VZCZCXYZ0000
PP RUEHWEB

DE RUEHMU #2375/01 2962000
ZNR UUUUU ZZH
P 232000Z OCT 07
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC PRIORITY 1556
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC

UNCLAS MANAGUA 002375 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
USDOC FOR 4332/ITA/MAC/WH/MSIEGELMAN 
3134/ITA/USFCS/OIO/WH/MKESHISHIAN/BARTHUR 
USDA/FAS FOR YWEDDERBURN AND LCERVANTES 
 
 
E.O. 12958: N/A 
TAGS: EAGR ETRD ECON NU
SUBJECT: NICARAGUAN GOVERNMENT LOOKS TO MARKET TO SUPPLY RED BEANS 
 
 
Summary 
------- 

¶1. (U) The retail price of red beans, a staple in Nicaragua along 
with rice and corn, has tripled this year, increasing to $0.97/pound 
in some local markets from $0.32/pound in January.  Adverse weather 
conditions have damaged two successive crops and are playing havoc 
with the market.  Pre-existing export commitments to El Salvador are 
also a factor.  Instead of draconian measures advocated by some, the 
Nicaraguan Government is apparently first looking toward a 
market-based solution, announcing on October 18 that a 30% tariff on 
beans would be removed for three months to encourage imports.  Post 
has alerted the U.S. Dry Bean Council of this potential export 
opportunity.  End Summary. 
 
Beans Triple in Price 
--------------------- 

¶2. (U) The retail price of red beans, a staple in Nicaragua along 
with rice and corn, has tripled this year, increasing to $0.97/pound 
in some local markets -- up from $0.65/pound in early October and 
$0.32/pound in January.  Media have dedicated significant attention 
to rising prices and, in true Nicaraguan fashion, rushed to report 
rumors as to the cause of the "bean shortage."  Some reporters 
speculate that unscrupulous traders are hording beans to drive up 
prices.  Others criticize President Ortega for exporting beans to 
Venezuela in exchange for fertilizer.  The truth has far more to do 
with Mother Nature. 
 
Unusual Rains Affect Plantings 
------------------------------ 

¶3. (U) Since Hurricane Felix struck Nicaragua in September, the rain 
has not stopped in the western regions of the country, where most of 
the red beans are grown.  Normally, farmers count on two plantings, 
with a third possible in areas subject to irrigation or additional 
rainfall.  The first season begins in May when the first rains come. 
 This year, however, May was unusually dry, so farmers delayed their 
planting until June, pushing back the harvest of the first crop to 
August. 
 
¶4. (U) This delay meant that the second crop of the year was not 
sown until September, shortly before Hurricane Felix struck the 
Atlantic coast and subsequently northern Nicaragua.  Felix was 
followed by unusually constant rains, causing extensive flooding and 
crop damage throughout the country's bean growing region.  What 
remains of the second crop will not be ready for harvest until late 
November.  Until then, Nicaragua will continue to experience a 
shortage of supply. 
 
¶5. (U) Unfortunately, the situation is complicated by pre-existing 
contracts for export and strong seasonal demand as large farmers buy 
staples to feed workers that they hire to harvest coffee and sugar. 
Moreover, farmers looking to plant a third crop will likely find 
seeds in short supply, as beans that would have been treated and 
offered as seeds are being sold for human consumption as prices for 
the food staple soar. 
 
Salvadoran Demand a Factor 
-------------------------- 

¶6. (U) Nicaraguan exports of red beans have steadily increased in 
recent years.  In 2006, the Ministry of Agriculture, Fisheries, and 
Forestry (MAGFOR) estimated that farmers grew 430 million pounds of 
red beans, enough to supply local demand and export more than a 
quarter of production.  During the first nine months of 2007, 
exports totaled 109 million pounds ($34.1 million), up from 96 
million pounds ($29.8 million) during the first nine months of 2006. 
 El Salvador has become Nicaragua's most important export market for 
red beans, with many buyers there willing to finance and sign 
forward contracts with Nicaraguan farmers to ensure supply. 
 
Government Looks for a Market-Based Solution 
-------------------------------------------- 

¶7. (U) Government officials are under pressure to lower red bean 
prices for local consumers.  Options under discussion in some 
government and FSLN party circles include imposing export controls, 
fixing domestic prices, and reviving a national marketing board to 
ensure local supply, all draconian measures characteristic of 
economic policy during Ortega's presidency in the 1980s.  Commodity 
traders believe either solution would produce equally disastrous 
results today. 
 
¶8. (U) Minister of Trade, Industry, and Development (MIFIC) Orlando 
Solorzano has publicly stated that the government would first seek a 
market-based solution to the shortage of supply.  On October 18, 
MIFIC and MAGFOR published a joint decree that removes the 30% 
tariff on red bean imports for a three-month period.  Meanwhile, the 
U.N. Food and Agriculture Organization is coordinating an effort to 
obtain international assistance for the purchase of $3 million worth 
of seeds (red beans and white corn) for the third planting season. 
Post has alerted the U.S. Dry Bean Council of potential export 
opportunities in Nicaragua. 
 
Comment 
------- 

¶9. (SBU) Fortunately, the government is first turning toward the 
market instead of intervention to relieve the temporary shortage in 
supply of this staple.  The result should be far more effective, as 
market incentives for Nicaraguan farmers to increase acreage in the 
coming year will remain.  Minister Solorzano's decision provides 
concrete evidence that he supports free-markets and trade, and that 
he is able to successfully argue that solution within government 
circles. 
 
TRIVELLI