The challenges for Spain's agro-food exports

Spain's agro-food exports are gaining ground and there is no doubt about the potential of Spanish foods, but conquering markets is like an adventure for producers and the industry, with many barriers to overcome.

In the Spanish trade balance, agro-food generated a surplus of 9,662 million euros and exports reached a record 44,000 million in 2015, according to data from the Ministries of Economy (Mineco) and of Agriculture, Food and Environment (Magrama).

However, Spanish companies must follow a torturous path to be able to see their products sold at foreign stores or supermarkets, especially outside of the European Union (EU), according to sources in the agricultural sector. These are some of the challenges:

It is one of the main obstacles, according to a list prepared by the State Secretariat of Commerce and the sector itself.

A most notable example is the veto on EU products imposed by Russia in 2014 in retaliation for its role in the conflict with Ukraine.

According to the Secretariat of Commerce, Spain faces more than 75 barriers of this type. The sector criticises the arbitrariness of their use by the destination countries or their use with a hidden political agenda.

The EU negotiates trade agreements with third countries as a single block, but in the end, the producers of each of the 28 Member States have to manage the authorizations individually. "The result is a lack of coordination within the EU; there is no united diplomacy," according to the director of International Relations of Cooperativas Agroalimentarias, Gabriel Trenzado.

According to Ignacio López, director of international relations at Asaja, the EU "is a single buyer with 28 sellers; any country wishing to sell to the Community market only needs to meet some common standards," but not vice versa.

Sources from UPA stress that the situation "does not improve with countries with which the EU has association or commercial agreements; in fact, it is usually worse, because in some cases their authorities make use of barriers, such as Mexico or South Korea."

The Food and Beverage Handbook of the IESE Business School and the consulting firm Deloitte considers the United States (1), China (2) and Germany (3) as the markets offering the best opportunities for agro-business; followed by Japan (4), the United Kingdom (5) India (6), France (7), the Netherlands (8), Italy (9) and Canada (10). Spain is ranked 13th.

Companies are also taking the UAE into account for gourmet food. However, the Handbook shows variations when looking separately at factors such as the GDP, legal security or social class of consumers.

IESE Professor Jaume Llopis explains that some of the major markets are hampered by "legal uncertainty." Such is China's case, when in terms of legal safety, "it stands 90th in the ranking." Consequently, any companies willing to go there should be prepared to "take risks." On the opposite side of the scale, a small country like Singapore ranks first in terms of "legal safety."

Currency instability or uncertainty over payments also put the brake on trade, according to the head of COAG's fruit and vegetables department, Andrés Góngora.

Góngora points out that the exporters have problems with countries outside of the Euro zone, as was the case with the UK three years ago, when the value of its currency collapsed. "If this happens in the midst of a trading process, we lose money."

He also stresses the difference between "solvent countries" and destinations with a smaller guarantee to receive the payment from the customer.

He assures that these problems could be tackled with "exchange insurances" or guarantees for cases of non-payments, but in Spain insurers "have a smaller risk capacity" against this "volatility" when compared to other countries, such as the Netherlands.

It is essential to be familiar with one's resources, markets, language, cultural or administrative circumstances and competition.

Llopis mentions the "lack of size" of the companies, which could be solved by forming clusters or with initiatives to bring together the entire value chain; setting up an office or identifying markets where the product can compete in terms of prices are decisions that require some "know-how."

The United States is the most important destination after the EU. Producers are desperate about the difficulties to export there due to the standards imposed by Washington, ranging from special pallets to extensive controls and intensive inspections.

The influence of pressure groups (lobbies) varies by state, and Spanish food is accepted, for example, in California, but not in Florida or New York. The EU and the US are negotiating a Transatlantic Trade and Investment Partnership (TTIP). The agricultural sector has shown concern about a possible agreement, as some Spanish products could profit from this, while others may lose.