VZCZCXRO4899
RR RUEHLMC
DE RUEHSN #1913/01 2642314
ZNR UUUUU ZZH
R 212314Z SEP 07
FM AMEMBASSY SAN SALVADOR
TO RUEHC/SECSTATE WASHDC 7930
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC
RUEHRC/USDA FAS WASHDC

UNCLAS SECTION 01 OF 03 SAN SALVADOR 001913 
 
SIPDIS 
 
STATE PASS USAID/LAC 
STATE ALSO PASS USTR 
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN 
3134/ITA/USFCS/OIO/WH/PKESHISHIAN/BARTHUR 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD EINV ES
SUBJECT: CAFTA-DR EARLY SUCCESS STORIES: FOOD & BEVERAGE AND 
ARTISANAL CRAFTS 
 
REF: A. SAN SALVADOR 1844  B.  SAN SALVADOR 1779 
 
Summary 
------- 
¶1. CAFTA-DR has shown early successes in El Salvador, especially in 
the local food and beverage industry and in artisan crafts. 
Agricultural exports are up 32 percent in the first half of 2007, 
especially exports of "ethnic foods," including cheese, loroco, and 
seafood, and producers are preparing for further expansion. 
Likewise, many local artisans, supported by USAID programs, are 
exporting crafts to the U.S. for the first time.  Successes in the 
textile, manufacturing, and services sector have been reported in 
reftels.  End Summary. 
 
¶2.  According to the Ministry of Agriculture, sales of agriculture 
and agro industrial food and beverage products to the U.S. increased 
by 32% in the first half of 2007 to $258.8 million. Ricardo Esmahan, 
the President of the Salvadoran Agricultural Chamber, stated that 
they are greatly expanding due to CAFTA-DR, and that firms have been 
encouraged by the clear rules that now exist to export to the United 
States.  Similarly, Minister of Economy Yolanda de Gavidia stated 
that the Salvadoran firms are taking advantage of the fact that we 
are complementary economies by selling products in the U.S. that are 
not produced there. 
 
 
CHEESE (PETACONES) 
------------------ 
 
¶3.  Cheese exports, aimed primarily at Salvadoran nostalgic market, 
increased by 58% during the first seven months of 2007.  One major 
CAFTA-DR success is the cheese producer Petacones.  During the first 
year of CAFTA-DR, Petacones exported $750,000 to the U.S., and in 
2007 they plan to increase their U.S. exports to $1.3 million. 
Their main export is the Salvadoran classic Petacones cheese. While 
their sales have focused on the Salvadoran community so far, they 
will next go after the Mexican community market in the U.S. and, 
afterwards target non-Hispanic U.S. consumers. 
 
¶4.  Before CAFTA-DR, Petacones exported $40,000 per year to the 
U.S., but they experienced many problems with U.S. customs.  Cheese 
was on Customs' Detention List, so their product would be stopped 
for around 45-60 days, after which it could not be sold in the U.S. 
(it was ruined).  USDA worked with the Ministry of Health and the 
Ministry of Agriculture to improve Petacones' production processes, 
Petacones received technical assistance with USAID funds, and a Food 
and Drug Administration delegation inspected Petacones production 
plant, making several recommendations for improvement. After 
Petacones implemented the changes, they were taken off the Detention 
list and could export without restrictions. Secretary of Agriculture 
Johanns visited the Petacones plant on a recent trip to El Salvador. 
 
 
 
ETHNIC PRODUCTS 
--------------- 
¶5. "Ethnic" or "nostalgic" product exports have also expanded, 
including exports of sweet corn tamales, pickled pacaya, frozen 
chipilin, morro seeds, sweet bread, horchata beverage, spices, 
pupusas, beans, frozen jocote, and sesame seeds. The Government of 
El Salvador opened a new line of credit to ethnic product producers 
and exporters through the Investments Multisectorial Bank (BMI), the 
Central American Bank for Economic Integration (BCIE), and the 
Agricultural Promotion Bank (BFA). The interest rate will vary 
between 9% and 11%, and some products will enjoy of a grace period 
of one year. 
¶6.  The large Salvadoran snacks firm Diana plans to increase its 
presence in the U.S. market through large supermarket chains such as 
Publix and Pantry Pride. Currently, Diana exports only 3 percent of 
its production to the U.S., mostly through medium supermarket chains 
and small businesses. Likewise, Pasteles de El Salvador produces 
ethnic sweet bread, a nostalgic product highly appreciated by the 
Salvadoran diaspora. They are selling products such as margarita 
cocada, pineapple pie, and rice salpor in the U.S. 
 
¶7. Loroco de El Salvador (Lorocosal) exported 18,000 pounds of 
loroco to the U.S during 2006. For 2007, they project to sell 
130,000 pounds to nostalgic and gourmet markets with prices varying 
between $5 and $20 per pound. Lorocosal took advantage of the Micro 
and Small Business Promotion Program of the Salvadoran Foundation 
for Social and Economic Development (FUSADES) and the Agribusiness 
Restructuring Program of the Ministry of Agriculture. The firm's 
industrial plant in Colon has the capacity to process 2,000 pounds 
daily.  Similarly, Exportadora e Importadora de Productos 
 
SAN SALVAD 00001913  002 OF 003 
 
 
Salvadorenos, exported around 3,000 pounds of Loroco per week in 
2006, and they project to double their sales during 2007. They 
stated that CAFTA-DR improved their exporting steps and requisites, 
and they have advised other producers to take advantage of it since 
demand for loroco in the U.S. is still not met. 
 
SEAFOOD 
------- 
 
¶8. The seafood sector has also expanded its sales.  La Union-based 
fish processing company Mar y Sol exported more than $346,000 in dry 
shrimp and $279,000 in dry fish to the U.S in 2006. As a result of 
the mounting demand, they have created 350 direct jobs and 600 
indirect jobs during the past year. The firm also received Hazard 
Analysis and Critical Control Point (HACCP) qualification in Miami. 
 
 
¶9. Similarly, dehydrated shrimp producer Exportaciones Agricolas 
increased exports to the U.S. by 25% during 2006. Hector Rivera, the 
firm's legal representative, stated that CAFTA-DR has improved the 
image of the firm in the U.S. market and has allowed them to obtain 
more clients. During 2006, the demand was so high that the company 
had to buy shrimp in Mexico in order to comply with the orders. They 
plan to acquire a new property this year in order to breed shrimp 
and want to expand their business into producing cooked shrimp. 
 
OTHER FOOD AND BEVERAGE SUCCESSES 
--------------------------------- 
 
¶10. Approximately 384 small farms and 1,811 small producers are 
growing organic products for export.  According to Emilio Espin, 
director of the Communal Development and Cooperation Foundation from 
El Salvador (CORDES), they are currently only exporting cashew and 
coffee to the U.S. under CAFTA-DR, but they hope to introduce new 
products like indigo, coconut, and vegetables. Other producers are 
exporting vegetables (e.g., bell pepper) and dyes. 
 
 
¶11. Jumex plans to open the first beverage producing plant outside 
of Mexico in El Salvador by December 2007. They have already 
invested more than $7 million.  Under CAFTA-DR, Jumex can export 
their juices and nectars directly from El Salvador to the U.S. 
without having to comply with a quota based on sugar content. 
 
¶12. Stephanie Andersen Cacao company, a joint U.S. -Salvadoran 
investment, invested $30,000 in a cacao plantation in Alegria, 
Usulutan, creating 50 direct and 100 indirect jobs. They will be 
ready to export chocolates to the U.S. in about a year. 
 
ARTISANS 
-------- 
 
¶13. Several small and micro artisan businesses are also benefiting 
from CAFTA-DR, starting exports to the U.S. for the first time. 
Many of these enterprises benefited from USAID assistance programs. 
 
 
¶14.  Paax Muul started exporting guitars to the U.S. in 2006. They 
expect sales of more than $50,000 in Pennsylvania during 2007.  They 
received support from the USAID in technical training for three 
years. Now the artisans are able to produce high quality hand made 
guitars which sell for between $600 and $1,600. They invested more 
than $20 thousand in machinery to elaborate some of the guitar 
pieces. 
 
¶15. Artesanias y Fachadas (Arfa), a small crafts producer from 
Ilobasco, started exporting to the U.S. encouraged by CAFTA-DR. They 
produce frontages in mud, wood and wrought iron.  While their 
initial exports were small, they found clients in Miami and Los 
Angeles, and are looking for direct distributors in several U.S. 
cities.  Likewise, Eco Bambu, another small crafts firm, increased 
its exports by 70 percent. They produce crafts in bamboo, morro, and 
a variety of seeds, as well as a variety of ceramics which they 
export to several cities in California. 
 
¶16.  Artisans from the town of Guatajiagua have exported $30,000 of 
artisan crafts to the U.S. after CAFTA-DR, selling products to 
PriceSmart and Park Avenue Candles. Guatiajiagua has over 400 
artisan workshops and is located in the eastern department of 
Morazan. Artisans produce an attractive black pottery with local 
clay. Artisans have received technical assistance and training from 
the USAID Artisan Development Program implemented by Aid to Artisans 
(ATA), a non governmental organization. 
 
 
SAN SALVAD 00001913  003 OF 003 
 
 
¶17. The Salvadoran firm Classic Reflections Vitrales plans to begin 
exporting to the U.S. before the end of 2007. They plan to start 
with 1,500 bevelings (designs in glass). They have received training 
from the Small and Micro Business National Commission (CONAMYPE). 
They have made business contacts in Miami, Houston and California. 
Similarly, small business Las Azulinas plans to begin exporting to 
Washington this year. They produce indigo textile articles for the 
home and clothing. The firm employs 10 women. 
 
 
Butler