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Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.

 

Ecuadorian banana exporters in a difficult position

Friday, February 13, 2015 > 11:46:27
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(Fresh Plaza)

In 2014, Ecuadorian banana exports broke new records. Earlier in the year, the price per box in the spot market is higher than the official.

Ecuador finally joined the trade agreement between the European Union and the Andean Community of Nations (ACN), as a result of which we can predict that sometime in 2016 or no later than January 2017, the gap between the highest tariff paid by Ecuador and the lowest paid by the Caribbean countries will be minimised.

This may lead us to believe that prospects are good for bananas, but it is not so.

2014 was a year of recovery in the banana sector due to weather issues in other exporting countries. Ecuador is once again the country from which bananas are purchased when there are none available elsewhere. Its inflexible pricing policies contribute to this, as these prevent exporters from buying fruit to export when the price is low.

Producers face the effects of the rise in agricultural salaries above inflation, the IESS and other factors, which increase their costs.

Many Ecuadorian exporters have seen their position weaken due to fines and other tax measures, forcing them out of the market.

Ecuador has never allowed transnational companies to own agricultural properties. While there is merit in this position, which ensures Ecuadorian banana plantations are owned by Ecuadorians, this also means that the fruit sold by exporters is that from its own plantations in Central America.

In this context, Ecuador lost ground in the two major global markets, the U.S. and the European Union. Ecuadorian exporters are constantly seeking new markets and have managed to turn Russia into a major destination, as well as the eastern Mediterranean, where the fruit is sold to Turkish importers for their re-export to third countries. Ecuadorian bananas are not marketed in Turkey.

The biggest challenge these days is the strengthening of the dollar and the depreciation of the Colombian peso, which makes Colombian bananas, which already enjoy a great position in the markets, much cheaper.

Additionally, the Rouble has been depreciated by 55% against the dollar in recent months. As Russian importers pay in dollars to Ecuador and sell in Roubles to supermarkets, they have lost their working capital and are not paying Ecuadorian exporters, who are in turn struggling to pay producers on time, and authorities consequently treat them as criminals.

In the Middle East, major customers are Syria and Iraq, currently involved in a civil war with much of its territory in the hands of the Islamic State.

There are talks of China as a great potential market, but China imposes a 10% tariff on Ecuadorian bananas and is closer to the Philippines, the world's second largest producer, where minimum agricultural wages stand at $174 per month, making it difficult to compete.

For these reasons, banana exports in 2015 are no longer in the hands of Ecuador; they will depend on the supply volumes of the other major exporting countries.


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