Eleven days have passed since the President of the Russian Federation, Vladimir Putingave the green light to a military operation to invade neighboring Ukraine.
This activated the alarms of the economies at a global level, projecting the impacts of the confrontation in Eastern Europe and Ecuador is no exception.
The Ecuadorian Federation of Exporters (Fedexpor) estimated that before the total closure of trade with Ukraine, the seventeenth destination of Ecuadorian exports, they will stop exporting weekly $2.4 million. Not counting the impacts on shipments to the Russian market, the fourth most important for Ecuador, exacerbated by the devaluation of its currency, the item.
Russia’s military offensive against Ukraine causes uncertainty among Ecuadorian banana and flower exporters
From the Sovereignty, Integration and Comprehensive Security Commission of the National Assembly, where last week the repercussions in Ecuador due to the conflict were analyzed, it was indicated that the war would be putting at risk $1.2 billion for Ecuador.
According to figures provided by the Ministry of Production, Foreign Trade, Investments and Fishing From January to December 2021, Ecuadorian non-oil exports to Russia left a balance of $1 billion, with a growth of 8.7% compared to the same period in 2020 ($ 80 million more). The main products shipped are bananas, shrimp and natural flowers, which represented 93.9% of total non-oil exports to this destination.
Meanwhile, in 2021, non-oil exports to Ukraine also grew, 15.3%, compared to 2020, by generating $124 million.
The impacts will also be reflected in imports and could affect the agricultural sector, due to a possible increase in the price of fertilizers that Ecuador imports from Russia.
An analysis of Oikonomics Economic Consulting indicates that Russia represents for Ecuador the origin of 39% of imports of these materials. While there would be no major impact on imports from Ukraine as it is not a significant trading partner. From that country, last year, $2 million worth of chemicals, oils, sugar syrup, alarms and other metal products were imported.
Meanwhile, from Russia, according to figures from the Ministry of Production, imports in 2021 reached $225 million. The main imported products include fertilizers, such as urea, chemical products, paper or cardboard, and polymers.
“The most relevant fertilizers that arrive from Russia are urea (45%), ammonium nitrate (22%), diammonium phosphate (17%), and potassium chloride (7%), all necessary for one or another crop in certain conditions”, indicates the State portfolio, which even indicates that 41% of imports of these products (in volume), came from Russia, being the main supplier.
Agency figuresPhytosanitary and Zoosanitary Regulation and Control IIA (Agrocalidad) show that in 2021 the import of approximately 197,456,302 tons of fertilizers from various countries. Of this total, 668,505 tons They come from Russia.
“Mostly the fertilizers imported from Russia correspond to nitrogen sources and their mixtures with other macroelements (phosphorus and potassium),” the Agency explained.
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The agricultural analyst Rodrigo Gómez de la Torre, former president of the Chamber of Agriculture Zone 1, indicates that urea is one of the most widely used fertilizers in the country, and is commonly used for pastures, rice, bananas, etc.; although he pointed out that it is not the only fertilizer, there are also other sources of phosphorus, potassium and others that are also imported from Russia.
The expert, who assures that the increase in fertilizers already came with more than 100% before the Russia-Ukraine conflict, analyzed that the impact, according to the forms of production and practices, could vary between 2 to 3% up to 20% of the total cost, depending on the producer. However, De la Torre is clear in pointing out that he would not expect a real impact to be felt in the market by the final consumer, unless it is the initial impact of speculation, which has nothing to do with fertilizers, he maintained.
“The first impact, when fertilization is reduced or eliminated, results in lower crop productivity. Less production per hectare”, explained the expert.
Franklin Torres, president of the National Federation of Banana Producers of Ecuador (Fenabe)agrees with De la Torres when pointing out that the increase in the cost of fertilizers has been around for a long time.
The leader assured that at the end of 2021 a bag of urea cost $54, muriate of potassium $58 and diammonium phosphate $66. Meanwhile, that at the end of 2020 urea was at $18, muriate at $22 and phosphate at $25.
“The problem of fertilizers is not from now, the high prices come from last year, when the prices of all fertilizers tripled, they should not blame the war for that at least,” says Torres, who says that currently the prices of urea are located at $46, muriate at $48 and phosphate at $56.
This roller coaster of prices has an explanation for the banana leader. “The lack of control and speculation in the prices of agricultural inputs is evident… (and prices are low now) because nobody buys, nor is there money to buy in the same quantities as before, which is why the production of all products will go down,” he criticizes.
For De la Torre the matter goes through a situation in the countries of origin. “The main producing countries are Russia, Ukraine and China. In the case of Russia and China, it had already been seen that the production of these countries was being oriented more towards domestic consumption than towards exports. Issue that generated the price increase in recent months, “he said.
Is it possible to replace these fertilizers or import them from other destinations?
The Ministry of Production ensures that the natural replacement would be China, who are the world’s second largest suppliers, but these products can also be obtained in the United States, Canada, and in the European Union in general.
There is also Indonesia, Italy and Estonia, and there are other major global suppliers such as Saudi Arabia, Oman, Algeria and Egypt.
The portfolio reveals that, for example, ammonium nitrate has already been imported from Estonia, but the United States, Bulgaria and Lithuania are major exporters worldwide. Diammonium phosphate also enters the country from China, Morocco and the United States, while Ecuador’s most important supplier of potassium chloride is Canada.
Agrocalidad indicates that in 2021, 313 import authorizations for fertilizers of Russian origin were issued, out of a total of 3,647 import authorizations issued in total.
“This tells us that there are other countries that can provide this input to Ecuador, such as China, Mexico, Chile, Spain, Germany, the United States, Guatemala, among others,” concludes the Agency, adding that there are several registered products that can be used to replace fertilizers originating in Russia.
Current situation of foreign trade
The Ministry of Production, Foreign Trade, Investments and Fisheries reveals that the current situation of the commercial exchange between Ecuador, Russia and Ukraine “is highly volatile” and changes every day.
The State portfolio reveals that until Friday, March 4, some notifications were received from shipping companies that temporarily suspended their cargo shipping services to and from Russia and Ukraine; Some exporting companies also suspended their shipments on their own, while others comment that until that same date they still had relatively normal conditions.
“We know that this is going to get worse in the coming days and cause ruptures, either due to transportation or due to the issue of sanctioning financial entities in that country; Together with the private sector itself, we are specifying this impact analysis by collecting direct information from the actors, exporters and importers,” the ministry told this newspaper. (I)
Source: Eluniverso
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