Currently, Ecuadorian bananas pay a 10% tariff for entering the Asian country, with the trade agreement it will decrease 1% per year.
Workers at the production plant of the Derose company, in October 2022.
Ecuadorian banana exports fell in 2022, both in volume and in dollars, according to the Central Bank of Ecuador (BCE) and the banana union.
Richard Salazar, executive director of the Banana Exporters Association (Acorbanec), explains that this was due to three factors:
- The war between Russia and Ukraine.
- La Niña Phenomenon.
- A decrease in purchases by the European Union and the United States.
And this 2023 started for the sector with spot prices (value paid at the time of negotiation, according to supply and demand) on the rise. For Salazar, the Banana Law must be urgently reformed and enable spot sales.
What opportunities do you see for the banana sector with the trade agreement with China?
It will be positive, because despite the fact that the results will be seen in 10 years, there will be an annual reduction of 1%. Currently, we pay a 10% tariff and in 10 years we will be at zero.
China is presented as a strategically important market. Export growth for us is in East Asia, especially China, Japan and South Korea.
How much banana is sent to that market and how much could they grow?
3.1% of the total exported per year is sent to China, in 2022 we send 10.5 million boxes.
The expectation is to triple or quadruple the current volume, we have already done it before, but space has been lost due to the effect of the tariff. There are countries, like the Philippines, that pay far less duty than we do.
In 2022, exports in banana boxes had a 12% drop compared to 2021. What factors explain this decrease?
In the first place, it is due to a reduction in the exportable supply, since at the beginning of the war between Russia and Ukraine, there was a slight oversupply. Some shipping companies stopped going to Russia, due to the logistical instability caused by the blockade.
This produced a price crisis, which led to neglect in certain banana farms: around 17,000 hectares were affected by phytosanitary conditions and the rest could not carry out adequate fertilization programs.
To this we add that, as of May, as a result of the La Niña phenomenon, the cold affected production, causing a 10% decrease compared to 2021.
What other variables influenced the drop in the volume exported?
On the other hand, the volume fell due to a slight decrease in purchases by two important destinations: the European Union, which reduced its purchases by 4%, and the United States, almost 1%.
This happened because the competition also produced fewer bananas, and since there were not more fruits, they bought less, but it was also associated with economic problems, such as inflation.
This trend of lower production will continue even during the first three months of the year, due to the weather factor a 9% reduction is projected.
According to the Central Bank, exports in dollars from the sector also fell 6.6% between January and November 2022, compared to the same months of the previous year. What factors explain this decrease?
Because less volume was exported, but it was sold at a better price. Starting in the second semester, as there was less fruit, the spot price skyrocketed, reaching USD 12 and 13 per box, in a few weeks. Especially, starting in October prices skyrocketed.
What prospects do you have for 2023 for the banana sector?
In 2023, we aspire to an improvement in the competitiveness of the sector, which has been lost in the last two years due to high costs, both in security and taxes.
The market scenario is a little better, they are paying us better for the fruit, but, unlike other years, the fruit in contract sales has only been around 35% of the exportable supply.
The producer wanted to sell this year on spot, taking advantage of the high prices. The official price is USD 6.50 and on spot it is USD 13.
This denotes that the banana law is expired, because they ask that contracts be signed to export bananas, but the producers do not want to do so due to the high prices.
Ecuador has adapted to the market, because 55% of the destinations buy it on the spot. The reform of the banana law is becoming more and more urgent and necessary, spot sales must be allowed.
What other aspects should they work on to improve the competitiveness of the sector?
We must continue working on productive efficiency and associative formats for small producers. Also, on security issues, such as the installation of scanners.
In addition, we need a reduction in costs and excessive taxes. We have a tax charge of USD 1.27 per box of bananas.
