At least some of the more than $1.2 billion in exports to Russia and Eurasian countries are at risk. Bananas and flowers would be the first to lose sales.
Before the Russian invasion of Ukrainethe Federation of Exporters of Ecuador (Fedexpor) has made a preliminary assessment of the affectations more immediate on the sector. Those affectations will increase to the extent of how long the conflict lasts and the severity of the international sanctions against the Government of Vladimir Putin and the main economic and financial sectors of that country
The top 10 impacts for Ecuador and its foreign trade are detailed below:
1.- Billions in exports are in danger. Ecuador allocates to Russia, Ukraine and Eurasian countries (Armenia, Belarus, Kazakhstan and Kyrgyzstan), about 1,200 million dollars annually in exports non-oil companies, and maintains a trade surplus of more than $950 million aggregate with these countries. Only to Ukraine $124 million is allocated.
2.- A closure is registered in the ports of Ukraine from the Russian military invasion in
this country, putting at risk the supply of corn from Ukraine to destinations such as China and the European Union. Similarly, shipping companies such as MAERSK have closed their offices until further notice.
3.- From the Russian side, operations in the Sea of Azov (with smaller ports) have been suspended and they maintain their navigation flows in the Black Sea.
4.- Russia and Ukraine represent 29% of the exports world wheat, 19% of the exports world corn and 80% of the exports world sunflower oil. The future shortage of supply of these essential goods will further drive up inflation in Ecuador and the world.
5.- It is possible that, if you receive Ukraine greater support from Turkey, the passage of the Dardanelles and Bosporus straits to Russian ships is closed, proposing that the most open way to trade with Russia it would be towards the port of St. Petersburg.
7.- Additionally, some air frequencies and freight arrivals to Russia may be reduced.
8.- From the financial side, the economic sanctions that the United States is beginning to impose on Russian banks will generate a financial blockade that will affect contractual relations (in terms of time and payment compliance) between companies.
9.- According to a report by the Association of Banana Growers (Acorbanec), this could cause Russian importers, due to the economic crisis in which the economy of that country is immersed, to suspend purchases of bananas from Ecuador (from contracts in force) and no new contracts are signed.
10.- Since the beginning of the conflict, the Russian ruble has depreciated between 13 and 15%, reaching about 90 rubles per dollar, which implies that the purchasing power of the Russian citizen is less to consume the products that arrive from Ecuador, and it is other countries that can supply this market in a more competitive way.
Following this phenomenon, it is possible that from Russia interest rates are increased, which will encourage less consumption in this country.
11.- During the months of February and May, for festivities such as Valentine’s Day, Women’s Day (March 08) and Victory Day (May 09), according to Expoflores, on average the flower sector allocates $70 million to Eurasian countries, equivalent to 40% of their annual sales in these markets, which at this juncture cannot be fully placed.
12.- Given the total closure of trade with Ukraine$2.4 million will not be exported weekly.
These short-term damage counts have the potential to turn into medium- and even long-term losses and problems in the wake of a global recession. That will reduce the total non-oil exports of Ecuador. (JS)
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