The global logistics crisis, coupled with the perverse effects of the 2019 tax reform in Nicaragua; the deterioration of the business climate, and the prevailing legal insecurity in the countrycombined to force the closure of the company Cereales de Centroamérica SA (Cersa), which sent some 150 people out of work, according to four sources who spoke with CONFIDENTIAL provided they protect their identities.
Cersa was one of the two Central American companies that processed the oat grains that arrived from Chile or Canada, to supply El Salvador, Honduras, Nicaragua, Costa Rica and Panama with products of the Quaker brand, owned by PepsiCo, a transnational company that is also owner of the brands Pepsi, Doritos, Lays, Gatorade, Lipton, etc. The company covers part of the North American market, with another plant that it has in Guatemala.
About four years before Cersa, DASA succumbed, a company dedicated to the transport of oats that were sold in the local market. A former Cersa employee, who lost his job when the company closed, and asked to be identified as “Juan Carlos,” said that he and his colleagues testified the harassment that the Mayor of Managuaand the Ministry of Health (Minsa), applied against DASA, until the owners decided to close it.
“They came to demand that the company invest in warehouses or patios, with the excuse that it was to improve the sanitary part, but they did it to force DASA to close, which is what ultimately happened. Cersa still had a contract with Quaker, so they kept working, now with a new distributor”, said Juan Carlos.
The nightmare of being very small
Although Cersa was able to continue working for the transnational, the global logistics crisis, which was the result of the covid-19 pandemic, put the Nicaraguan company in such a situation that it would lead to bankruptcy, when the lack of containers, the rise in the price of freight, and the small size of the operation that was carried out in Managua, showed PepsiCo executives that it was time to make changes.
The executive of a national agri-food company, who asked to be identified as “Javier”, explains how the complex global logistics chain collapsed as a result of the global crises of recent years (covid-19; the war in Ukraine, the closure of the Chinese port of Shanghaito which is added the time that the container ship Ever Given remained aground in the Suez Canal.
“The supply chains (production, inputs, transportation, fuels, availability of ships and containers) of agricultural raw materials are super saturated, and that includes oats, so the most logical thing is to consolidate logistics in a few places, to make it easier to circulate them around the world. If you are a country with a very small production, shipping companies have little incentive to include you in their programming”, he explained.
A little of that was what happened to Cersa. The administrator of a company that processes and distributes food in the country, explained that, after many years of outsourcing Quaker, the numbers were no longer favorable to Cersa’s interests, “due to a logistical issue: they needed their operation to be more large, to face the cost of raw material and double freight, because they re-exported the oats.”
Who is going to invest in Nicaragua?
In reality, it was more than a logistics problem, admits this administrator, recalling the high tax burden that companies in Nicaragua must face; the general insecurity that the country exhibits, and the high cost of electricity, which is decisive in any industrial process like this, which applies heat to the grain; he grinds it, fortifies it with iron, vitamins, calcium… and then packs it and distributes it.
“PepsiCo, which owns the brand, did its numbers and saw that it was convenient for it to close its operation in Nicaragua and take it to Chile – where this cereal is grown – instead of continuing to work with Nicaragua, where it faced too high costs. The option was to put money into that plant so that it would be efficient, but you have to think twice to put money into Nicaragua,” said an industrialist who knows the operation.
Having experienced the process from the inside, “Juan Carlos” relates that this year, Cersa began to receive increasingly smaller shipments and to process fewer orders. His perception is that “Quaker sought a way to continue guaranteeing its product, and stayed working with Chile.”
Although it did not completely abandon Cersa, the decrease in orders led it to cease operations in February.
“Cersa worked only for Quaker. She was exclusive to them. Quaker specified how to mix, how to pack and package the product, where and when to ship orders, etc. When the company closed, more than 150 mechanics, electricians, technicians, truck loaders, packers, maintenance personnel, engineers, warehousemen, administrative staff, forklift operators, etc., we were left without a job”, he lamented.
