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Ecuador: Banana Sales to the European Union Fall

23.5.2019

Banana exports could end 2019 with minimal growth, in the first quarter they only increased 2.49%, in relation to the same period of 2018. From January to March, a volume of 95.2 million boxes of banana was sold, compared to 93.3 million last year. But sales had performed better in the first quarter of the last two years, with increases of 5.73% and 4.87% in 2017 and 2018, respectively.

Fabricio Espinosa, president of the Association of Banana Exporters of Ecuador (AEBE), expects total sales this year to exceed at least 350 million boxes. He calculates a growth of 1.2%, if the trend continues.

In 2018 the increase was 6%. "We have to wait until the end of the year, but we hope that the same fruit production as 2018 can be achieved," he says. That will also depend on the impact of the winter season on the coastal areas.  But what most concerns exporters is the external scenario.

The European Union (EU), the main market for Ecuadorian fruit, received 15.46% less fruit in the quarter, in relation to the previous year. There was also a decrease to South America of 6.79%. This is offset by the growth of other markets such as Asia, Russia, the Middle East and the US. After two years of continuous growth, after the Multiparty Agreement signed in 2016, the first quarter of this year registered a sharp drop, according to statistics from AEBE. The EU receives 29.75% of the Ecuadorian fruit, followed by Russia (23.11%), the Middle East (12.72%) and the USA (11.01%). "The competition reacted by lowering the price and winning market share against Ecuador, we are not competitive," said Richard Salazar of the Marketing Association of Banana Exporters (Acorbanec).

The Ministry of Agriculture set the official producer price at USD 6.30 for 2019. That was an increase of 10 cents. Meanwhile, the FOB reference value to be declared by the exporter was US$ 8.1353. Guatemala, for example, dropped its price 50 cents. No other competitor country has "such a rigid banana regulation," according to Salazar. That is in addition to the high production and labour costs.

Espinosa recalls that last October Ecuador suffered pressure from the European supermarket chain Aldi, to lower the price of the box. As Ecuador did not give in buyers reduced their purchases and for this year there is little chance of recovering the EU market. "By 2019 the contracts had already been signed, any new business would be for 2020."

In addition, the cold season in Europe is approaching and consumption will fall compared to other fruits. Given this, the sector insists on the need for trade agreements. Last week, the United Kingdom signed a multi-party agreement with Ecuador, Colombia and Peru. According to the Minister of Foreign Trade, Pablo Campana, 95% of the exportable goods from the country will be able to enter without tariffs.

The banana sector expects the Assembly to accelerate the approval of the agreement with the States of the European Free Trade Association (EFTA). It was signed on June 25th, 2018 but it has still not come into force. Ecuador also hopes to finalize an agreement with South Korea, which charges a 30% tariff  but has a lesser tariff for a natural competitor,

The Philippines. And it is expected that the WTO will decide in favour of Ecuador, so that Brazil will eliminate phytosanitary barriers to bananas. The sector also hopes that the Banana Law, which is being debated for a second time in the Legislature, will be filed; since no proposed changes were contemplated and there are disproportionate sanctions. The exporters are preparing a joint strategy, through what they call the 'banana cluster' to have a single voice in the face of the demands of a larger market and regulations.

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