Who are Ecuador’s main competitors and what are the problems faced by the second non-oil product that generates the most foreign exchange in the country?
Ecuador exported 387 million boxes of bananas during 2020, in the midst of the pandemic, a growth of 5.3% compared to 2019. It is a historical figure, the highest ever exported before.
The record came after investments since 2017 in plantation renovations and the improvement of genetic material, which generated greater productivity, according to Marianela Ubilla, president of the Association of Banana Exporters of Ecuador (AEBE)
Nevertheless, Between January and August of this year there is a reduction of 6% that represents 16 million less boxes compared to the same period in 2020.
Regarding the XVIII International Banana Convention that will be held from October 26 to 29 in Guayaquil, this newspaper makes a diagnosis of the second main non-oil export product of Ecuador after shrimp.
The problem with the reduction in exports so far this year is that there was a lack of investment during 2020 due to confinement due to the COVID-19 pandemic. Productivity decreased because fertilization was not frequent and the two eruption processes of the Sangay volcano also damaged last January’s harvest, says Ubilla. This year there have been three more eruptions which affected the quality of the fruit, Add.
Franklin Torres, producer and president in charge of the National Banana Federation of Ecuador, assures that for the country to remain the world’s leading exporter, fair marketing is needed. “The prices that small and medium producers receive during the last 18 months are misery and sustainability has fallen on their shoulders, which must be corrected.”
The producer’s representative says that the average sale for each 40-pound box that the producer receives is $ 4.25, while the cost of production is close to $ 6. “Much more so after the rise in diesel (which was frozen at $ 1.90 per gallon), fertilizers and inputs during 2021, which it means a hit of $ 0.60 per box to date.
The country’s banana regulations indicate that the official price that producers should receive is $ 6.25 per box during this year, which included a profit margin of $ 0.45 per box, which is what has gone with the increase in production costs, indicates Torres.
“These last two years they have worked at a loss, they have had to sell properties or borrow to keep the farms afloat, but all of this has limits. We want decisive action on the part of the State when such obvious speculation occurs, ”says Torres.
Ubilla points out that competitiveness must be improved, aggravated by a lack of adaptation to the changes of globalization. “There are problems between producers and exporters. The law that governs the minimum support price has not been adapted to the current reality and has a lot of paperwork. It dates from 1998, it is already 23 years old so it must be reviewed ”.
The other factor is the requirement of the European Union (EU) to ban the use of a chemical molecule from this year. “So the banana companies have to adapt to these new controls, plus the climatic factors that delay production.”
Colombia and Costa Rica supply what Ecuador stops exporting. They are countries that have higher productivity. The crops of Honduras and Guatemala, the other two competitors of the country in this field, were affected by a hurricane, which reduced their production capacity.
And the Philippines, the world’s second largest exporter, meets the demand in Asia despite the fact that its crops are affected by the plague Fusarium 4, that causes the wilting of banana and plantain plants with the consequence of a decrease in their production.
Eduardo Ledesma, producer and former president of the AEBE, affirms that this product will continue to be counted on as one of the main generators of foreign exchange. “Every day there are countries that increase their production, but others also decrease. Ecuador has the permanent capacity to export quality bananas ”.
Ecuador is the world’s leading banana exporter and the world’s third largest producer
Despite the problems, Ecuador will continue to lead as the world’s leading exporter, according to the producers and exporters union. The country covered 27% of world demand during 2020, followed by the Philippines, whose exports accounted for 14% of the market.
The main world producers of bananas are India, China, Ecuador, in their order. All the production of the first two is for their internal demand as they are the countries with the largest population in the world with more than one billion people in each, so they are not exporters.
Ecuador shipped a total of seven million metric tons
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The The main market for Ecuadorian bananas is Russia, which buys 21% of what the country exports. But as a bloc of nations, the EU is the main buyer, receiving 29% of what is shipped. The second bloc is the Middle East (United Arab Emirates, Saudi Arabia, Iraq, Syria, Turkey and Iran) with 14%.
But the main historical market for national bananas were the United States and the EU, which bought 90% of the fruit for local export and today represent 40% (the EU takes 30% and the US the remaining 10%).
Ecuador has lost market in the United States. This weight has been reduced in favor of exports from Guatemala, Honduras and Costa Rica, which are closer and can access the two coasts of the United States from their own ports with more competitive prices than Ecuadorian bananas.
A high cost of production implies the loss of important markets such as the United States, says Ubilla. “We have lost a safe market for dollar currency in all this time.”
Ledesma assures that a banana undersecretary is missing. “The Ministry of Agriculture covers all the productive sectors and does not manage to establish the realities that the banana sector needs, especially that of the producers.”
The high tax burden within the country also leaves less money for investment in the sector, according to Ubilla. “What is paid in taxes reaches $ 460 million per year of the $ 3,600 million sold per year, that is, 13% of the foreign exchange obtained.”
The formation of the banana cluster (business chain) helps to achieve greater competitiveness.
“The objective is to alert the government portfolios, for example, we have problems with water in Santa Elena. The Daule river feeds the Cedege transfer (the defunct Commission of Studies for the Development of the Guayas River Basin) created 30 years ago. At the time there was not so much reception, but now 5,000 hectares of organic bananas are at risk because the water pumping system is out of date, we must facilitate access to water ”, says the leader of the exporters union.
The mechanism includes two branches that transport the liquid from the Daule to the plantations in the Santa Elena canton, in the province of the same name, and in General Villamil Playas, in Guayas.
It is an area that includes other crops, such as papaya, pitahaya, watermelon, mango, grape, tomato, pepper, and the liquid is also used after treatment for human consumption by the villagers.
“The distribution channels are empty because an engine is damaged. We have requested the intervention of the Public Water Company and the Ministry of the Environment to find a solution, because the investments are in danger, ”says Ubilla.
Beyond the challenges, the country will continue to lead the world banana market, but always with an eye toward diversifying destinations and renewing plantations. (I)
