Nicaragua - Backgound

Country Situation. Despite some success in improving the economic well-being of the poor during the last decade, Nicaragua is still the second poorest country in the Americas. About half of the population lives in poverty and 17% live in extreme poverty. 75% of Nicaragua's poor are found in the rural areas and are heavily dependent on agricultural activities for food and employment. Hence, Nicaragua desperately needs to spur economic growth in the rural areas to reduce poverty, the potential for political instability, and increase income.

The recently signed Central American Free Trade with the U.S. (CAFTA) agreement has rapidly forced the Nicaraguan economy to globalize; resulting in both opportunities and threats for the Nicaraguan agricultural industry, particularly for the small– and medium–scale producers. There are outstanding opportunities for small– and medium–scale producers for those that can meet the regional and global market standards and penetrate new markets. On the other hand, competition in domestic markets will intensify as a result of the lower trade barriers, meaning that producers must be prepared to meet this competition at home and abroad. Regardless of the market (local, regional or global), Nicaragua's agricultural strategy must be to focus on producing globally competitive goods and services.

Nicaraguan agriculture primarily consists of small producers and a few medium– and large–scale producers that have historically produced only moderate quality fruits and vegetables for sale in local markets. Therefore, a strategy highly focused on assisting and upgrading small producers is critical to counter the increasing level of imports.

PFID—F&V Phase I Market Access for Nicaraguan Farmers Project. Under a Leader–with–Associates grant awarded in July 2003, PFID—F&V has implemented a program to assist Nicaraguan farmers to become more competitive and to increase their access to high value markets. PFID—F&V in Nicaragua provides tailored technical assistance programs to participating small– and medium–scale producers and firms. The goal of the program was to assist producers to consistently and efficiently produce high quality and safe produce for the local, regional, and export markets.

To date, PFID—F&V/Nicaragua has demonstrated the effectiveness of a sound market-led strategy in promoting agriculture diversification that has dramatically improved income for small- and medium-scale producers in Nicaragua. PFID—F&V, along with its primary funding agency, USAID, and its partners work as an integrated team to enhance the productive and marketing capacity of small– and medium–scale producers and private agriculture companies. The project partnership includes the following businesses, NGOs, and governmental organization: Hortifruiti and La Colonia supermarket chains, Catholic Relief Services, Adventist Development and Relief Agency, Project Concern International, Save the Children, World Relief Corporation, and the Inter–American Institute for Agricultural Cooperation (IICA). The following table illustrates the success of this project utilizing a team approach to positively impact the lives of the rural poor in Nicaragua.

Indicator	Target (March 2005)	Result (March 2005)
Amount of sales increased (in US $M)	7	7.4
Access to potential market contracted (in US $M)	15	16
Number of alliances formalized	20	24
Market contracts between buyers and farmers formalized	25	26
Number of associations with improved business practices	5	6
Employment generated	N/D	11,354
Beneficiaries	N/D	3,840
Hectares in production	N/D	3,672

To continue this momentum, PFID—F&V has designed a 2nd Phase Market Access for the Farmer project that builds on the solid achievements obtained during the initial 14 months of the 1st Phase project.