LatinFinance - March/April 2015 - Supplement - 18

Trade

Wake-up call
As a tough international economy hits export revenues, talk of revving up value-added
production is stirring

Ecuador's trade ministers have been able
to point to impressive growth in export
revenue over the past decade. Earnings
boomed, more than tripling from $7.6
billion in 2004 to just under $25 billion
in 2014.
The trade ministry had expected
another double-digit increase in exports
this year. But in fact, earnings might dip
as a combination of international factors
batter Ecuador's $95 billion economy.
"The forecast was to grow 10%
above 2014, but today, with the
problems we are encountering, we
are looking at zero growth or even a
decline," allows Francisco Rivadeneira,
Ecuador's former trade minister.
Rivadeneira characterizes the series of
economic forces that have swamped the
country's exports in a past few months
as a perfect storm. "I want to be clear
that this is a short-term situation that
will not last beyond the ﬁrst quarter
of 2016. Once we get out of this, we
should be able to get back to the high
growth rates we are accustomed to
seeing," says Rivadeneira, who stepped
down in mid-February, shortly after
being interviewed by LatinFinance.
Diego Aulestia has replaced him.
The principal problems right now
are the strength of the US dollar and
the steep drop in oil prices. A stronger
dollar, which Ecuador adopted as
its currency in 2000, has made the
country's exports more expensive and
imports, especially from neighboring
countries, cheaper. The price of oil,
which accounts for more than 50%
of exports, has plummeted. The

government initially expected oil prices
to hover between $80 and $90 a barrel,
but the average price in the ﬁrst two
months of 2015 was closer to $50 a
barrel. Oil output has increased, but not
enough to cover the gap in price.
"It was impossible to foresee the
drastic drop in oil prices that affects
our total exports and the government
budget," says Rivadeneira. "This has not
only been drastic, but sudden."
Beyond bananas
If that were not enough, agro-exports,
which make up a third of Ecuador's
exports, have been slammed by the
adverse international climate. Russia
absorbs 23% of Ecuador's cut ﬂowers
and 25% of its bananas, and exports of
both have been hurt by the devaluation
of the ruble and the country's economic
downturn.
Flowers brought in $798 million last
year, slightly below the $808 million
from 2013. Banana exports were up
14.9% in 2014 over 2013, according

"IT TAKES YEARS TO
BUILD UP MARKETS
AND WE DON'T WANT
TO SEE PRODUCERS
LOSE THIS OVER SHORTTERM PROBLEMS"
Ramiro González

18 A Supplement to LatinFinance - March/April 2015

to the Banana Exporters' Association of
Ecuador.
Indeed, 2015 will be a tough year all
around for agro-exporters. Labor costs
are rising and the dollar's appreciation
has undermined competitiveness
from countries whose currency has
depreciated, making their products
cheaper. "Our biggest competitors,
Colombia and Nigeria, are booming
because of currency depreciation," says
Santiago Mosquera, vice president of
Quito-based Analytica Investments.
Disease has decimated palm oil crops
in several provinces. Farmers are not
replanting because of lower prices,
says Gilbert Torres, of the National
Association of Palm Oil Growers. He
forecasts a drop of about 20,000 tons of
palm oil exports this year.
Rivadeneira, however, sees a silver
lining in the slowdown: Low demand,
he says, is providing a greater impetus
to diversify the country's basket of
exportable goods and increase its
competitiveness. For example, Ecuador
hopes to tap into the bourgeoning
organic and gourmet markets in
North America and Europe by joining
neighboring Peru in cultivating Andean
products such as quinoa. Peru's quinoa
export earnings from the crop were
$196 million last year, an astounding
148% increase over 2013.
In the meantime, Industries and
Productivity Minister Ramiro González
says the government is working on
different mechanisms that will help
exporters maintain market share despite
the strength of the dollar. "It takes years
LatinFinance - March/April 2015 - Supplement

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