Growing middle class in Panama spurring restaurants

By JOHN O'CONNELL

Capital Press

U.S. potato industry leaders estimate a free trade agreement with Panama that takes effect Oct. 31 should boost frozen fry exports to the Central American nation by at least $10 million, once fully implemented.

The agreement phases out a 20 percent tariff on frozen fries and a 15 percent tariff on dehydrated products from the U.S. over the course of five years.

According to the U.S. Department of Commerce, the value of frozen U.S. potato exports to Panama jumped 77.86 percent in 2010 from the prior year to $5.254 million and rose by another 16.5 percent in 2011 to $6.121 million.

U.S. dehydrated exports to Panama were valued at $547,000 in 2011.

The outlook is also much improved for U.S. fresh exports to Panama, valued at $459,000 in 2011.

Under the new trade agreement, fresh potatoes will have a 750 metric ton duty-free quota, with an 83 percent tariff imposed on any excess volume. The quota will be expanded 2 percent per year, compounded in perpetuity.

Panama is already a sizable market for fresh Washington spuds. Since July, Washington producers have exported 87 metric tons of fresh spuds to Panama, said Matt Harris, director of of government affairs with the Washington State Potato Commission. Last year, Harris said Washington exported 675 metric tons of fresh potatoes to Panama.

"There is potential to grow, but in my opinion the over-quota tariff on fresh will keep the industry in check," Harris said.

According to U.S. Trade Representative Ron Kirk, Panama is among the fastest growing economies in Latin America, expanding by 10.6 percent in 2011 and forecasted to grow 5-8 percent annually through 2017.

National Potato Council spokesman Mark Szymanski said the rapid growth of Panama's quick-serve restaurant industry has fueled demand for frozen fries.

"You have more people in Panama entering the middle class and more people with disposable income," Szymanski said.

John Toaspern, vice president of international marketing for the U.S. Potato Board, said the economic impacts of expanding the Panama Canal, the country's stability and its tourism industry make for a favorable trade outlook. He said USPB's Central American market development program based in Costa Rica will likely help his organization with its efforts in Panama.

The Idaho Potato Commission plans to attend a trade mission to Panama, organized by the Western United States Agriculture Trade Association, from Jan. 28 through Feb. 1. The trade mission will also visit Colombia, which enacted its own trade agreement with the U.S. on May 15.

The Colombian agreement immediately eliminates the country's 20 percent tariff on U.S. french fries and dehydrated products and is expected to lead to a $5 million to $10 million increase in U.S. spud exports.

Seth Pemsler, IPC's vice president for retail/international, said other Idaho organizations intend to join on the trade mission, and Idaho potato shippers have voiced their intentions to start doing business with Panama based on the trade agreement. During the mission, Pemsler hopes to meet with key distributors in the fresh, frozen and dehydrated channels for both countries and build relationships.