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November, 2009

Market Watch:
Cigarette Trade Changing In Central America

by John Parker

Now, more than ever, Central America is an ever-changing field of opportunities and obstacles. John Parker profiles the region and goes through the numbers market by market.

The combination of rising income, more influence of free trade policies, multinational business connections, and smokers seeking higher quality brands contributed to greater cigarette imports by countries in Central America in 2008. Estimated cigarette imports for countries in Central America in 2008 rose to about 11 bn pieces. That is an estimate for total imports tabulated by adding data for each of the seven countries. The net regional imports would be about half of that because of large shipments to other countries in Central America by Honduras and Guatemala. BAT and subsidiaries account for most of the cigarette output in Central America.

Cigarette consumption reached an estimated 24 bn pieces in 2008, compared with 23 bn in 2007. Sales were relatively flat in most countries in the region except for Panama, but they were down in 2008 in Guatemala and Honduras from the 2006 peak. Some of the sales gain for stores in Panama was because of shoppers visiting shops while they waited for their ship to pass through the Panama Canal. The trade policy agenda for trading more with each other has influenced cigarette trade in Central America. The Central American Free Trade Association had greater trade among members. Countries belonging to CAFTA include: Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama. Two countries are major cigarette exporters in this group: Honduras and Guatemala.

Honduras Is The Leading Cigarette Producer And Exporter In Central America: Honduras had peak exports of 4.9 bn cigarettes in 2008, compared with 4.6 bn in 2007 and 1.9 bn in 2006. The leading destination for cigarette exports from Honduras in 2007 was Nicaragua, with the shipment of 1.387 bn pieces. Colombia was a customer for 963 mn pieces, Guatemala for 663 mn, and El Salvador for 638 mn pieces. Shipments to Bahamas were 140 mn pieces in 2007.

Honduras is the leading producer of cigarettes in Central America because over half of its output is exported. Estimated production of cigarettes in Honduras in 2008 advanced to 7.6 bn pieces. Purchases of Brazilian tobacco reached $43 mn in 2008 as factory output in Honduras remained strong.

Guatemala Expanding Cigarette Exports: Guatemala’s cigarette exports advanced from 1.74 bn pieces in 2007 to a peak of 1.96 bn in 2008. Nearly half of the cigarette exports from Guatemala in 2007 went to El Salvador, about 30 percent to Nicaragua, and a fifth to Honduras. Cigarette output averaged about 5.6 bn pieces annually during 2006–08, compared with 5.2 bn pieces in 2004. Much of the leaf tobacco used to manufacture cigarettes is imported. Brazil exported leaf tobacco valued at $8.7 mn to Guatemala in 2008.

Cigarette Imports Into Guatemala Show Slight Upward Trend: Cigarette imports into Guatemala averaged about 800 mn pieces during 2006–08, compared with the reported arrival of 717 mn pieces in 2004. The estimated imports for 2009 may be up slightly because of larger arrivals in trucks of passengers coming through Mexico.

Costa Rica Importing More Cigarettes: Costa Rica is the leading cigarette importer in Central America. Imports of cigarettes into Costa Rica rose from 1.256 bn pieces in 2005 to 2.89 bn pieces in 2007 and advanced slightly in 2008. Honduras and Colombia are major suppliers of cigarettes imported into Costa Rica. Rising imports provided a greater share of the cigarette market as domestic output declined from 2.2 bn pieces in 2005 to about a fourth less in 2008.

Cigarette Imports Into Nicaragua Were Relatively Flat In Recent Years: Nicaragua had imports of about 2.1 bn cigarettes in 2008, compared with 2.2 bn in 2004. Arrangements to bolster manufacturing of consumer goods in Nicaragua apparently meant a push to produce more cigarettes locally for the domestic market. Cigarette output in Nicaragua averaged about 2.9 bn pieces during 2006–08, compared with 2.5 bn pieces in 2004.

Guatemala had steady imports of about 800 mn cigarettes annually during 2006–08, compared with imports of 717 mn pieces in 2004. BAT produces a regular set of brands in Guatemala. Cigarette output in Guatemala averaged about 5.6 bn pieces during 2006–08, compared with 5.2 bn pieces in 2005.

Panama Imported More Cigarettes In 2008: Panama had greater cigarette output in the last several years, partly to capture some of the business for sales to passengers shopping while their ship was passing through the Panama Canal. Cigarette imports into Panama rose to about 2.1 bn pieces in 2008 - more than double the 2004–06 average.

Cigarette sales in Panama rose to an estimated 3 bn pieces in 2008, compared with about1.8 bn pieces annually during 2003–05. Per capita income in Panama and Costa Rica are the highest in Central America. Many imported consumer goods are displayed in Panama shops at attractive prices.

Panama imports cigarettes from many countries because of efforts give a wide variety of brands for passengers on ships passing through the Panama Canal. The to supplier of cigarette imports into Panama in 20–08 was Paraguay with shipments of 1,018 bn pieces. Honduras exported 478 mn cigarettes to Panama in 2008, and Guatemala provided 260 mn pieces. US cigarettes exports to Panama were 236 mn pieces in 2008, and German deliveries were 201 mn pieces. Chile shipped 143 mn cigarettes to Panama in 2008, and Uruguay delivered 182 mn pieces. France exported 39 mn cigarettes to Panama in 2008, and Romania was a relatively new supplier of 36 mn pieces. The busy activities of China’s trade in the area contributed to Hong Kong’s exports of 265 mn cigarettes to Panama in 2008.

Honduras Allows Imports With Help Of Free Trade Agenda: While Honduras is the leading cigarette exporters in Central America, some imports are made to allow certain smokers to find their favorite brand. Imports of cigarettes into Honduras peaked at 742 mn pieces in 2006 and were down to about 535 mn pieces in 2007, before rising back to over 600 mn pieces in 2008. Guatemala exported 329 mn cigarettes to Honduras in 2008, and German shipments were 51 mn pieces. Chile shipped 8 mn cigarettes to Honduras in 2008, and deliveries from the United States were nearly 4 mn pieces. Estimated consumption of cigarettes in Honduras rose to a peak of nearly 3.8 bn pieces in 2006, before dropping to about 3.4 bn pieces in 2008.

Cigarette Sales In El Salvador Appear Relatively Flat: Retail sales of cigarettes in stores may not completely record the demand for cigarettes when other flows are important. El Salvador has a considerable inflow of US cigarettes when workers return home from jobs in the United States. Those arrivals are not counted in the matrix of exporters sending cigarettes to El Salvador. Commercial imports of cigarettes into El Salvador averaged about 1.64 bn pieces annually during 2006–08, compared with 1.5 bn pieces in 2005. Strong sales to places catering to foreign tourists contributed to steady cigarette demand of about 3.3 bn pieces annually, despite more restrictions on smoking.

Shipments of cigarettes from Guatemala to El Salvador rose to 844 mn pieces in 2008, and deliveries from Honduras were up to 564 mn pieces. US commercial exports of cigarettes to El Salvador were 170 mn pieces in 2008.

Sales In Belize Bolstered By Rising Incomes and Tourists: Belize is about the size of New Jersey, with a population of about 300,000 people Rich timber reserves and beautiful beaches have attracted significant foreign investments. Most foreigners with business dealings in Belize indicate they are happy with their involvement. Imports of cigarettes into

Belize were up to about 670 mn pieces in 2008, more than double the 2003–05 average. UK cigarette exports to Belize were 621 mn pieces in 2008, compared with the shipment of 39 mn pieces from the United States.

Tobacco International - November, 2009

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