This Thursday marks one month since the beginning of the conflict between Russia and Ukraine that has severely impacted and distorted the global economy.
One of the effects is the appreciation of the US dollar that began its climb even on the eve of February 24 only with the uncertainty of the possible start of the conflict, which led investors to take refuge in the hard currency that quickly gained ground against most of the world’s currencies, be they the Argentine, Mexican, Chilean peso, Russian ruble, euro, Swedish krona or pound sterling.
Only from February 24 to March 7, the dollar appreciated 3.4% in relation to the euro, while the ruble collapsed and lost more than a third of its value, he says Alberto Acosta Burneo, editor of Weekly Analysis.
What consequences does it have for dollarized economies like Ecuador’s?
Internal prices rise and the country becomes more expensive, a situation that Acosta indicates must be combated through internal devaluation, a complex, slow process that takes several years and is not yet complete, says the analyst.
Russia’s military offensive against Ukraine causes uncertainty among Ecuadorian banana and flower exporters
In short, a permanent strengthening of the dollar is not convenient for Ecuador.
The economic analyst Jorge Calderón summarizes the effect on the Ecuadorian economy by pointing out that exports of shrimp, bananas, cocoa, coffee and all the other exportable supply of the country become more expensive.
The consequence is that international buyers will seek to buy less or substitute us, that is, buy shrimp in other countries, as in the case of Southeast Asia, perhaps buy cocoa in African countries, bananas also between Africa and Asia, and so on, that brings down the exports of dollarized countries like Ecuador.
In this line and theoretically what is imported into Ecuador should be cheaper.
This, according to Calderón, would make local production cheaper, although it would happen if only the dollar appreciated.
But there are other variables that affect such as speculation, weather factors that have harmed agricultural production, among others.
José Antonio Camposano, president of the board of directors of the Corporation of Exporting Guilds of Ecuador (Cordex), explains that importers, having greater difficulty in acquiring the usual volumes, press for the price to be adjusted in order to compensate for this loss of purchasing power and then to the interior, once the goods have been purchased, nationalized and their prices converted into the currency local, once again they are more expensive and that also affects those who consume imported goods, in this case exported from Ecuador.
The leader assured that in Russia, the greatest impact is on the banana sector, because 70% of the total exports that go to Russia are fruit, almost a quarter of the bananas produced in Ecuador go to that destination. .
In 2021 Russia was the second destination of banana exports with $699 milliononly behind United States ($964 million). Meanwhile, last January, before the conflict, Ecuador exported $69 million, 8% more in currencies and 10% more in volume. However, after the start of the war, only in one week, they stopped exporting 765,000 boxes of bananas to countries in conflict.
More than a million boxes of bananas have not been exported due to complications from the conflict between Russia and Ukraine
For its part, to Felipe Rivadeneira, executive president of the Ecuadorian Federation of Exporters (Fedexpor), he is concerned about the environment of uncertainty caused by the war.
However, he highlights that the export sector has been used to exporting with hard currency since 2000, even though this means being less competitive against direct competitors such as Colombia, Peru or Chile, which have easier costs because they can carry out devaluations of their currencies.
However, Rivadeneira indicates that these devaluations give these countries a false competitiveness, because in the end this ends up harming their economies, for which he believes that it is better for Ecuador to compete with hard currency.
What are the tasks for the export sector? Rivadeneira assures that work must continue on innovation and diversification and the creation of new agro-industrial products that allow them to remain attractive for the future.
While with the public sector it is necessary to continue working on a joint strategy to reduce logistics costs, direct taxes, as well as on the commercial agenda, and the drawback automatic that is established in the law since December 2019 and that due to fiscal deficiencies, according to Rivadeneira, has not been implemented.
Camposano agrees on this: “The drawback automatic exists only on paper.”
“The public sector, which has to enter this cycle of efficiency, we see with concern that it is not entering on time and that the efficiencies that have allowed the sectors to expand their exports or sustain them in recent years, especially since the beginning of the pandemic, they have been the responsibility of the private sector,” adds the leader.
Although he highlights the announcements made by the Ministry of Foreign Trade and the Government on the commercial agenda and the diversification of markets, through the negotiation of agreements, he indicates that it is a medium- or long-term agenda, not to solve current problems or that it will to immediately motivate exports by 2022.
Eurasian Economic Union plans to give up the dollar as payment currency
Meanwhile, Acosta assures that the appreciation of the dollar will not be in the medium or long term. He indicates that there are other forces that are going to limit this phenomenon that comes from the side of the strong inflation in the United States that last February reached 7.9%a record that had not been recorded since the early 1980s.
That will, he adds, eventually cause the dollar to begin to lose value and will help Ecuador not to be so affected by that appreciation.
“To face the temporary appreciation of the dollar, Ecuador has to continue seeking to build competitiveness, the Government has to seek trade agreements so that our products do not have to pay tariffs to enter the main markets,” suggests Acosta. (I)
Source: Eluniverso
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