The country is attentive to the policy of the United States, a country that could increase sanctions against Russia for the invasion of Ukraine.
Referential image of shrimp containers in Ecuadorian ports.
One year after the Russian invasion of Ukraine began, Ecuador ‘s economy has suffered the consequences, mainly in terms of foreign trade.
The increase in the cost of raw materials and inputs was one of the main effects generated by the war, with an impact on the costs of products for local and international consumption and on imports.
The war conflict also brought a drop in exports to Russia, a destination to which USD 928 million in products were sent, in 2022.
However, so far this year there has been a recovery in exports to Russia, says the representative for Quito and the Sierra region of the Corporation for the Promotion of Exports and Investments (Corpei), Francisco Rivadeneira.
And he stresses that the Government and the private sector must remain attentive to what could happen in the coming months, taking into account that, with the recent visit of the president of the United States, Joe Biden, to Ukraine, the sanctions against Russia could be intensified.
These are the five main effects for Ecuador’s foreign trade of the war in Ukraine.
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Less exports
The value of exports to Russia fell 7.1% in 2022, compared to 2021.
Last year, Ecuador exported USD 928 million to Russia, that is, USD 71 million less than the previous year. However, this amount was higher than what was sent in 2020.
Russia went from being the fourth to the fifth destination of Ecuador’s non-oil exports.
The main export product to Russia is bananas, which, despite the war, had an increase in value of 5.1%.
This is due to the rise in the spot price in the second half of the year, explains Richard Salazar, executive director of the Banana Marketing and Export Association (Acorbanec).
By volume, expressed in boxes, banana exports fell 2.17%, according to Acorbanec.
The banana union faced problems at the beginning of the conflict, including the increase in the price of the product for the final consumer due to the devaluation of the ruble, which reduced consumption in Russia.
Similarly, exporters faced delays and even non-payment due to the sanctions imposed on the Russian financial system, as well as the reduction in the prices of the box of bananas and weekly purchases by Russian importers.
For the shrimp sector, the drop in the value of exports was up to 12.8% in 2022, when they totaled USD 123 million.
Natural flowers, the third export product from Ecuador to Russia, had a 65.5% decrease in 2022, falling to USD 34 million.
This sector, for example, failed to ship to Russia in May 2022, for the Mother’s Day and Victory Day celebrations.
Although it is a small market for Ecuador, exports to Ukraine fell by 73%, remaining at just USD 33.630 million.
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Logistics changes
The logistical difficulties to export to Russia were another of the challenges that Ecuador faced, especially in the first months of the invasion, in 2022.
This as a consequence of the economic sanctions against Moscow, which prevented at least two important shipping companies from going to Russia. While those that continued to do so suffered saturation in European ports.
This produced a rise in freight prices, both in contract shipments and in spot sales.
The foregoing forced certain export sectors, such as bananas, to enter their products into Russia through alternate routes, such as Kazakhstan, or through new maritime corridors, says Rivadeneira.
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Cost increase
The rise in the price of agrochemicals has probably been the strongest impact of the war.
The vice president of the Ecuadorian Federation of Exporters, Xavier Rosero, says that the increase in the price of agrochemicals has been 40%, on average, and is maintained.
Russia and Ukraine are the world’s leading producers of agrochemicals. After the start of the war, Ecuador began to import them from other markets, such as the United States and Chile, but at higher prices.
Urea is the main fertilizer used in agriculture. The rise in the price of this agrochemical raised the cost of agricultural products for local and international consumption.
Imports of cereals, such as wheat and corn, from Ukraine have also been limited, which has raised the price of these inputs for the balanced animal feed sector, explains Rivadeneira.
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Inflation
World inflation, which has grown more strongly in developed countries, is also one of the consequences of the war.
However, the rise in prices was already being felt as an effect of the Covid-19 pandemic and the shortage of certain raw materials.
In the case of Europe, the inability to import natural gas and fuels from Russia pushed up energy prices, causing consumers to buy fewer imported products such as bananas and shrimp.
Another effect of the war is the increase in the final price of fats, vegetable oils and some raw materials produced in Ecuador, explains Rosero.
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Fuels rise
Sanctions on Russia have caused disruptions in the supply of oil and natural gas, driving up fuel prices.
The Government has had to allocate more resources to subsidies for diesel, low-octane gasoline and gas for domestic use.
In 2022, the Government spent USD 4.560 million in fuel subsidies. Currently, the price of diesel in Ecuador is set at USD 1.75 per gallon, while Extra and Ecopaís gasoline are at USD 2.40 per gallon.
