A trade agreement with Canada would boost flower exports to that country, which is now the fifth destination for Ecuadorian flowers.
Referential image of a flower farm, June 2022.
Ecuador’s flower industry is seeking to recover from at least three shocks in 2022, and a trade agreement with Canada could help them.
Canada is currently the fifth market for Ecuadorian flowers. A trade agreement between the two countries could increase exports from the floriculture sector to that country.
Between January and November 2022, Ecuador exported 5,197 tons of flower stems to that market, which represents USD 33 million in FOB value (port price).
This gives Canada a 4% share of the main export destinations for Ecuadorian flowers, according to the National Association of Ecuadorian Flower Producers and Exporters (Expoflores).
The main market is the United States, with 39%. Then there is the European Union, with 25%. And behind would be Kazakhstan (10%), Russia (4%) and Canada.
Ecuadorian flowers pay a 10.5% tariff to enter Canada, if the dispatch is direct from Ecuador. If the cargo leaves Miami, they pay an additional rate of 6.5%, that is, a total of 17%.
One of the main benefits of trade agreements is the reduction of tariffs on products that are part of the trade between the parties. This relief can occur immediately or gradually.
Negotiations between Ecuador and Canada for a Free Trade Agreement (FTA) could begin in the first half of 2023. With this objective, the Government opened a commercial office in Ottawa, in December 2022.
Competition with Colombia
In 2022, the Pontetresa company exported 910,000 stems to Canada, which represented USD 377,000 in FOB value. “This is 4% of our sales for the year,” says Xavier Serrano, manager of the flower company.
“If there is a trade agreement with Canada and the tariff drops to zero, we are sure that we could double and even triple sales,” adds Serrano.
Colombia already has this benefit, which pays zero tariffs for the entry of its roses to Canada. “The tariff that we currently pay means that we cannot compete against the Colombian rose,” says Serrano.
Japan and South Korea, two countries with which Ecuador expects to sign trade agreements, are also presented as potential growth markets for the flower sector, explains Alejandro Martínez, president of Expoflores.
Thanks to the agreement with China, in five years the sector will no longer pay tariffs for the entry of its flowers; currently, it pays 11.5%.
However, Martínez explains that the weight of China in the exports of the sector is very low, since that country is the main producer of flowers in the world.
Three downside factors
Between January and November 2022, the flower industry saw a 2% drop in its export volume, compared to the same period in 2021, according to the Central Bank (ECB).
For the president of Expoflores, this responds to three factors:
- The war between Russia and Ukraine, which although it did not have such a strong commercial effect, did have an impact on the cost of inputs, such as fertilizers.
- The June 2022 strike, led by the indigenous movement. It caused the sector problems in its exports for almost three weeks.
- The slowdown in the world economy, which began to affect them in the last quarter of 2022, with a 17% drop in exports to Europe in November. In the United States, flower growers perceive a slowdown in consumption for this year.
By 2022, the sector had the expectation of exceeding USD 1,000 million in exports; but these difficulties, including the June strike, will not allow them to reach their goal.
Valentine arrives
Valentine ‘s season is the strongest for the export of flowers. Martínez indicates that for some companies it represents between 25 and 30% of their sales for the entire year.
However, for the current season, expectations are not so favorable, due to the recession. “The perception is that exports are not as high as expected,” says Martínez. He adds that prices are also lower.
To cope with the impact, the president of Expoflores considers it important to create public policies that help sustain employment and encourage investment. As well as a regulation for the informal production of flowers.
