April 11, 2022

Export Q & A: Top 3 U.S. Export Markets in South America

A: Much of the export growth to South America in recent years is a direct result of tariff elimination through Trade Agreements. The U.S. has a Free Trade Agreement (FTA) with Chile and a similar Trade Promotion Agreement (TPA) with Colombia and Peru.  They are the top 3 U.S. export markets for total agricultural, consumer ready and processed products in South America. For more information on each trade agreement, including rules of origin and documenting origin, go to https://www.trade.gov/us-free-trade-agreement-partner-countries

Chile: Focus Economics reports Chilean GDP growth will wane notably in 2022 on a tough base effect, high inflation and interest rates, and uncertainty over the content of the new constitution weighing on investment. New Covid-19 variants, surging energy prices due to the war in Ukraine, potential flare-ups in social unrest, and policy shifts under the new constitution are key factors to watch. Focus Economics see GDP growing 2.6% in 2022, and in 2023, GDP is seen expanding 1.5%.

FAS in Santiago reports that the U.S. and Chile are strategic partners whose agricultural relationship has been guided by collaboration and trade capacity building allowing Chile to become a regional leader with a competitive trade market.  Because of the U.S.-Chile FTA, Chile dropped all tariffs on agricultural products to “zero” as of January 2015.  The United States is the second-largest supplier of agricultural and related products to Chile, with a 15.4% market share.  The first supplier is Argentina with a 24% market share. 

U.S. agricultural exports to Chile topped $1 billion and were nearly US$1.3 billion 2021.  Chile is also now the largest market for U.S. consumer-oriented products in South America.   This category of products represented nearly70% of all U.S. agricultural exports to Chile in 2021 reaching US$886.3 million, and a strong increase of 34% over that of 2020.  Chile is also the largest market in South America for U.S. processed food product exports, totaling US$653.6 million, up and astounding 52% in 2021 and an all-time record high.  Top processed food exports to Chile in 2021 included alcoholic beverages, processed/prepared dairy products, food preparations and ingredients, condiments, sauces, jams and jellies and dog and cat food.   

The Chilean Retail Food Sector

According to Euromonitor, retail sales in the packaged food market in Chile had been estimated to reach US$16.4 billion in 2021.  That represents a growth rate of 15.1% or US$2.1 billion since 2017.  The forecast for growth in this market is also promising.  By the year 2026, the retail sales in the packaged food market in Chile is expected to reach US$20.5 billion, a growth rate of 19.3%, or nearly US$3.3 billion from 2022.  High growth products in the forecast include:

  • Baked goods
  • Confectionery
  • Savory Snacks
  • Baby food
  • Ice Cream & Frozen Desserts
  • Cheese

FAS Santiago reports that Chile has been one of Latin America’s fastest-growing economies in the last decade enabling the country to have a modern and dynamic food retail industry.  The Chilean retail sector is composed of a mix of large supermarkets, mid-sized grocery stores, convenience stores, gas station markets, and thousands of smaller independent neighborhood mom-and-pop shops.  Chile is becoming increasingly urbanized, not only in the Metropolitan region (Santiago), but also in other major cities like Valparaiso or Concepcion.  The retail food industry has adapted to this trend through the increase of convenience store chains, gas station markets, and smaller supermarkets.

Retail food sales reached US$27.9 billion in 2020, a 2.9% decrease over 2019 while supermarket sales totaled US$15.1 billion and represented 54.2% in total retail sales. During the COVID-19 pandemic, the Chilean government designated the retail food sector as essential and continued to operate without interruptions.  Local suppliers/distributors to supermarkets and mom-and-pop stores shifted toward e-commerce to reach consumers directly.  As a result, online food and drink sales totaled 1.2 billion and grew by 133% in value.

Chile’s main supermarket groups are:  Walmart Chile operating around 363 stores under Líder and Express de Líder brands.  Walmart Chile is the largest supermarket chain in Chile in terms of revenue with a market share of approximately 12.9% of total retail value in 2020.  Walmart Chile continues to dominate the market with its hypermarket format Hiper de Lider brand.  Cencosud is the second largest player in Chile operating around 247 hypermarkets and supermarkets under Jumbo and Santa Isabel brands. Cencosud had 7.5% of total retail value in 2020. 

FAS Santiago reports that U.S. consumer food products with good potential in the Chilean retail food market include beer/craft beer and spirits; meat products (pork, poultry, and beef); dairy products (cheeses); sauces, mixed condiments, and seasonings; pet food; fruit juices; prepared and frozen meals; snack foods and tree nuts. 

Colombia: Focus Economics reports that the Colombian economy will lose momentum this year, following 2021’s stellar economic performance. Despite the moderation, growth will remain robust and both domestic and external demand should continue to strengthen. Weakened economic sentiment, tighter monetary policy, persistently high inflation, and political and policy uncertainty all weigh on the outlook, however. Focus Economics project GDP to grow 4.5% in 2022. For 2023, panelists see GDP growth at 3.1%.

The U.S Colombian Trade Promotion Agreement (CTPA) entered into force in May 2012.  This comprehensive trade agreement eliminated tariffs and other barriers to goods and services.  Although over 80% of U.S. exports of consumer and industrial products to Colombia have become duty-free, the CTPA provided a duty-free tariff-rate-quota (TRQ) on certain goods that operate under a first come/first serve basis, except for rice and poultry, which are subject to auctions managed by Export Trading Companies (ETC).

Colombia is eager for access to other markets and has signed Free Trade Agreements (FTAs) with various countries and trade blocs, such as Canada, the South American Common Market (MERCOSUR), the European Union, Israel, Panama, South Korea, Costa Rica and a larger trade bloc, the Pacific Alliance, which includes Mexico, Peru, and Chile. 

Colombia is now the largest U.S. South American market (and 9th overall) for the export of U.S. agricultural products, which grew 19% and totaled over US$3.4 billion in 2021.  That is also nearly 3 times more than US$1.2 billion more than Chile which is the 2nd largest market for U.S. agricultural exports.  In 2021 U.S. exports of consumer-oriented food products to Colombia totaled US$877.4 million, growth of 39% from that of 2019.  This now makes Colombia the 2nd largest export market for consumer food products in South America, after that of Chile.  

Colombia is now the 2nd largest importer of processed food in South America, US$543.6 million in 2021, and an increase of 10%.  Top processed food exports to Colombia in 2021 included processed/prepared dairy products, food preparations and ingredients, fats and oils, dog and cat food, non-alcoholic beverages, prepared/preserved meats and processed vegetables and pulses.   

The Colombian Retail Food Sector

Euromonitor has reported that retail sales value of the packaged food market in Colombia reached nearly US$11.4 billion in 2021.  That ranks Colombia as the 5th largest packaged food market in Latin America.  The 2021 figure also represents an increase of 20.4% from the 2017 value, or US$1.9 billion.  They also forecast the value of retail sales in packaged food to increase to US$14.5 billion by 2026, an increase of nearly 20.9% or US$2.5 billion from 2022.  High growth products in the forecast include:

  • Cheese
  • Processed Fruit and Vegetables
  • Ice Cream & Frozen Desserts
  • Sweet Biscuits, Snack Bars & Fruit Snacks
  • Savory Snacks
  • Baked Goods
  • Dairy (Ex. Cheese)

FAS Bogota reports that Colombia’s retail sector continues to reinvent itself through a difficult economic period caused by the COVID-19 pandemic.  U.S. exporters face new market conditions in Colombia, as well as new opportunities, resulting from changes to consumer habits and preferences during the pandemic, which has altered the landscape for the retail, food industry, and food service sectors.

Western style: large supermarkets are part of a noteworthy retail transformation in the last decade with major, domestic, and international grocery chains opening new stores.  Discount stores have increased market share and continue opening outlets throughout the country, offering private label portfolios.

Supermarkets: Olimpica, Carulla, Jumbo, and Colsubsidio led the segment.  Strengthening private label product portfolio and developing an e-commerce strategy were priorities for supermarkets, which remained as Colombia’s preferred product source.  Independent supermarkets were also popular.  These family businesses developed their own private label products and expanded their presence in the country. Some brands were Zapatoca and Euro.

Convenience stores: OXXO, Exito Express, and Metro Express were the key players of the segment. COVID-19 deeply affected these retailers since most of them were located nearby offices and universities.  OXXO changed its portfolio to offer a wider variety of products and developed its own application to implement delivery services.

Best Product Prospects: FAS reports that Colombia is a fast-growing market for value-added food products. Surveyed retailers and food importers feel there is significant potential for new products in all food categories.  Healthy and ethnic food categories are especially new and fast growing.  Wines and gourmet products are penetrating the market with excellent results. Organic food products are a new trend and retailers are searching for the best suppliers.

Peru: Focus Economics reports Peruvian economic growth is set to slow markedly in 2022 as the favorable base effect that bolstered 2021’s region-leading rebound subsides. Notably lower consumer and capital spending growth will drive the slowdown, while continued political uncertainty and elevated inflationary pressures are likely to weigh on activity in the short term. GDP is projected to grow 3.1% in 2022, which is unchanged from last month’s forecast, and 3% in 2023.

FAS in Lima reports that Peru is the third largest export market for U.S. agricultural products in South America.  For over a decade, Peru has been one of the world’s top performing economies, registering sustained high growth accompanied by low inflation. U.S. origin food and agricultural product exports to Peru benefit significantly from the U.S.-Peru Trade Promotion Agreement (US-PTPA).  U.S. agricultural exports to Peru are reached $999.1 million in 2021, growth of 9% over that of 2020.

Peru is a member of a number of bilateral and multilateral trade agreements that have opened new markets for its exports and increased demand for imported goods.  This openness to international trade and Peru’s growing middle class has transformed domestic food market channels.  The number of commercial centers in Peru increased from seven in 2000 to 82 in 2019.

Peru is now the 3rd largest South American export market for U.S. consumer food products.  In 2021 the total was US$343.2 million, an increase of 17%.  Peru also ranks 3rd as a market for U.S. processed food exports.  In 2021 Peru imported US$297.6 million, outstanding growth of 26% over 2020.  Top processed food exports from the U.S. to Peru in 2021 included processed/prepared dairy products, food preparations and ingredients, fats and oils, dog and cat food, chocolate and confectionery and non-alcoholic beverages.

The Peruvian Retail Food Sector

According to Euromonitor, retail sales in the packaged food market in Peru had been estimated to reach US$9.7 billion in 2021.  That represents a growth rate of 22.3% or almost US$1.7 billion since 2017.  The forecast for growth in this market is also promising.  By the year 2026, the retail sales in the packaged food market in Peru is expected to reach US$11 billion, a growth rate of 14.4%, or nearly US$1.4 billion from 2022.  High growth products in the forecast include:

  • Ice Cream & Frozen Desserts
  • Confectionery
  • Ready Meals
  • Baby Food
  • Sweet Biscuits, Snack Bars & Fruit Snacks
  • Savory Snacks
  • Processed Meat, Seafood & Alternatives to Meat

FAS Lima reports that Peru´s food retail sector has shown a growth trend in the last 10 years based on the opening of new stores and the consolidation of middle-class and economic indicators.  Given changes in the consumption of products, with a trend towards basic categories due to the COVID-19 crisis, some formats showed higher growth such as hard discount and cash & carry outlets versus the supermarket and even hypermarket formats.

Gradually, the sector overcame challenges posed by the pandemic and sales rebounded towards the second half of 2021.  However, growth will likely be variable across the sector.  For this reason, FAS forecasts 9% growth of the overall sector this year.  Despite the current situation, FAS foresees a long-term recuperation since this sector is not yet at a mature phase and has room to continue growing.

Peru’s food retail market is adapting to the economic hardships and realities arising from the Covid-19 pandemic.  FAS Lima foresees a long-term recuperation since this sector is not yet mature and has room to keep growing.  The market currently holds over 790 convenience stores and 282 conventional supermarkets.  The sector’s expansion strategy targets Lima’s lower to middle income districts.  Ecommerce is expected to grow but still has logistics issues to overcome.

There are three main supermarket chains in Peru: Cencosud (Wong and Metro), Saga Fallabella (Tottus) and Supermercados Peruanos (Vivanda and Plaza Vea).  The market includes 282 conventional supermarkets and superstores, with 178 in Lima, and close to 790 convenience stores.  The sector is comprised of both conventional supermarkets and traditional channels, comprised of wet markets and independent stores.  Different types of food appear to perform better in the two formats.  Top products include snack foods, dairy, edible oils, confectionaries, bread, and cookies.

Best Product Prospects: FAS Lima reports that U.S. products with high sales potential in this sector include cheese, chocolate and confectionery, food preparations, red meats, poultry meats, fruit and vegetable juice, bread, pastry and cookies, soups and broths, sauces, and tree nuts.