VZCZCXYZ0001
RR RUEHWEB

DE RUEHMU #0242/01 0651732
ZNR UUUUU ZZH
R 061732Z MAR 09
FM AMEMBASSY MANAGUA
TO RUEHC/SECSTATE WASHDC 3841
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS MANAGUA 000242 
 
SIPDIS 
 
STATE PASS USTR 
STATE FOR WHA/CEN 
 
E.O. 12958: N/A 
TAGS: EFIS ECON ETRD NU
SUBJECT: NICARAGUAN SEAFOOD SECTOR HIT HARD BY GLOBAL ECONOMIC DOWNTURN
 
SUMMARY 
------- 
 
¶1.  Seafood is a major industry for Nicaragua and the 
country's fifth leading export.  The industry concentrates on 
cultivated shrimp and wild-harvested lobster.  Seafood 
production employs 55,000 people nationwide, of whom 20,000 
live and work on the Caribbean coast, where the industry is 
the major employer.  The majority of seafood is exported to 
the United States.  While exports increased overall in 2008 
over 2007, market prices for cultivated shrimp and lobster 
fell dramatically during the last quarter of 2008.  Industry 
officials predict that 2009 exports may fall by as much as 
50%.  With demand for high-end seafood products such as 
lobster and shrimp down sharply in the United States and 
Europe as the result of the global economic crisis, the 
Nicaraguan seafood industry has been hit hard. 
 
THE INDUSTRY 
------------ 
 
¶2.  The Nicaraguan seafood industry produces four main 
products: cultivated shrimp, wild-harvested shrimp, lobster, 
and an assorted variety of mostly ocean-caught fish. 
Cultivated shrimp and lobster are the primary products, 
accounting for 80% of the dollar value of Nicaragua's seafood 
exports.  Cultivated shrimp is produced largely in the 
northwest, while lobster is harvested along the Caribbean 
coast.  Eighty percent of Nicaragua's seafood catch comes 
from the Caribbean coast, which has the largest continental 
shelf in Central America.  Small in population, the Caribbean 
coast relies on the seafood industry as its largest employer. 
 According to the Nicaraguan Chamber of Fisheries (CAPENIC), 
the industry accounts for up to 70% of the local economy 
there, employing as many as 20,000 people.  Nationally, the 
seafood industry employs 55,000 people.  In recent years, 
seafood has been a dynamic growth industry for Nicaragua, 
generating approximately 1.5% of GDP and climbing to 
Nicaragua's fifth leading export. 
 
THE EXPORT MARKET 
----------------- 
 
¶3.  Almost all Nicaraguan seafood is exported.  According to 
CAPENIC, 95% of domestically produced seafood products are 
sold on the international market, mostly in the United 
States.  Historically, up to 90% of Nicaragua's seafood 
products have been exported to the United States.  In the 
last two years, seafood exports to Europe have increased. 
One reason is because Pescanova, the giant Spanish seafood 
company, acquired the U.S.-owned Camarones de Nicaragua 
(producers of cultivated shrimp) in 2006 and, in 2008, opened 
the largest shrimp processing plant in the Western 
Hemisphere.  Another shrimp producer, Sahlman Seafoods 
(U.S.), has shifted up to 60% of its shrimp exports to 
Europe.  The Nicaraguan Center for Export Procedures (CETREX) 
reports exports of $116 million in seafood in 2006, $121 
million in 2007, and $146 million in 2008 -- a 26% increase 
in two years. 
 
¶4.  Both the volume and value of Nicaraguan seafood exports 
increased significantly in 2008.  The increase in 
dollar-value exports in 2008 was driven by a 70% increase in 
the value of exports of cultivated shrimp.  For the first 
time, cultivated shrimp overtook lobster as Nicaragua's main 
seafood export. 
 
GLOBAL COLLAPSE IN DEMAND 
------------------------- 
 
¶5.  While the first three quarters of 2008 were very 
successful, U.S. and international demand for luxury foods 
such as lobster collapsed in the final quarter of 2008 under 
the weight of the growing global economic crisis.  In the 
last four months of 2008, CAPENIC estimates that Nicaraguan 
shellfish exports fell by 30%.  Today, local industry has 
built up an inventory of around 500,000 pounds of lobster and 
200,000 pounds of shrimp, bringing production to a halt. 
Half of the lobster inventory has been shipped to the United 
States, where it sits in cold storage waiting for a buyer. 
Storage costs between 3 to 5 cents per pound per month, 
translating into a monthly storage cost for this industry of 
around $30,000.  In 2009, CAPENIC estimates that seafood 
product exports may fall by as much as 50% from 2008 levels, 
putting thousands of artisanal fishers, mainly from the 
Caribbean, out of work. 
 
CULTIVATED SHRIMP 
----------------- 
 
¶6.  In 2008, the value of Nicaraguan exports of cultivated 
shrimp increased by 70% over 2007, making it the country's 
leading seafood export.  The country exported $63 million of 
cultivated shrimp in 2008, up from $37 million in 2007.  This 
increase is a result of a 28% increase in the average market 
price of cultivated shrimp for the year and a 31% increase in 
export volume in Nicaragua. 
 
¶7.  Though cultivated shrimp exports showed strong growth 
during 2008, the market has not escaped the global economic 
decline.  The market price for cultivated shrimp fell 
significantly during the last quarter of 2008, coming in at 
14% lower in January 2009 than in January 2008. 
Nevertheless, large producers, such as Camarones de 
Nicaragua, owned by Pescanova of Spain, and Sahlman Seafoods, 
have both the capital and the storage capacity to survive a 
down market.  In addition they can shift production from 
larger, more expensive shrimp to smaller shrimp, which are 
less expensive and thus less affected by a decline in global 
demand. 
 
CARIBBEAN LOBSTER 
----------------- 
 
¶8.  For lobsters, the situation is considerably more complex. 
 In 2008, the average market price of lobster rose by 12%, 
resulting in a 9% increase in the value of lobster exports 
for the year, despite a slight decrease in volume.  These 
figures partly reflect the exceptionally high price of $22 
per pound in early 2008.  The price collapsed in the last 
quarter of the year to $10 per pound in January, 2009. 
According to CAPENIC, $12 per pound is the break-even price. 
Producers have been sitting on inventory hoping that the 
price would recover, but are now beginning to sell at a price 
that at least covers the cost of production.  The value of 
lobster exports in January 2009 was 70% below that of January 
¶2008. 
 
¶9.  The lobster industry largely depends on artisanal 
fishermen, many of whom still dive for lobster rather than 
use traps.  Poor diving practices, which legislation is 
attempting to halt, have resulted in widespread decompression 
sickness among divers.  These men, who increasingly dive in 
deeper water because shallow waters have been picked clean, 
lack the wherewithal to survive a market downturn.  As a 
result, the crisis in the export market is likely to force 
many of then out of business.  The fall in demand for lobster 
follows on the heels of high fuel prices in 2008 and the 
economic devastation of Hurricane Felix in 2007. 
 
FISH AND WILD-HARVESTED SHRIMP 
------------------------------ 
 
¶10.  In addition to lobsters and cultivated shrimp, Nicaragua 
exports wild-harvested shrimp and assorted species of fish. 
In 2008, Nicaragua exported $8.3 million worth of wild 
shrimp, 30% less than in 2007.  Shrimp trawlers are now 
located exclusively on the Caribbean coast, as harvests off 
Nicaragua's Pacific coast declined steadily since 1999 and 
ceased in 2007.  As with lobster, global demand for wild 
shrimp has declined, leading to a large inventory of unsold 
shrimp. 
 
¶11.  Nicaraguan fish exports, caught off both coasts, have 
remained relatively stable.  Nicaragua exported about $22 
million worth of fish in 2008, approximately the same amount 
as it exported in 2007.  While a significant export 
commodity, Nicaragua's fish exports are valued at less than 
half the per pound price of lobster or shrimp exports.  The 
leading species are red snapper and snook.  Nicaragua also 
exports some freshwater fish, 40% of which is tilapia farmed 
in Lake Nicaragua.  With an abundance of fresh water and a 
warm climate, Nicaragua has the best conditions in Central 
America for farming tilapia. 
 
HELP FROM THE GOVERNMENT? 
------------------------- 
 
¶12. In response to the decline in global damand, lobster producers and industry representatives are requesting government subsidies, plus a moratorium on taxes charged per pound of seafood harvested from Nicaraguan waters, totaling as much as 30 cents per pound. To date, however, the government has focused on finding new markets, initiating talks with Russian and Iranian officials to facilitate exports. Industry representatives dismiss this effort because of the distances involved and high transportation costs. CAPENIC is also proposing that the GON take advantage of the industry slowdown to introduce badly needed reforms. They want the GON to finance the transformation of lobster boats outfitted for divers to boats outfitted with traps. CAPENIC also wants the government to promote fish farming to make up for lost income and employment from lobster.
 
 
COMMENT 
------- 
 
¶13.  (SBU) As widely reported in the local press, producers 
and exporters continue to be unable to sell their product in 
overseas markets at a profitable price, threatening thousands 
of jobs, especially on the Caribbean coast.  While the 
government has held talks with Russian and Iranian officials 
hoping to open new markets for Nicaraguan seafood, the 
likelihood that this will result in quick sales is not high. 
It is also unlikely that the government will dedicate scarce 
budget resources to subsidies or long-term structural reforms 
in support of the industry in the near term. 
CALLAHAN