Optimism in the business sector due to the signing of a Memorandum with China, the first step towards the Free Trade Agreement

In November or December, the Free Trade Agreement between China and Ecuador would be sealed, after the signing of the Memorandum of Understanding that begins the formal negotiations. This was one of the issues discussed by the presidents of both nations, Xi Jinping Y William Lassoat their meeting this Saturday in Beijing.

The Minister of Production, Julio José Pradocataloged the form of the memorandum as the first step that will allow Ecuador to open a market of more than $1,000 million in product exports.

Prado hopes that the closing of the negotiations, by the end of the year, will take place in Guayaquil, for which a negotiating team will be activated, who will have to manage the ‘terms of reference’ of said agreement.

The expectation, according to Prado, is to double exports to China, in products such as shrimp, bananas, cocoa, chocolate and snacks. In addition, there is an opening for the entry of pitahaya fruit.

The signing of this memorandum is viewed with optimism by the Ecuadorian business sector, which has insisted that these negotiations begin as soon as possible.

China will donate to Ecuador more vaccines against COVID-19 and household appliances for those affected by La Gasca, first results after presidential meeting

Gustavo Cáceres, president of the Ecuadorian-Chinese Chamber of Commercemaintained that there is much expectation at the beginning of the negotiation rounds with China and assured that the agro-export sector will be one of the sectors that will benefit the most from the future agreement by allowing more products to enter with less or even zero tariffs.

“Let’s remember that China is our second largest trading partner, it is a market of around 1.4 billion people and at present we have not yet managed to exploit everything that we could offer as a country to this great market,” said Cáceres, who maintained that in the Currently Ecuador already consumes many Chinese products.

The union leader indicated that the agreement will allow Ecuador to have the opportunity to offer many more products to China and that all the Chinese products that Ecuador already consumes have more competitive prices.

Cáceres also recalled that between the first and second week of November, Guayaquil will host the China Latin America Summit, the main tool of the Chinese Government to strengthen relations between China and the region.

“Going hand in hand with the negotiations for the review of a trade agreement, the fact that Ecuador is hosting this event of great importance for China and the region, I think will speak very well of the political will it has,” Cáceres stressed. .

Meanwhile, specific sectors such as cocoa also have great expectations in the liberation of the Chinese market with a trade agreement.

According Francisco Miranda, president of the National Association of Cocoa and Industrialized Exporters of Ecuador (Anecacao)China is a market with severe restrictions for cocoa beans, processed and Ecuadorian chocolate, but it is also a market with enormous potential.

Ecuador is the second largest exporter of cocoa to China and Ecuadorian cocoa exports represent 20% of total imports from China, according to figures from Anecacao. Cocoa beans and Ecuadorian chocolate pay 8% ad valorem, butter 22% and cocoa powder 15%.

“Giving us the correct tools to open the market, it could be one of the probable future markets for great Ecuadorian exports,” said Miranda, who projected that one of the most benefited segments would be the chocolate maker.

“Their chocolate market is not very developed, so the opening of their products to us would have little consequence in the Ecuadorian chocolate industry, while the opening of our products, be it called chocolate, grains or processed, to their markets has an attractive very large with the right conditions,” explained the leader.

The banana export sector also sees the memorandum as great news. José Antonio Hidalgo, executive president of the Ecuadorian Association of Banana Exporters (Aebe), He highlighted the setting of a date to close negotiations for the agreement, which would be in November or December of this year.

Hidalgo indicated that it would be important for bananas to stop entering China with a 10% tariff. He indicated that in 2021 the sector closed with 10.9 million boxes exported to China, a decrease in -37.71%due to lack of competitiveness and a trade agreement, compared to 2020 when they exported 17.5 million boxes.

“All this effort is worth it! China represents a market of 1.4 billion inhabitants, a growing middle class of 800 million people, new consumer trends that are going towards online stores, smart stores and in addition to China’s food balance that is deficient and the consumption of fruit per capita which is 60 kilos, of which 60% is imported fruit,” said Hidalgo, who pointed out that progress is expected at the China-Latin America Summit.

For Felipe Rivadeneira, president of the Ecuadorian Business Committee and the Ecuadorian Federation of Exporters (Fedexpor), The signing of the memorandum is very important, as he stressed that China is the third destination of Ecuadorian non-oil exports in the world with more than $3,000 million.

He indicated that shrimp and bananas, the main Ecuadorian export products, undoubtedly have a great opportunity for growth, however, he assured that China is a market with a great consumption capacity and when other Ecuadorian products enter the At the moment they cannot do it, which is going to generate an exponential growth that is very difficult to calculate.

Guillermo Lasso informs Chinese businessmen of his intentions to auction the CNT internationally and sell the Banco del Pacífico to a foreign bank

“That is something really positive for our economy, for the trade balance. Ecuador in recent years depends a lot on the growth of non-oil exports and what better to have great access to such an important market as China”, Ribadeneira said.

Meanwhile, Cáceres maintained that it will be important for the negotiations to be agreed upon with civil society and the business sector.

“The benefits that having a trade agreement with China will bring to the vast majority must be communicated constantly, through government communication channels, so that people can have better expectations or greater acceptance. of what the trade agreement with China could be”, concluded the leader.

Chinese debt

Meanwhile, another issue discussed at the presidential meeting was the Ecuadorian government’s request to the Chinese head of state to decouple oil from debt instruments.

For this, a work table will be formed between the ministers of Economy and Finance of the two countries, who will address “the oxygenation of debt quotas, and these guarantees that oil has within those financial instruments,” he specified. Ecuadorian Foreign Minister Juan Carlos Holguínin a virtual press statement in which the Minister of Production, Julio José Prado, participated.

Decoupling oil from the debt with China and the start of talks to sign an FTA were what marked the dialogue between Guillermo Lasso and his Chinese counterpart, Xi Jinping

Prado confirmed that the debt with Chinese institutions amounts to more than $5,000 million, of which $2,077 million are backed by oil.

According to Holguin, The proposal consists of untying third-party oil intermediation in the debt, which will allow Ecuador to obtain more than $400 million in income per year, since it was observed that the intermediation carried out by some companies, especially in oil freight, is linked to debt.

Holguín explained that when Lasso returns to the country -between Tuesday or Wednesday- he will be informed how these high-level meetings and consultations will be carried out.

He revealed that during the last three weeks there has been progress in talks between Ecuadorian authorities and representatives of three Chinese companies that are the creditors of these financial instruments. Among these, the China Development Bank, the Bank of China and the Exim Bank of China.

In addition, it was reported that China will donate an additional 2,500,000 vaccines for children between 3 and 5 years of age and household appliances for families affected by the flood in the La Gasca sector in Quito.

“China has donated millions of vaccines against COVID-19 to Ecuador. We show our gratitude to the Chinese people and the Government for their support in the vaccination plan. It is a source of joy to inform you that work will continue on this matter, which is essential for reactivation,” Lasso said.