Despite the worldwide reduction in demand for products and the more than 20 weeks sustained drop in prices (since the start of the pandemic in mid-March), Ecuadorian banana exports increased in volume and value during the crisis. The fruit consolidated itself as Ecuador's main agricultural export product and it's one step away from surpassing oil exports and positioning itself as the country's main source of foreign currency.
Between January and July 2020, the country shipped 208 million boxes of bananas for a total of $ 2.314 billion, stated Jose Antonio Hidalgo, the executive director of the Association of Banana Exporters of Ecuador (AEBE). This represents a growth of 8.74% in volume and 19.3% in revenue compared to the same period of 2019.
“The sector has not laid off a single person or stopped selling a single box during the emergency. We are one of the main generators of work in the country, with around 250,000 direct jobs,” Hidalgo added.
This good performance is due to two major strategies undertaken by the Ecuadorian banana sector. First, the sector has been working for the past year and a half on the process of forming a banana cluster. To date, it has been possible to bring together almost 100% of exports, more than 50% of the local production, and the different actors in the value chain. The goal of the cluster is to be able to establish protocols and joint actions, work on a competitiveness roadmap for the sector, and having a greater say in public policies. This work allowed the sector to create logistics corridors during the crisis to prevent the distribution of the fruit from being affected.
In addition, the industry had implemented biosecurity measures years ago to face the imminent threat of Fusarium race 4. "We only had to adapt the protocols to COVID-19," said Roberto Rosero, a producer of the sector.
Becoming more competitive
The Ecuadorian banana sector still has to face great local challenges that reduce its competitiveness, when compared to other producing countries in the region. According to Hidalgo, they face excessive regulation, which includes a specific law for their own activity and price control.
In addition, bananas are the only export product that has been paying, for several years, a minimum of a 3% tax on monthly sales, instead of an income tax.
"In the past few weeks we learned that they are going to put an additional tax on the transfer prices of companies that have related parties abroad," the AEBE representative added.
Moreover, the country needs to achieve more trade agreements to avoid paying 10% to 30% higher tariffs than its competitors in several of the main emerging markets such as China, Japan, and Russia.