After months of tension and military build-up, on February 24, 2022, Russia launched a military offensive and invasion of Ukraine, an ongoing conflict that has affected and continues to affect world trade, Ecuador being no exception.

A year after the start of this war, the Ecuadorian export sector is considering the effect of the conflict on exports to Russia in 2022 and the collateral effects that have affected other markets such as Europe.

According to data from the Ecuadorian Federation of Exporters (Fedexpor), 2022 ended with a 7% decrease in exports to Russia, caused by a drop in sales of most products, the only ones registered being bananas and canned tuna. an increase in export value of 5% and 23% compared to 2021.

Trade dynamics between Ecuador and Russia are on the decline due to the country’s conflict with Ukraine, bananas are one of the main affected export products

In the first two months of 2022, i.e. before the outbreak of the conflict, a 6% increase in exports to Russia was recorded, shipments of bananas and flowers grew at a rate of 12% and 8%, respectively, and shrimp. began to decrease by 15%, which gave signs that exports to Russia in 2022 will reach at least the same value exported in 2021, a year in which exports of bananas and shrimps grew at a rate of 4% and 82%, and registered flowers fell of 13 percent. This is how Felipe Ribadeneira, president of Fedexpor, remembers him.

Made with Flourish

Ending the year, 8 of the 10 main Ecuadorian exports to Russia saw a decline, such as shrimp which exported $133 million, -13% in value and -30% in volume; flowers with $34 million (-66% in value and -72% in volume); fish and crustacean products with $11 million (-49% in value and -55% in volume); coffee with $12 million (-26% in value and -45% in volume), canned fruits and vegetables which fell from $8 million – exported in 2021 – to just $2 million last year, a decrease of -78% in value and -76% in volume, among other things.

In the case of flowers, Ribadeneira reveals that there has been a reorientation of trade where Kazakhstan has established itself as one of the main destinations, as part of a strategy to access the Eurasian market.

“The main factor that caused the reduction of other products was the uncertainty caused by the numerous sanctions imposed on Russia, in terms of logistical complications when arriving in Russia, the risk that importers will not be able to pay for the product. , among other effects”, analyzes the president of Fedexpor.

In the case of bananas, Ecuador’s main product in Russia, it closed 2022 with 74.23 million boxes exported, 2.17% less than what was exported in 2021, but in monetary terms $733 million was received, 5% more, according to Central Bank. This increase is driven by price stains fruit that was high in the second half of 2022, indicates Richard Salazar, executive director of the Association for the Marketing and Export of Bananas of Ecuador (Acorbanec).

Salazar reminds that at the beginning of the conflict, in the last week of February 2022, the USA, the European Union, the United Kingdom, Japan, Canada and Australia began to impose sanctions on Russia, which caused economic problems for this country, starting with a high devaluation of the ruble (almost 60% in one month) which made imported products such as Ecuadorian bananas more expensive, causing consumers to reduce their consumption of fruit, preferring to buy other products with lower prices.

With $85 million in losses in the export sector due to the conflict between Russia and Ukraine, commercial eyes are on China and South Korea

“In addition, the payment system and the flow of capital to exporting companies are affected by payment restrictions, non-receipt of full payments and late payments, which creates payment problems for banana producers,” adds the spokesperson for Acorbanec, who reveals that in February and March, Russian importers asked of Ecuadorian exporters to reduce the prices of banana boxes, as well as to reduce the weekly purchases, some even canceled the contracts signed with certain exporters and changed their purchases to place.

However, in April 2022, the decision of the Eurasian Economic Commission reduced the customs rate for a number of products imported into Russia and other countries that make up the EEU (Kazakhstan, Kyrgyzstan, Belarus and Armenia), including Ecuadorian bananas and other products had customs duties of 0% and this benefit has been extended until today.

“Banana exports to Russia have practically normalized, both in terms of logistics and in terms of payments received, to the extent that the overall impact has been minimal considering the severity of the situation,” says Salazar, who points out instead that exports to Ukraine at the end of 2022. they have decreased by -85.19% in volumes and are practically closed, moving from 10.9 million boxes in 2021 to 1.6 million boxes last year.

It is important for Ribadeneira that the main export product managed to maintain its deliveries to the Russian market. It therefore predicts that export levels achieved in the final months of 2022 will be maintained through 2023, pending how conflict conditions develop.

The energy crisis in Europe is limiting consumption

However, the collateral effects of the conflict translate into an energy crisis facing Europe that has meant a reduction in its imports, including those from Ecuador, which last year exported $3.502 million to the country’s third-largest destination. and which has already shown a slowdown in exported volume of 13%, but an increase in value of 3% compared to 2021.

That year, 3,443 million dollars were exported, with a growth of 14% in value and 7% in volume compared to 2020.

Another effect of the conflict is that inputs, many of which are key to export production, such as petroleum products, plastics and products, fertilizers and other packaging materials, have increased their prices.

Despite record exports of $20,000 million in 2022, agricultural sector exports stagnated and grew by only 1%

Alejandro Martínez, president of the National Association of Flower Producers and Exporters of Ecuador (Expoflores), confirmed in December the increase in costs and the problems of the European market in maintaining the usual level of consumption. “The effect of the war between Russia and Ukraine, the decrease in exports and the skyrocketing input prices and high energy prices, especially in Europe. It means that they will stop consuming something, the flower is one of them”.

Ribadeneira, for his part, assures that the average price of fertilizers in Ecuador has increased by 114% compared to the value before the pandemic, which is why some agricultural producers have imported other substitute chemical products for fertilizers or reduced the level of production.

However, at the end of 2022, there was a downward normalization of the prices of these inputs, which is expected to continue during 2023, indicates the head of Fedexpor, who nevertheless points out that it is possible that they will not reach their normality before the pandemic, taking into account the inflationary wave which is held globally.