May. 7, 2019
The Nicaraguan agrochemical industry reported a drop in sales of between 35% and 40% in April this year, compared to the same period of 2018, as a result of tax reforms, according to the preliminary data of the Nicaraguan Association of Formulators and Distributors of Agrochemicals (Anifoda).
Mario Hanon, vice president of Anifoda, said April was the worst month in terms of sales for agrochemicals, and confirmed that the union would be conducting surveys sometime soon in May to provide definitive figures. The executive explained that the figure from April is more evidence of the negative impact of the reforms on the agricultural sector.
"April was the worst month for the agrochemical industry, with the first estimates revealing that sales decreased between 35% and 40%. May is important, because it is the first one in which the total impact of the reforms will be felt, since March was a month of transition, "Hanon explained.
The tax reforms which came into force on February 28, caused an average increase of 18% in the price equivalent, in the case of granulated fertilizers, and 30% in the case of agrochemicals.
This effect was channeled because the reform excluded agricultural inputs from the list of goods exempt from the value-added tax (VAT) and moved them to the list of exempted products. However, the Ministry of Finance and Public Credit (MHCP) denied VAT exemption to companies affiliated to Anifoda.
During this cycle, Anifoda predicted that the sale of agrochemicals for coffee and peanuts, two of the main export items, would decrease to US$ 10.5 million.
"This means that agriculture figures have dropped drastically. We project a smaller sowing area and lower yields due to reduced use of agrochemicals," Hanon said.
The Central Bank of Nicaragua (BCN) published its report on foreign trade corresponding to February 2019. According to this data, the import of intermediate goods for agricultural use, where fertilizers, agrochemicals and products for veterinary use are concerned, decreased 17.7% in the first two months of 2019, compared to the same period of 2018, when it went from $44.8 million to $36.88 million.
In addition to the decrease in import of agricultural inputs until February 2019, the BCN reported a 48.7% decrease in imports of capital goods for this sector. Exports dropped from $9.63 million between January and February 2018 to $4.94 million, in the same period of 2019. This drop is the worst in the last seven years, according to official figures.
Among the capital goods for agricultural use, the most prominent imports in the first two months of 2019 were tractors for $1.2 million, followed by metal straps and serpentine security wires at $0.94 million and animal feed mincers for $0.85 million. The remaining $1.95 million correspond to lawn mowers, milking machines, milk cooling tanks, shovels and rakes, among others.
The reduction of these purchases is associated with the drop in investments by economic agents due to the lower economic activity, according to Guillermo Jacoby, president of the Association of Producers and Exporters of Nicaragua (APEN).
"They have fallen because there are no investments. If companies grow, they need to invest to replace or to generate more business and neither of that is happening. There are no new purchases since companies either maintain or repair their machinery. This is not sustainable over time and has an impact on productivity," Jacoby said.
The reduction of investment in machinery and equipment and other technology will have a negative impact on the knowledge base of the workforce, and therefore, on the productivity of the country.
"Productivity should increase every year and that is associated with purchased of equipment and machinery and skilled labor. As technology improves, the staff should be more qualified. If there is no new technology, labor remains stagnant because it is not educated at the level of sophistication of new technological equipment," the president of APEN said.