly live with hunger.

Why could small and medium-scale agribusinesses be key to achieving the goal of food security?

The most obvious reason is that, whether as producers, processors, or suppliers of inputs, equipment, or services, they participate in an essential sector for sustaining life. Agriculture not only provides food to humanity but also remains the activity that employs the most people worldwide.

Another advantageous characteristic of small and medium-sized agribusinesses (SMEs) is that, unlike large agro-industrial companies, their knowledge and proximity to local production systems and markets allow them to provide unique added value.

Furthermore, they have the potential to promote a multiplier effect, as they can generate or strengthen value chains that contribute to the regional or global supply of nutritious and varied food.

An opportunity for Central America

Central America faces a paradox: it has the conditions to position itself as a region that produces and exports basic agri-food inputs, but it is a region particularly vulnerable to food insecurity. Nicaragua, Guatemala, and Honduras are among the countries with the highest prevalence of undernourishment in the region, according to an FAO report.

If the countries in the region capitalize on their advantageous conditions, they could support the food security of their inhabitants and also contribute to reducing hunger in the rest of the world.

One of these advantages is its abundance of natural resources and the diversity of ecosystems and species, conducive to the development of agricultural activities. In fact, agriculture remains one of the main economic activities in Central America, and many of its productive rural areas are linked to urban spaces and an immediate regional market in the capital and intermediate cities of the seven countries that make up the region.

Evidence of the importance of its dynamism is that its intra-regional agri-food trade represents, on average, 35% of the total agri-food trade in the region, according to the study "Support for the Promotion of the Trade Agenda for the Internationalization of Sustainable Businesses: the case of Central America," published by the Inter-American Development Bank (IDB).

Central America also has a strategic location for regional and international trade, with access to the Atlantic and Pacific Oceans and an interoceanic canal that facilitates communication and transportation between Europe, Africa, and Asia.

Additionally, it has trade and regional cooperation agreements with the European Union, the United States, Canada, Mexico, and the Dominican Republic, and several countries have bilateral free trade agreements with countries outside of Central America. Other conditions that favor the mobility of capital and investments are its intraregional free trade regime and its free trade zones.

Diversification, the added value of SMEs

Despite the advantages that Central America offers for agribusiness, it also poses a challenge for SMEs: production concentration. Eighty percent of the region's agricultural land is focused on five export products (sugar cane, coffee, banana, pineapple, and oil palm), and the ownership of processing and exporting industries is also concentrated in the hands of a few large companies, mostly with contributions from extraregional capital, according to the IDB study.

However, SMEs can turn this limitation into opportunities. The key is diversification.

The concentration of production in a handful of crops for export shows that there is potential to develop the production of other foods, with the possibility that diversification itself generates added value. Additionally, it is an opportunity for innovation in the development of new products.

There is a wide range of products that could be considered in the exportable offer of the region's countries, according to an FAO analysis. Among them are vegetables, fruits (such as avocado, dragon fruit, passion fruit, and soursop), dairy products, bee honey, black and allspice, cocoa, coconut oil, sesame oil and seeds, tuber flours (cassava, sweet potato, taro), cardamom, beef, pork, and tilapia.

Creating value chains that produce a more diverse range of foods also contributes to making them more accessible to consumers and makes more efficient use of resources.

Diversification is a key element to ensure the quality of people's food and is one of FAO's guidelines for achieving food security.

Value chains, the multiplier effect of SMEs

It is clear that value chains that ensure the provision of food, covering food production and associated services and inputs, are key to ensuring food security. Small and medium-sized agribusinesses in Central America can start by developing short value chains, that is, local production centers that, in turn, activate local and regional markets.

Developing short value chains is an opportunity to increase the income of small producers, who are the ones still producing most of the food consumed in many developing countries. Supporting them is a way to increase food production for local and regional markets and, at the same time, improve the nutrition and food security of the most vulnerable people.

Additionally, the local operation of value chains can ensure proper and sustainable management of input supply, as well as its transformation and distribution, and generate a local food supply that takes into account nutrition.

Local production also contributes to reducing the cost of food for people, ensuring its affordability and greater consumption.

Once short value chains are articulated, SMEs can scale their capacities by generating agri-food clusters and linking their production to food programs or regional markets through broader value chains.

Where to start?

If you are an SME in agribusiness and are interested in boosting your company in agri-food value chains in Central America, here are some recommendations to consider when starting:

Participate in local, regional, and global agribusiness fairs and events. Virtual platforms have facilitated access to these events, so take advantage of them. On the ConnectAmericas platform, you can find an updated list of business events, both in-person and virtual. The Central American Trade Network is another platform where you can participate in virtual business fairs and even virtual business rounds. Connect with SME or agribusiness communities to share information or create contact networks. On the ConnectAmericas platform, we have four communities, one of them dedicated precisely to the food industry. Join us! Join regional supplier networks. This way, you will establish new contacts and can reach new markets. We recommend contacting commercial or agri-food chambers in your country. The Federation of Chambers of Commerce of Central America and the Central American Federation of Agricultural and Agro-Industrial Chambers bring together several of them. On ConnectAmericas, we have a Purchasing Ads service where you can find opportunities to offer your products or services to food and beverage companies. Improve the visibility of your company by using digital tools. On ConnectAmericas, you can find multiple resources to help you achieve this, such as this video on growing your business through digital marketing and this article on how to start implementing your social media marketing strategy.

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