Ecuador will sign an agreement with Mexico to enter “La Alianza del Pacífico” in 2020

Ecuador’s trade agreements with Chile and Mexico will be signed at the end of this year 2019 and the beginning of next year respectively.

These are steps prior to the integration of the country into the Pacific Alliance (a group made up of Colombia, Peru, Chile and Mexico) that would also take place in 2020, according to Iván Ontaneda, Minister of Foreign Trade and Investments.

The agreement with Mexico is the one that most worries the national industry. In September, Ecuador and Mexico will exchange lists of sensitive products of each economy. Meetings with this country will continue in October and November.

For Ecuador, the sensitive sectors are textiles, appliances, metalworking, footwear and car assemblers. Ontaneda reported that these analyze ways to improve your productivity and competitiveness.

However, representatives of these industries still do not see major advances. David Molina, executive director of the Chamber of the Ecuadorian Automotive Industry (Cinae), believes that the priority needs for vehicle assemblers have not been resolved.

For example, tariffs on imported raw materials follow and the State has not 100% complied with the return of the Currency Exit Tax (ISD). “We are concerned that the negotiation with Mexico will start by leaps and bounds and the competitiveness issues are not resolved,” he says.

It proposes that a basket of products be established for the sector with tariff relief over a period of more than 10 years or that quotas for importation of units are contemplated. If the sector is not strengthened, explains Molina, manufacturers of auto parts, tires, radios, etc. would be affected.

Another sector that is concerned about the agreement with Mexico is the metalworker. Ramiro Garzón, president of the Ecuadorian Federation of Metal Industries (Fedimetal), says that it is “a shame” that an agreement is sought without matching the competitive advantages of that industry in labor and tax matters.

Garzón argues that Mexico produces and consumes 28.5 million tons of steel, while Ecuador, 1.65 million tons. “They have a competitive advantage. In addition, Ecuador is a 31% more expensive country to produce due to the (current) valuation of the dollar. ”

Currently, steel production in the country contributes $ 2.5 billion to national GDP and 15% to manufacturing GDP.

40% of the inputs used by the industry are produced locally, so a slowdown in this activity would affect the entire production chain, Garzón warns. Mexico also has products sensitive to an agreement with Ecuador, but that list is not yet public.

Pablo Zambrano, executive president of the Chamber of Industries and Production, believes that this will allow both parties to negotiate a beneficial agreement. He is also in favor of establishing product baskets to define specific tariff lines.

Zambrano expects the Government to adopt an competitiveness agenda for the country and that a roadmap to dismantle the ISD, among other incentives, will be contemplated in the tax reform to be delivered.

Minister Ontaneda clarified that the tariff aspects will be applied gradually. “Trade agreements have a timeline to incorporate sensitive sectors.”

Source: El Telégrafo – https://www.eltelegrafo.com.ec/noticias/economia/4/acuerdo-comercial-mexico-ecuador