VII International PENSA Conference
“Economic crisis: Food, Fiber, and Bioenergy Chain”
COMPARATIVE ANALYSIS OF THE FLORICULTURE SECTOR IN
ARGENTINA AND CHILE: RESTRICTIONS AND OPPORTUNITIES FOR
DEVELOPMENT
Trujillo Becerra, Mónica María
Programa de Agronegocios y Alimentos – Campo Latino
Facultad de Agronomía-UBA
Email: monica.trujillo@campo-latino.com
Senesi, Sebastián Ignacio
Sub-Director Programa de Agronegocios y Alimentos
Facultad de Agronomía-UBA
Email: ssenesi@agro.uba.ar
Corrales Martino, Dalila Lucía
Programa de Agronegocios y Alimentos – Campo Latino
Facultad de Agronomía-UBA
Email: dalila.corrales@campo-latino.com
Alcover, Paulo Alejandro
Programa de Agronegocios y Alimentos
Facultad de Agronomía-UBA
Email: alcoverp@agro.uba.ar
Barilatti, María Mercedes
Programa de Agronegocios y Alimentos
Facultad de Agronomía-UBA
Email: barilatt@agro.uba.ar
Vilella, Fernando
Director Programa de Agronegocios y Alimentos
Facultad de Agronomía-UBA
Email: vilella@agro.uba.ar
ABSTRACT
With the main objective of characterizing the fresh cut flowers chain in Argentina and
Chile, a comparative analysis to identify barriers and opportunities was carried out,
based in the theoretical tools of the New Institutional Economics (NIE) and the
Agribusiness Systems. Despite major differences between both countries regarding the
economic, social and institutional environments, relations and characteristics within the
floriculture sector are very similar. In both cases there is a predominance of informality,
low technological level, information restrictions, hybrid forms and market as common
governance structures, a high seasonal nature of production and consumption. Among
the main differences, in Chile, there is a higher level of available information and an
active participation of the public sector with support programs. In Argentina, there is a
higher level of association between producers, a minor involvement of the public sector
and a lower level of available information. In general terms, national consumption of
fresh cut flowers appears to be greater in Chile then in Argentina, in volume as well as
in value.
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VII International PENSA Conference
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COMPARATIVE ANALYSIS OF THE FLORICULTURE SECTOR IN
ARGENTINA AND CHILE: RESTRICTIONS AND OPPORTUNITIES FOR
DEVELOPMENT
Track: Agribusiness chains and networks coordination
1. INTRODUCTION
Ornamental plants in Argentina have a tradition and history of over 100 years;
the first nurseries were settled in 1875, producing fresh cut flowers such as rose,
carnation and chrysanthemum. There are two main historical immigrant communities
that traditionally have worked within this activity: the Portuguese and the Japanese,
which ascribes a cultural component to the economic activity. The labor consists mainly
of members within the home environment. Currently, there are around 1,300 flowergrowing establishments in Argentina and they extend over, approximately, 1,160.2
hectares in the whole country. National production of fresh cut flowers is over 6,000
tons per year; trading volume is approximately 271 million stalks/years. During the
latest years, export volume (kg) has fallen around 21% between 2005 and 2008. During
last year, export volume was 130 tons, which were equivalent to U$S167 thousand. The
principal destination was Chile, with chrysanthemum. The foreign trade outcome
showed a deficit balance, that is, import volume and value are higher than exports
during the analyzed period.
For Chile, in Region V flower-growing is historical due to favorable agriecological conditions and the proximity of the major consuming center that is Santiago.
The activity is is one of the most important ones within the region, which could also be
extended towards region IV. In the other regions southwards (VI, VII, VIII and IX) the
activity is characterized as being emerging innovative, of productive restructuring, as it
has no more than a 10 year-production average. Floriculture has expanded with the
development of basic infrastructure and with the support of governmental programs.
The total flower-cultivated area in the country extends over 2,224.5 hectares. Chilean
production of fresh cut flowers average out to 5,700 tons per year and 287 million stalks
a year; carnation, rose, lilium, gladiolus and chrysanthemum are among them.
Principally, production is developed outdoors, which implies a highly-stressed seasonal
nature of supply and prices. Between 2004 and 2008, exports volume (kg) has decreased
around 4%, even though it remained in value terms. In 2008, the export volume was 501
tons and almost U$S3 million. Holland is the main destination; lilium and peony are the
principal export species. Regarding foreign trade, it is worth mentioning that is has a
deficit balance. This is due to the fact that imports are much greater than exports, and
this balance has been growing in favor of the former during the latest years.
The environment of a country puts pressure on the businesses that are
developing within it. These economic, social and institutional pressures go beyond the
business control and management itself, but are fundamental in its present and future
performance. For this purpose, the PEST analysis methodology of Johnson and Sholes
(1996) will be used, as it enables the approach to the most relevant indicators of each
environment in a fast and synthetic way1. For this reason, the following table shows the
1
Even though PEST analysis includes the analysis of the Political, Economic, Social and Technological
indicators, in this case, only the economic, social and institutional aspects are taken into account, due to
lack of comparable technological information.
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general scene in which Argentine and Chilean fresh cut flowers businesses are
developed and will be carried out.
Table 1: PEST analysis (Economic, Social and Institutional) of Argentina and Chile
ARGENTINA
CHILE
· GDP = 326.47 thousand million dollars
(current prices, 2008).
· GDP=169.46 thousand million dollars
(current prices, 2008).
· GDP per capita in 2008: (U$S
nominal) 8,214.
· GDP per capita in 2008 (current
prices): U$S 10,147. First in South
America.
ECONOMIC
· Growth: 6.,9% - 2008.
· Accumulated inflation from 2008: 10%
(INDEC), 25% (private sources).*
SOCIAL
INSTITUTIONAL
· Growth: 3,2% (2008).
· Accumulated inflation from 2008:
7.1%.
· 40.9 million inhabitants.
· 16.1 million inhabitants.
· Density: 14 inhab./km.².
· Density: 20 inhab./km².
· 89% urban population.
· 88% urban population.
· Literacy rate: 97.5%.
· Literacy rate over 95%.
· Unemployment rate: 7.3%.
· Estimated unemployment rate 7.5%.
· Bad world-wide performance al
(128/134) in public and private levels.
· Institutional advantages that place
Chile in position 42 of 134 countries in
public institutions. Competitive advantages
in public policy transparency, credibility in
the police and low terrorism cost.
· Last third in the world ranking
regarding the Facility to do business
(position 113 of 181 countries).
· Position 40 from 181 countries
regarding the Facility to do business. Chile
is the best positioned with respect to Latin
American average.
· First quarter in world ranking for
Contract compliance (position 45 of 181
total countries). In this case is slightly
better than Chile.
· Chile is placed in position 65 of 181
total countries for Contract compliance.
· Argentina is placed in position 104 of
181 countries, regarding Investors
protection.
· Chile is placed in position 38 of 181
countries, regarding Investors protection
· Levels of informality and corruption
are similar to Latin American average.
· Regarding business informality Chile
is placed below the Latin American
average, this is also the case of business
corruption incidence.
· High Macro Transaction Costs.
· Relative low Macro Transaction Costs.
*Inflation estimate has been questioned given the problem of methodology change and governmental
intervention in the estimates registered and published by INDEC (National Statistics and Censuses
Institute). The entity is strongly intervened since 2005, and the published information is questioned
nationally as well as internationally.
Source: International Monetary Fund (IMF), National Statistics and Censuses Institute (INDEC), Chilean
National Institute of Statistics (INE), World Economic Forum, CIA World Factbook, World Bank
(Enterprises Surveys, Doing Business).
Despite major differences at country-level that can be observed in the three
environments above mentioned, the floriculture sectors of each country share main
similarities. For example, some of them are the informality, the predominance of small
production units (with a low technological level), information restrictions, governance
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structures, seasonal nature of production, high market power of wholesalers, seasonal
nature of consumption during holidays, among others.
Given the fresh cut flowers production tradition in both countries, it is important
to impart information in order to understand the reality of production and domestic
commercialization, to identify restrictions and strengthen the development opportunities
within the industry.
2. OBJECTIVES AND METHODOLOGY
The objective of this work is to characterize the fresh cut flowers chains in
Argentina and Chile, following the Agro-industrial system analysis methodology,
according to Zylbersztajn (1996) and Neves (2008).
The main purpose is to describe the fresh cut flowers chains in Argentina and
Chile, analyzing comparatively both countries. The specific objectives are:
1) To carry out a discrete structural analysis of the flowers chain;
2) To describe agents (competitors, importers, distributors – intermediaries,
institutions, and final consumer) and their relations (transactions) within the flowers
distribution chain;
3) To quantify the size of the flower consumption market;
4) To perform an analysis regarding opportunities and barriers to the development of
fresh cut flowers chain.
This article could be classified as an exploratory research since it looks towards
a better interpretation of an empirical phenomenon (flowers agribusiness system). As a
reference for the analysis, we based this research on two known research methods: ‘the
mapping and quantification of agribusiness systems’ (Rossi et al., 2005) and ‘the
strategic planning and management of agribusiness systems’, recognized as GESIS
(Neves, 2008). The methodological procedures are limited to literature review and indepth interviews with sector agents. Therefore, in this work sources of primary and
secondary information were consulted.
With regards to Chilean and Argentine floriculture information, nowadays there
is little data about buying and selling volumes—of production and trading, which makes
it difficult to measure their evolution. Besides, in addition to few total secondary data
taken as starting point, inevitable differences arise when comparing them, as the criteria
for collecting information, as well as the initiative origins and their objectives, were not
always the same.
To collect primary information, semi-structured interviews were designed, with
the purpose of obtaining data on the variables being studied, as well as registering other
non-expected variables2 (Morse & Field, 1995). The most prominent agents within the
fresh cut flowers chain in Argentina and Chile were interviewed, as well as officials that
belong to entities related to the industry.
The results obtained in every instance of information gathering were included in
the analysis, comparing it at the same time with information collected in previous stages
and carrying out new adjustments. Again, this information was discussed and
corroborated with the specialists, in order to achieve consecutive approximations to a
definitive description of the system being studied, more objective, reliable and
complete.
2
The questionnaire used is in the Appendix.
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3. THEORETICAL FRAMEWORK
3.1. Conceptualization of Agribusiness Systems (AGS)
This conceptualization has its origins in two approaches developed in different
time and place, but both show similarities with respect to the structure of productive
systems. The first of them is based on the works of Davis and Goldberg (1957) and
Goldberg (1968), which represent the first references regarding the study of agrifood
businesses, and introduced the concept of “Agribusiness”. They brought the definition
of “Commodity System” as an addition of the various transformations of a product along
a vertical chain aimed at the consumer. The authors discuss coordination issues in
agribusiness, by relating contractual relations, coordination institutions, and vertical
integration and coordination.
On the other hand, the notion of “filière” originates in the school of French
industrial organization that applies a sequence of activities that transform a commodity
until it reaches the consumer (Movan, 1985, in Zylbersztajn, 1996): “relations between
agents are interdependent or complementary, and are determined by hierarchical
forces.” This approach focuses on non-price coordination and, specially, on the
industrial aspects of the product.
Zylbersztajn (1996) bases on the contributions of these two approaches given the
extent of description and the definition of vertical systems around a product; he also
considers that coordination, price-mechanism limitations, institutional environment
influence, distributive aspects, and the competitive environment are relevant issues
(Theory of the Modern Industrial Organization). Thus, he suggests that the Agribusiness
System (AGS) should be studied as a group of contractual relations between specialized
companies with the aim of satisfying consumers. Figure 1 represents this model:
Figure 1. Typical Agribusiness System (AGS)
INST IT U T IO N AL E NV IRO M E NT : Cult ur e, Tr adit io n
E duca tio na l lev el, leg a l sy ste m , ha bit s
C ommo di t ies
pro du cer s
R&D
In du st ry
Wh ol esale
S
R
E
M
U
S
N
O
C
S u perm k
T R ANSA CT IO NS
T1
T2
T3
T4
T5
O RG AN IZ ATIO NA L E NVIR ON M E NT : public & pr iva t e burea u,
Info rm a ti on, Co o per at iv es, F irm s
Source: Zylbersztajn, 1996
The theoretical tools employed for the analysis are framed within the New
Institutional Economics (NIE) and the Transaction Cost Economics, which constitute a
useful framework to understand the dynamics of interrelations between different agents
inside the Cut Flowers SAG in Chile and Argentina.
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3.2. New Institutional Economics and Transaction Cost Economics
Following Coase, a new theory on the study of economic systems has been
developing: “the transaction cost economics” (Coleman, 1998), which takes transaction
as the basic unit of analysis, wherein are exchange costs. A concept by Williamson
(1985) arises from the precedent works: “the new institutional economics”, based on
historical processes with institutional changes (North, 1990), the economics of property
rights (Demsetz, 1967), the theory of the firm and the transaction costs (Williamson,
1985), and the theory of agency (Arrow, 1963, 1968; Jensen and Mekling, 1976).
One of the objectives of the NIE is to explain the determinants of informal and
formal institutions3 and their continuity—or the lack of it, in time, and to “assess the
impact of these on the economic performance “ (Nabli and Nugent, 1989); that is, the
transaction cost level that exists under one or other institutional system.
According to North (op. cit.), institutions represent an important figure regarding
the development of goods and services trading, since when transaction costs are high,
institutions do matter. Following Kherallah & Kirsten (2001), “to study institutions is
important to the extent that the level of the latter [and the compliance of current laws or
enforcement] has an influence over the economic growth, and that the sustained
economic growths come from significant institutional changes.”
The Transaction cost economics (TCE) is a branch within the New Institutional
Economics and focuses on studying the coordination and efficiency of systems
organizationally, that is, via the analysis of relations between the areas that constitute
them (Williamson, 1985; 1993).
This approach is based on Ronald Coase (1937) work, which associates the
existence to the fact that there are costs for coordinating market production. Williamson
(1985, 1991, 1996) adopts transaction as the analytical unit, proposing a theoretical
model wherein agents align in an efficient governance structure for a given institutional
environment, with the purpose of minimizing transaction costs.
There are three dimensions—attributes—of transactions associated to transaction
costs: the frequency, the uncertainty and the specificity of assets, the latter being the
most important one (Williamson, 1994).
Williamson (1996) employs the concept of assets specificity in order to refer to
the loss of value in an investment, in case there is a contract breach due to opportunism;
this implies there is a possibility of redistributing it for other purposes and by alternative
users with loss of productive value. The significance of assets specificity is remarkable
in the context of unfinished contracts (Williamson, 1979).
The frequency of a transaction provides a dimension of its regularity and
determines the extent to which the parties know each other, and, at the same time, the
creation of trust-building, prestige and reliable commitment processes. Great
transactions frequency—along with the consequent creation of reputation, economizes
transaction costs (Williamson, 1991).
The third attribute, uncertainty, is the ignorance about future events. According
to Williamson (1996) it includes three aspects: the uncertainty related to contingency,
the one related to lack of communication, and the one due to situations of performance
in interdependent relations. If it weren’t for the limited rationality of agents, it would be
possible to anticipate to every risk and adopt contingency beforehand.
According to that, there is a choice of the way in which the exchange is done—
governance structures (explained below)—according to the attributes above described;
3
By informal institution we refer to the culture, customs and everything that informally governs men and
business. By formal institutions we refer to laws, regulations and other legal requirements that govern
men and business.
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it arises as an alternative adaptation to the environment in which it is developed. In this
sense, three discrete governance alternatives to property rights exchange are commonly
acknowledged: the classical spot market, contracts or hybrid forms, and the firm,
vertical integration or hierarchy (Williamson, 1996).
Given the impossibility to execute complete contracts (due to limited rationality
and opportunism) and the necessity to adapt the relation of an asset provision through
time (as a response to disruptions), the main institutional alternatives to be assessed are
situated among short-term unfinished contracts and vertical integration or hierarchy.
These theoretical assumptions provide a useful framework to understand the
dynamics of the interrelations between the different agents of the Chilean floriculture
AGS, and therefore, which should be the Colombian Floriculture strategies to
coordinate with them.
3.3. Mapping and quantification of the production system
Many are the reasons for choosing Rossi et. al (2005) research method,
improved by Neves (2008). Some of them are: (i) the method’s application is relatively
simple and direct, and the collection of information does not depend on public sources
of data; (ii) the resulting drawing enables an easy visualization of positioning and
relevance of the different existing sectors in a value system; (iii) the validation of results
by cross of interviews increases research credibility. Besides the external analysis, as
macro-environment (institutional, organizational, and technological environment), the
mapping and quantification method can be summarized in four stages:
Table 2: Summary description of the mapping and quantification method.
Phases
Procedures
Agribusiness
System
Description (in focus)
Designing the Agribusiness system by means of “boxes” respecting the product flows,
going from the input up to the final consumer.
Research in associations,
institutions and data
publications
Some private associations or public agencies make sector data available, sometimes
even in the Internet. A careful bibliographical revision also must be carried out
looking for recent dissertations/theses, besides articles in magazines/periodicals with
large printing amounts or academic.
Interviews
agents
sector
This is the central point of this method. Interviews with experts in order to understand
the transactions throughout the agribusiness system. Besides, interviews with
managers will be done, aiming at estimating the market’s size and potential.
Quantification
and
Strategic Proposals
All gathered data are processed and inserted into the system description. Then, the
data are sent to the agents who collaborated, to analyze the results.
The agents will send the data back with their commentaries and contributions. Also in
this stage a lot of material is already available to elaborate suggestions on strategies.
with
Source: Adapted by the authors based on Rossi et al. (2005) and Neves (2008).
4. RESULTS ANALYSIS
4.1. Analysis of transactions among agents within cut flowers chain
Below, the cut flowers chain with its main links and common agents in both
countries is presented (Figure 2). According to the following diagram, the most
important agents are: inputs suppliers, producers, importers and distributors, retailers
and final consumer.
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Final Consumers – Institutional
Consumers
Figure 1: Diagram of Argentine and Chilean floriculture sector
Source: Designed by the authors, 2009
Once the commercialization chain is characterized, it is important to describe
transactions and its main attributes that determine the governance structures. Similarly,
opportunism situations that arise within the relations and contribute to increase the
system’s transaction costs were synthesized. Thus, the following table summarizes this
analysis:
Table 3: Description of transactions within the cut flowers Agribusiness System and its attributes.
T2 Producer - Wholesaler
T1 Inputs supplier - Producer
(propagation plant material)
Transaction
ARGENTINA
CHILE
Frequency
According to productive cycle for
species and variety.
According to productive cycle for
species and variety.
Uncertainty
Medium - Low
Medium - Low
Assets
Specificity
Big producers: High, certified
material (royalties).
Small producers: Low.
Big producers: High, certified
material (royalties).
Small producers: low.
Governance
Structure
Big producers: informal contract.
Small producers: Vertical
integration (self-propagation) and to
a lesser extent market.
Big producers: informal contract.
Small producers: Vertical
integration (self-propagation) and to
a lesser extent market.
Opportunism
Big producers: Low.
Small producers: High (they don’t
pay royalties).
Big producers: Low.
Small producers: High (they don’t
pay royalties).
Frequency
High: 2 to 3 times per week.
High: 2 to 3 times per week.
Uncertainty
High: There are no reference prices,
fluctuations due to undersupply or
oversupply. Supply uncertainty
during times of high demand.
Uncertainty due to climate and
environmental factors. Uncertainty
concerning post-harvest treatment
and duration.
High: Fluctuations due to
undersupply or oversupply. Supply
uncertainty during times of high
demand. Uncertainty due to climate
and environmental factors.
Uncertainty concerning post-harvest
treatment and duration.
Low: when there is vertical
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T4: Retailer – Final Consumer
T3: Producer /Wholesaler - Retailer
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Low: when there is vertical
integration.
integration.
Assets
Specificity
Medium – High due to flower
quality and perishability
Medium – High due to flower
quality and perishability
Governance
Structure
Mostly informal contracts and
market, with the exception of big
producers vertically integrated.
Mostly informal contracts and
market, with the exception of big
producers vertically integrated.
Opportunism
Big producers: Low.
Small producers: High due to price
fixation and non-payment risk.
Big producers: Low.
Small producers: High due to price
fixation and non-payment risk.
Frequency
In general high, outlets supplied the
whole year, except small producers
with frequencies according to
productive cycle
In general high, outlets supplied the
whole year, except small producers
with frequencies according to
productive cycle
Uncertainty
High: There are no reference prices,
fluctuations due to undersupply or
oversupply. Supply uncertainty
during times of high demand.
Uncertainty due to climate and
environmental factors. Uncertainty
concerning post-harvest treatment
and duration.
Low: when there is vertical
integration.
Medium - Low: Price information
system (fluctuations due to
undersupply or oversupply). Supply
uncertainty during times of high
demand. Uncertainty concerning
post-harvest treatment and duration.
Assets
Specificity
Medium – High due to flower
quality and perishability.
Medium – High due to flower
quality and perishability.
Governance
Structure
Mostly informal contract
safeguarded by trust. There is also
market and to a lesser extent vertical
integration.
Mostly informal contract
safeguarded by trust. There is also
market and to a lesser extent vertical
integration.
Opportunism
Medium - High: price information
asymmetry and non-payment risk.
Low: when there is vertical
integration.
Medium: non-payment risk.
Low: when there is vertical
integration.
Frequency
High: particularly in special
occasions (Valentine’s Day,
Mother’s Day, Day of the Dead).
High: particularly in special
occasions (Valentine’s Day,
Mother’s Day, Day of the Dead).
Uncertainty
Low: connected to product quality
and its post-harvest duration.
Low: connected to product quality
and its post-harvest duration.
Assets
Specificity
High-Low, according to the product
demanded by retailer.
High-Low, according to the product
demanded by retailer.
Governance
Structure
Market – Creation of customer
loyalty/hybrid forms.
Market – Creation of customer
loyalty/hybrid forms.
Opportunism
Low: asymmetric information on
product origin and quality.
Low: asymmetric information on
product origin and quality.
Source: Designed by the authors based on secondary data and interviews
4.2. Discrete Structural Analysis
The following tables present the Discrete Structural Analysis of Argentine and
Chilean floriculture sectors in a comparative way.
Within the institutional environment there are macro factors of the sector such as
information availability, public entities participation, national-scale quality standards,
phytosanitary measures, and the informality level of the sector in general.
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Table 4: Institutional Environment of the Floriculture Sector
Institutional Environment of the Floriculture Sector
Argentina
Chile
Low level of information about production volume
and prices. There is information about trade
volumes but with certain restriction.
High level of information about production areas. Low
level of information about trade volumes.
Last production Survey 2002.
Last production Survey 2007.
Low level of secondary information or studies
about the sector.
Medium to High level of secondary information about
the sector: studies carried out.
High tax evasion.
Medium tax evasion.
Low participation of public entities: scarce or
almost none public policies.
High participation of public entities: public policy
within the sector, prices information system, market
studies, others.
Medium level of quality standards.
Scarce or almost none production and post-harvest
quality standards.
There are phytosanitary standards but there is low
enforcement.
High phytosanitary standards and high compliance level
(high enforcement).
Floriculture has a tradition of over 100 years and Floriculture has a tradition of over 30 years and a
an ethnic character: Portuguese, Japanese and gender emphasis: women are the principal producers.
Bolivian
Source: designed by the authors based on secondary data and interviews
The differences found in terms of this environment are: in Chile, the availability
of information on the sector, public sector participation, quality standards, and
enforcement are higher. In Argentina, the flower production is a longer-standing
tradition.
In the organizational environment, the main characteristics of transactions
between agents within the flower agribusiness systems of both countries are described.
Similarly, the associativism level, the predominant governance structures and the
business coordination are presented.
Table 5: Organizational Environment of the Floriculture Sector
Organizational Environment of the Floriculture Sector
Argentina
Chile
Informality relations
Informality relations
Trust as base for transactions is prioritized.
Trust as base for transactions is prioritized.
High associativism level: Co-operatives constitution.
Low associativism level, there are neither unions nor cooperatives.
The predominant governance structure is the market
and informal contracts based on trust.
The predominant governance structure is the market and
informal contracts based on trust.
Business is coordinated via prices: high pressure to
drop prices.
Business is coordinated via prices and quality.
High informality in transactions.
High informality in transactions.
Most producers are small with low technological
level.
Most producers are small with low technological level.
Source: designed by the authors based on secondary data and interviews.
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In this environment, it is remarkable that in both countries there are high levels
of informality in transactions, which are based, generally, on trust. The associativism
level is higher in Argentina. In both cases the governance structure is the market and the
informal contracts. In Chile, business is coordinated via prices and quality, unlike in
Argentina.
In the technological environment, the level of production and post-harvest
innovation, cold chain to preserve the fresh cut flower, employed transportation,
technological level and the quality of the main produced flowers are described.
Table 6: Technological Environment of the Floriculture Sector
Technological Environment of the Floriculture Sector
Argentina
Chile
Low production and post-harvest innovation
level
Medium production and post-harvest innovation
level (influenced by export emphasis)
Deficient cold chain to preserve flowers
Deficient cold chain to preserve flowers
Inadequate transportation
Inadequate transportation
80% outdoors, 20% more modernized level
84% of the area sown outdoors, 16% greenhouse
Low quality in rose production, dependence on
imports
Low quality in rose production, dependence on
imports
High quality in chrysanthemum and carnation
High quality in lilium, tulip and carnation
Source: designed by the authors based on secondary data and interviews
In this environment, there is an evident low technological level characterized by
small productive units, from medium to low productive and post-harvest innovation
level. In general, there is low quality in rose production and better quality in other
flowers.
4.3. Quantification of fresh cut flowers consumption
The main difficulty found in both countries consists in the lack of official
registries about the production volume of fresh cut flowers. For this reason, a different
estimation method was employed for each country. In the case of Argentina, there is
data about stalks trading from the main concentrating markets4. For Chile, data from the
2007 Agricultural, Livestock and Forestry Census (ODEPA5, 2008), which provides
information about sown areas6; taking this information the stalk production volume
based on average performance by species was estimated (Prochile, 2002). For both
countries a standard average weight per flower was assumed, based on previous
estimates provided by INTA7 (2009).
In Argentina, 41% of traded volume is composed by carnations, roses, freesias
and chrysanthemums; 7% by gladioli, gypsophilas, lisianthus and alstroemerias. The
remaining percentage is composed by more than 70 products. Domestic consumption is
approximately 7.1 thousand tons. This estimate was obtained from traded volumes in
concentrating markets and imports volume.
4
Argentine Floriculture Co-operative, CAF. Flower and Plant Producers Co-operative, MERCOFLOR.
Office of Agrarian Studies and Policies.
6
Data on performance by species was available only for the 5 principal flowers (Carnation, rose, lilium,
gladiolus and chrysanthemum), which represent approximately 70% of nationally traded volume.
7
National Agricultural Technology Institute.
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VII International PENSA Conference
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In the case of Chile, around 30 species are produced. Of them, chrysanthemum
occupies a larger area (314.7 ha., 14% of the total area occupied by flowers), followed
by the lilium (202.7 ha., 9%), carnation (179.5 ha., 8%), Matthiola incana (115.6 ha.,
5%), gladiolus (66.6% ha., 3%) and, to a lesser extent, rose (25.7 ha., less than 1%).
According to the average species performance (measured in greenhouse and outdoor
stalks), the estimate is that the average Chilean production of this cut flowers is 5.7
thousand tons8, as it is presented in Table 7. In both countries the rose is the more
consumed flower and its supply depends on imports, given the high seasonal nature of
production and the low quality of the national flower.
The apparent consumption of main fresh cut flowers in Chile is approximately
8.9 tons. This estimate was made following volumes of flower production9, import and
export. Results are presented as follows:
Table 7: Apparent consumption of main fresh cut flowers in Argentina and Chile
MARKET FACTOR
ARGENTINA
CHILE*
Apparent National consumption of fresh flowers (Tons - 2008)
6.979
8.937
Production (Tons)
6.169
5.715
Imports (Tons)
940
3.414
Exports (Tons)
130
192
50
71
Apparent National Consumption of fresh flowers (U$S millions)
Source: designed by the authors following Customs registries – Nosis Database, among other Argentine
sources such as INTA, CAF and Mercoflor; national Chilean sources ODEPA and Prochile
* A 20% loss due to production and trading handling was considered, and it was restricted to the main
traded flowers.
5. CONCLUSIONS
The main purpose of this work was to characterize the fresh cut flowers chain in
Argentina and Chile. For this, a review of studies concerning the sector, a synthesis of
the main theoretical concepts related to the Agribusiness Systems (AGSs) and semistructured interviews to primary agents within the chain were carried out.
The main results obtained were presented through a description of transactions,
their essential attributes and the governance structures. These relations were displayed
in a diagram. Afterwards, a Discrete Structural Analysis was performed in order to
achieve greater knowledge about the institutional, organizational and technological
environments. Finally, the size of fresh cut flowers consumption market in both
countries was estimated.
Based on the results analysis, the sector main barriers and opportunities for each
country were identified. The following table summarizes these data, which are
significant in order to formulate public policies and to define private strategies.
8
The methodology suggested by Prochile in “Análisis del Sector y Estudio de Mercado de Flores de
Corte” (2002) was employed.
9
This estimate was made taking into account the same species selection: carnation, chrysanthemum, rose,
gladiolus and lilium.
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VII International PENSA Conference
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Table 8: Barriers and Opportunities for the Argentine and Chilean floriculture sectors
ARGENTINA
CHILE
BARRIERS
- High informality in transactions
(inability to execute formal contracts)
– Unfavorable climate factors for
fresh cut flowers production all year
- Information asymmetry (no registry
about volume or reference prices)
- Precarious cold chain
- Inadequate internal transportation
- Low technological level for
production
- Lack of quality standards
implementation
- Monopolistic competence of
wholesalers
- Opportunism in price setting and
non-payment risk
- Lack of public policies fir the sector
- High informality in transactions
(inability to execute formal contracts)
despite macro institutional strength)
- Unfavorable climate factors for fresh
cut flowers production all year
- Information asymmetry (no registry
about traded volumes)
- Precarious cold chain
- Inadequate internal transportation
- Medium technological level for
production
- Low compliance with quality
standards for nationally-traded flower
- Monopolistic competence of
wholesalers
- Opportunism in non-payment risk
- Low associativism level
OPPORTUNITIES
- Market size: U$S 50 million in 2008
- Market potential: levels are similar
to those before 2002
- Supply in times of shortages and
high demand (by importing or
technological advances)
- Development of marketing strategies
to increase consumption
- Export to markets in counterseason
- Development of new trading
channels: supermarkets, shopping
malls and others.
- Growing internal market (U$S 71
million in 2007)
- Supply in times of shortages and
high demand (by importing or
technological advances)
- Development of marketing strategies
to increase consumption
- Export to markets in counterseason
- Strengthen of trading channels:
supermarkets, shopping malls and
others.
Source: designed by the authors
For future investigations, we suggest there should be studies on the cut flowers
Final Consumer, in particular, in Argentina—which lacks this kind of information,
identifying market areas, preferences, opinions, perceptions, buying behavior. Besides,
it is recommendable to work on local productive arrangements studies, in order to
qualify the producer on seeking for value-gaining within trading. Finally, we suggest
applying the agribusiness systems analysis methodology—that has been adapted in this
study to a lack-of-information situation—to other industries or countries.
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