Record in the export sector in 2022, but with different realities

Mining is on the heels of an affected banana that is suffering the effects of the war in Europe, which also means that Russia is no longer the fourth main market for Ecuador, now Colombia is. Just as China is confirmed in the first place and is one step away from closing a trade agreement. Although there is a record number in the export sector, Felipe Ribadeneira, president of the Ecuadorian Federation of Exporters (Fedexpor), warns of stagnation and setbacks in some sectors:

Until October 2022, non-oil non-mining exports increased by 19% compared to the previous year, and are projected to close the year with a value of more than $18,000 million, a record figure for the export sector.

The export sectors, however, have registered a different behavior according to the international and internal conditions that affected each of them in a particular way.

The agro-industrial agricultural export sector is practically stagnant in export value as of October, but with a decline of 4% in export volume, which compromises the capacity and planning of exportable production. The poor performance of this sector is based on the decrease in production that occurred after the war between Russia and Ukraine, which limited production conditions, made production inputs more expensive, and affected the economy of the main consumers of this sector. The situation in this sector worsened after the June mobilizations affected the production cycle.

Sectors such as bananas have fallen in volumes exported by an equivalent of five years ago, so the necessary attention to reverse this reality is urgent to safeguard the sustainability of production and employment in agricultural chains like this one.

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The aquaculture and fishing export sector registered an increase of 40% until October 2022, equivalent to more than $2,200 million over the value exported in 2021. Although the performance of this sector is positive in the year, during the last months , the lower world demand and a reduction in the export price of the main product in this basket, has caused a slowdown in the growth achieved towards the end of the year.

And the value of exports from the manufacturing sector is 9% higher than the value exported between January and October 2021, despite this, its exported volume is 12% less than last year, implying that the exported production of this sector has been minor.

International conditions and the country’s export potential have reconfigured the main export destinations. The uncertainty resulting from the sanctions to trade with the Eurasian market after the war implied that the agricultural sector, mainly, reorganized its production cycles considering a lower demand from the affected destinations. Exports to Russia have decreased by 8% until October; however, the production planned to be sold in this market could not be redirected to other destinations.

Many of the factors that affected export performance in 2022 will remain latent in 2023.

On the external front: the strength of the dollar, high interest rates that cool consumption in the main markets, high energy costs in Europe, high logistics costs that pay in the scenario of a global escalation of prices.

On the home front: Although the consolidation and progress of the trade agenda to open new markets through trade agreements is very positive to equalize tariff access conditions compared to our competitors, on the other hand, the higher security costs to avoid cargo contamination, cargo The high tax rate, higher labor costs due to the increase in basic salary and high financial costs have caused a further deterioration in the competitiveness of export products.

Minister Santos: 2022 was a year of stagnation for Ecuador on the oil issue

The progress in the negotiations of commercial agreements opens a window of opportunities to increase the scale of production of the exporting sectors that have seen their offers displaced by direct competitors that already have commercial agreements with our main destinations. The National Assembly has the responsibility of trying and promoting these tools that allow more productive actors, particularly medium and small producers, to be inserted in international trade and deepen development in the environment of the communities where these initiatives are located.

In addition to the commercial agenda, 2023 will be marked by the urgent need to work on aspects of competitiveness that have become the Achilles heel of export activity: logistics costs and cargo security.

Both require a comprehensive plan that addresses regulatory improvements and cost waivers that allow exporting companies to compete safely and efficiently. (YO)