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Three strategies for SMEs to promote food security in Central America

Central America is a region with favorable conditions for the agri-food system but that also has 8.4 million of its inhabitants in a food emergency situation, according to the World Food Crisis Report 2022. This means that they live in an extreme situation of food insecurity and require assistance.

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Published by ConnectAmericas

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Food insecurity occurs when people do not have regular access to sufficient nutritious and safe food to meet their dietary and nutritional needs. This may be due to a lack of available food or a lack of resources to obtain them.

The Food and Agriculture Organization of the United Nations (FAO) has established four pillars to achieve food security:

  1. Availability: Adequate supply of food in sufficient quantity and quality at the local, regional, or national level.
  2. Access: Physical, economic, or cultural ability to obtain food.
  3. Utilization: Biological use of food.
  4. Stability: Related to the ability to have continuous access to the necessary food to maintain a nutritious diet at all times.

Small and medium-sized enterprises (SMEs) in the agri-food sector in Central America can impact at least two of these pillars: the availability and stability of food. In this article, three different strategies are presented to contribute to achieving food security in Central America.

SMEs in the agri-food system

Before discussing the strategies that SMEs can adopt to promote food security, it is worth noting that in the agri-food system of Central America, the participation of small and medium-sized enterprises varies at each level of value chain articulation.

According to the study "Support for the promotion of the trade agenda for the internationalization of sustainable agribusiness: the case of Central America," published by the Inter-American Development Bank (IDB), Central American SMEs have an increasing participation in agribusiness and the food industry, and to a lesser extent, in the trade of fresh products.

The growing trend of SMEs' participation in agribusiness is due to the implementation of vertical integration initiatives, as well as the creation of rural added value and local brands. While in the food industry, SMEs have expanded mainly in urban areas and in the prepared food sector, sold to supermarkets or small-scale businesses.

It is worth mentioning that although the participation of SMEs in the trade of fresh products is limited, the requirements of local authorities and the demands of supermarkets on their suppliers are promoting the formalization of the sector and, therefore, the creation of SMEs in this link of the chain.

An area where the participation of SMEs remains limited is direct export operations. Some participate indirectly connected to larger companies, which are the ones that export. This panorama also reveals the opportunities that SMEs have in this field.

The potential of Central America

Now that we know the areas of impact of SMEs in the agri-food system, let's talk about the most relevant agri-food production areas in the countries of the region or with potential to be exploited by SMEs, in order to identify opportunities in the Central American intraregional market.

An analysis by the FAO on the exportable supply of agricultural products in the region identified food preparations and cereal-based preparations as the most relevant agri-food products that are traded intraregionally.

Dairy, fats and oils, vegetable and fruit preparations, as well as meat and fish preparations and milling products (e.g., starch) are other relevant products for intraregional trade.

The analysis also provides a list of agri-food products that have better opportunities for export. Take note: vegetables, fruits (specifically pitahaya, passion fruit, soursop, banana, and avocado), dairy products (specifically goat milk cheeses), honey, black and white pepper, coconut oil, sesame oil and seeds, essential oils, tubers, roots and tuber flours (cassava, sweet potato, malanga), cardamom, corn derivatives, beef, pork and sheep, tilapia, cocoa, and coffee.

Both for SMEs dedicated to the production or processing of food and for businesses supplying inputs or services to the agri-food sector, knowing which products are strategic for trade in the region will be useful when planning an intraregional commercial or export strategy.

Strategy 1: Generate or strengthen sustainable value chains that consider nutrition:

The first strategy we propose takes up one of the guidelines of the FAO to achieve food security, based on value chains but outside its traditional focus centered on economic value.

According to the FAO, a value chain that considers nutrition seizes opportunities to improve the supply and/or demand for nutritious foods, as well as opportunities to add nutritional value or minimize food loss at each link in the chain. For its effects to be lasting, this approach also seeks to be sustainable.

How can this approach be applied in the different links of an agri-food value chain? Here are some ideas:

  • Diversify agricultural production and increase the availability of naturally nutritious foods.
  • Valorize local and traditional foods.
  • Improve the safety of food by using the least possible amount of chemicals and having better storage and transportation facilities.
  • Reduce food loss and waste, which involves improving storage, transportation, processing, and packaging facilities.
  • Professionalize local food processing techniques.

When small or medium-sized entrepreneurs are inserted into value chains through cooperation, they can achieve significant improvements, as demonstrated by a project of fruit and vegetable producers in Peru. Producers and marketers improved their competitiveness with implementations such as packaging development, product image, and added value.

In Central America, agri-food value chains with the best conditions for promotion and development are those of basic grains (corn, beans, and rice), cocoa, beekeeping, coffee, fishing and aquaculture, dairy, fruits, vegetables, essential oils, and sustainable livestock, according to the FAO analysis.

Strategy 2: Participate in public programs that seek food security

Countries often have policies focused on improving access to food for their population. The Covid-19 pandemic and the war in Ukraine have caused disruptions in the supply of food inputs or reduced access to them globally, leading governments to intensify such policies to access food. This opens an opportunity for SMEs to participate in some of them.

In fact, the FAO considers public procurement, especially from small producers, as one of the policies for food security in Latin America and the Caribbean, as it focuses on involving actors seeking fresh, varied, and nutritious food for the population.

Among the public policies for food access that SMEs can take advantage of are in-kind transfers, either as food vouchers, public canteens, or school feeding programs. Some countries, such as Guatemala, have other measures such as support for the marketing and supply of food, where SMEs can also find opportunities for impact.

To learn more about public procurement in the agri-food sector, we recommend exploring this tool from ConnectAmericas, with links to the public procurement portals of the countries in the region.

Strategy 3: Make a difference

The last strategy we propose is to differentiate yourself with products that meet the nutritional needs of the region or a particular sector.

To do this, you need to adopt a value-added strategy to differentiate a product. Remember that value-added strategies necessarily involve some form of innovation in products, but often it is enough that the novelty is only in relation to the local market.

Some ideas that will help you stand out are:

  • Obtain certifications that indicate unobservable attributes about your product or process, such as fair trade certification or organic product certification.
  • Focus on products with qualities particularly valued by your target market and that are attributes of your product. For example: products with a longer shelf life or an agricultural product that is easier to consume.
  • Process primary products to obtain by-products that complement primary production. In addition, this will help reduce food loss.
  • Also, consider that the added value of a product can be, in itself, its processing.

To get an idea of which products have better opportunities for a value-added strategy and at the same time contribute to food security, we take up some proposals from the FAO analysis mentioned earlier.

One proposal is alternative crops. For example, pitahayas, rambutans, and okra are alternative crops with specific potential for the so-called Central American Dry Corridor, which crosses the territories of Costa Rica, Nicaragua, Honduras, El Salvador, and Guatemala, where prolonged drought threatens the food security of local populations.

Another proposal is the production of superfoods, as certain food products that can provide numerous health benefits to humans due to their high nutrient density are called. Consider that such products are in growing demand. In the region, we can find examples of companies that have focused on the production of superfoods, such as Latin Food Fresh N Frozen/MAYA IXQ, which also distinguishes itself by employing women in Guatemala.

Finally, remember that you don't have to choose only one strategy. Adopt the ones you consider most suitable and adapt them to the conditions and goals of your company.

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