The exporters are on the edge of the knife

Ecuadornews:

The discussion has focused on the surface, but the background is more turbid. In recent weeks, authorities and productive sectors focused their efforts on the elimination of subsidies and compensation, while the competitiveness of exporting companies is mortally wounded.

There are companies that have closed due to the high costs of producing coffee and others, from different sectors, each year their profitability is reduced by the paperwork, the inefficiencies of state entities, the changing market conditions, the rearrangements of logistics. Molotov is about to explode. And that’s what the Export Promotion Corporation (Corpei) knows.

A few days ago, a few hours after 115 lawmakers from all the banks approved the Energy Efficiency Law, the cruel reality was revealed: this legal body will control the electrical management of the industries, this increases the procedures and the hiring of personnel to comply more requirements.

Eduardo Egas believes that it is time to focus on competitiveness, on pain of entering an irremediable process of closing companies and invading imported products due to lack of local competition.

The fight of the fishing sector after the rise of fuels is given by a tacit agreement that they accepted for years: “They said they accept a wage increase above productivity in exchange for maintaining subsidies. Now they take away the subsidies and leave their salaries up. “

The exporter has been absorbing costs in 19 years of dollarization and can no longer.

High cost of producing

Labor is expensive in relation to the other countries in the region, and twice that: “high remuneration and low productivity,” says Eduardo Egas. In addition, there is an excess of procedures that involve high costs, legal uncertainty and confusion of laws that are combined with financial costs, 10% rates that “leave us out of competition”.

Official prices

The biggest deception in a market economy is to set support prices: these end up being a punishment for both the producer and the buyer.

By offering a higher price than the international one, everyone who wants rice or corn is forced, for example, to pay a higher price than the international price. The state, for its part, must buy the production from the farmers and have their silos full because they cannot sell at the same price they bought them. As corn producers cannot sell for the high domestic price, they demand that the State buy them. In banana the same thing happens, prices are raised to the producer, but in international markets these tend to be maintained or reduced.

External factors

In 2019 there are threats. One of them, the revaluation of the dollar. “Clearly it is a challenging year for the export sector because changes are taking place, beginning with the weakening of world trade, which has slowed down,” says Corpei.

On the other hand, external trade wars, as well as changes in the value of currencies, rising interest rates in the United States and technology takes over more than other countries and not Ecuador, are challenges for the sector that generates dollars.

Hence the importance of new trade agreements, because they force countries to be more competitive, because “when we open markets they can also sell us”. (I)

Source: https://www.expreso.ec/economia/economia-subsidios-exportaciones-leyes-cacao-FI2569799