Latin America – Britain’s Breadbasket after Brexit?

October 14, 2019

The UK imports almost half the food it consumes, with the majority coming from the EU. That means Brexit should create opportunities for Latin American producers. Canning House commissioned a paper from LatinNews to investigate the business opportunities in food and beverage trade between Britain and Latin America.

Food and drink already make up a considerable chunk of Latin American exports to the UK. In 2018 they accounted for 39% of the $10.5billion worth of goods that Britain imported from the region. But that $4.1billion of Latin American produce only made up 7% of the UK’s total food and drink imports for the year. So, there is significant potential for an increase.

Given its relative size and well-developed agroindustry, it is not surprising that Brazil is the region’s main supplier of food to the UK. However, food only comprises a third of Brazil’s total exports to the UK. Similarly, food accounts for 42% of Peru’s total exports to the UK. For the other countries in the region, food and beverages account for the majority of their total exports to the UK. In Argentina, Ecuador, Costa Rica, Guatemala, Honduras, Nicaragua and Panama food and drink makes up more than 90% of exports to the UK. The share of food exports for the remaining countries in the region is also significant, as it varies from around 60% to more than 80%. The exception is Mexico, where food accounts for less than 8% of its total exports to the UK.

Benefits of no-deal Brexit

Initially it was feared that no-deal Brexit would have a detrimental impact on trade with Latin America as the UK would be left outside existing free trade agreements with Chile, Colombia, Mexico, Peru and Central America. However, the British government has managed to sign a string of Continuity Trade Deals in the region.

On the 15th of May in Quito, three Andean countries – Ecuador, Colombia and Peru – signed a trade agreement with the UK to allow companies to continue trading in a no-deal Brexit scenario with the same terms they currently enjoy under the EU trade deal. The objective is to protect a trade flow of £2.1billion, that has grown steadily over the last decade with UK imports from those countries up 24% and British exports to the Andes rising 58% between 2008 and 2018. On the 18th of July, in Managua, the UK signed an agreement to maintain trade continuity with three Central American countries – Nicaragua, Honduras and Costa Rica. As in the case of the Andean countries, the goal was to avoid hurting the £1billion trade between them and the UK. The agreement will enable continuity of tariff-free trade of industrial products as well as the liberalisation of agri-food and seafood products. These agreements that will come into force once the UK is out of the EU.

In Argentina, Ecuador, Costa Rica, Guatemala, Honduras, Nicaragua and Panama food and drink makes up more than 90% of exports to the UK…

Moreover, Thomas Mills, an academic at Lancaster University, believes that Brexit could pave the way for other markets in Latin America. Mills highlights that protections for agriculture demanded by several EU states have so far prevented a Mercosur-EU trade agreement from materialising, recent progress notwithstanding. As this form of protection is much less pronounced in the UK, the chances of reaching an agreement that would enable increasing agri-food exports from the region are higher, not only with Mercosur but also with other blocs such as the Pacific Alliance, which comprises some of the region’s most open economies.

Most popular Latin American produce in the UK

The biggest category of Latin American food export to the UK is, unsurprisingly, fruit. It is the main food product exported by Chile, Peru, Colombia, Bolivia, Costa Rica and Panama to Britain. The second-most important Latin American export to the UK, beverages and spirits, is more concentrated. Exports of this product are dominated by Chile and Argentina, with their wine, and Mexico, with beer and tequila. The third category is coffee, where Brazil dominates, followed by Colombia and Peru.

the British government has managed to sign a string of Continuity Trade Deals in the region….

Each country has its own speciality. For example, in addition to coffee, Brazil exports significant amounts of meat and soy to the UK. Argentina is very strong in cereal sales to Britain. Mexico is responsible for 80% of the Latin American honey that arrives in the UK, while Ecuador is responsible for around a quarter of the shrimp and Peru is the main supplier of asparagus. In Central America, Costa Rica sells plenty of bananas, pineapples and coffee to the UK, while Guatemala’s main export to the UK is sugar and the Honduras sends lots of shrimp.

According to the UN, Latin America is home to 33% of the world’s supply of fresh water and 36% of its available unused arable land. That means it has incredible potential to meet global food demand. As Britain exits the EU and becomes free to sign bespoke free trade agreements, it will likely source more of its food and drink from the region.