The Russian market is closed with economic sanctions. National exporters must look for other markets and sell their production cheaply.
The war between russia and ukraine is causing logistical and payment problems for some of the main export sectors from Ecuador.
In the first place, the announcement by shipping companies such as Maersk and Hapag-Lloyd to suspend their transport services to the Russian market is already causing affectations at banana exports.
This mainly because Odessa, the entrance to the Black Sea to supply central Eurasia, is besieged by Russian troops and the port is paralyzed.
Ships from the US, Western Europe and Japan have decided, for security reasons, to no longer direct shipments to the ports of St. Petersburg and other major ports of Russia. Likewise, Western ports will not admit Russian ships.
This situation endangers the stability of the banana activitygiven that Russia and Ukraine They buy a quarter of the total banana exported by Ecuador. In 2021, sales exceeded $786 million ($705.8 million in the Russian market and $80.6 million in the Ukrainian market).
Walter Spurrier, an economist, explained that in addition to this, the main Western governments have imposed serious sanctions on the Russian financial system. The main banks of that country have been left out of the Swift system (interbank communication); they have also frozen about half of its economic reserves to the Moscow government.
It will be increasingly difficult for Russian banks to pay for the imports of goods and services. Also, on the domestic market the ruble is plummeting; there is a run on deposits, and the purchasing power of the Russians and their demands are severely contracting.
The result is that less and less can be placed banana, or even close the market completely. Given this, the only feasible solution is to look for other destinations for the production that can no longer go to Russia; but the problem is that this production is sold at an increasingly lower price
“As it is better to sell cheap than to let the banana to rotintended for Russia others will go markets. An American importer of Guatemalan bananas stated that he expected a flood of ecuadorian banana, competing with low prices. As he said, the spot market in Ecuador it’s $3 a box,” Spurrier said.
The banana industryalready hit by the pandemic with higher costs for fertilizers, paper for boxes and freight, among other items, now also has to deal with the difficulties of war
Flower growers cannot charge exports to Russia
For their part, the Ecuadorian flower growers are pinning their hopes that economic sanctions against Russia rise in the short term.
Currently, the disconnection of Russian banks from the SWIFT payment platform is preventing this sector from being able to charge Russia $38 million for the more than 6,500 tons of flowers that they sold in that marketon the eve of the celebration of International Women’s Day
This lack of payment, according to the Association of Flower Exporters (Expoflores), could extend over the next six or 10 months, which would leave a large part of the businesses in that country without a floor. market.
If the situation continues in the medium and long term, not only will there be no debt payments, but no sales are expected on the Russian market, which traditionally absorbs 15% of the supply of ecuadorian flowers.
The flower growers have already requested a kind of bailout to the Government of Guillermo Lasso. That rescue In its core, it consists of access to very long-term fresh credits, which would help them improve the liquidity of companies.
As in the case of bananadestinations are being searched and alternative markets to avoid significant losses in the coming months.
The possibility of Russian payments being channeled through China’s own system is not feasible in the near future; furthermore, it could not cover all transactions.
The government must take action
The banana industrylike other exporters in Ecuador, suffers from the lack of policies that promote competitive production. Ana Rosero, an economist, explained that, despite the efforts of the current government, the country is behind in the agenda of signing more trade agreements.
Likewise, solutions to the hiring problems in the labor market are not in sight, and the obstacles to more competition entering activities that are too regulated and controlled, such as bananawhere there are even official prices.
According to Spurrier, the main victims, amid the ravages of the war, will be the small and medium producers. In the case of bananaa drop in these producers will be a strong economic blow to agriculture in the center-south coast.
“From the Government a package of measures is required to help them overcome the bad moment. It could be the reimbursement to the producers of the taxes paid with their previous exports (retroactive drawback), restructuring longer-term loans, among others”, he assured. (JS)
FACT. – The war between russia and ukraine could cost Ecuador between $1,000 million and $2,000 million exports losses.
FACT. – Another Ecuadorian star product that could run out of ground in the Russian and Ukrainian market is shrimp. The amount at stake is more than $130 million.
