BANANAS IN ECUADOR

Ecuador 2012 | AGRICULTURE | INTERVIEW

TBY talks to Eduardo Ledesma, Executive Director of the Ecuadorean Association of Banana Exporters (AEBE), on the main characteristics of Ecuador's most lucrative agricultural industry and the relationship the country has with the banana markets.

Eduardo Ledesma
BIOGRAPHY
After graduating with a degree in political science, Eduardo Ledesma began working in the banking sector. He became the Executive Director of Proexant in 1991, an organization designed to promote the export of traditional products. He has worked with short-cycle crops since 1966, and has been Executive Director of the Ecuadorean Association of Banana Exporters (AEBE) since 2003.

What are the main markets Ecuador exports to, and what other countries are you targeting for exports?

Nowadays, banana exports represent about $2 billion, and 40% of our production goes to Europe, 21% to Russia, 20% to the US, 7% to the Southern Cone of South America, and the rest is divided between the Middle East and Asia. In the past, China was one of our main markets, but we lost market share due to customs tariffs and final product prices. In this regard, we are aiming to open up new markets like Iran and Turkey, which offer huge potential for Ecuador, for we could easily export some 1 million extra boxes of bananas every month. In order to expand our activities in these markets, we would need to reduce customs tariffs. Finally, I think we can also start exporting bananas to Brazil in the near future, although Brazil is a very important producer of bananas itself.

How has the economic slowdown in Europe and the US affected Ecuadorean banana producers?

The economic crunch in these two regions—our main export markets—has had no negative connotations in terms of volume of exports to these markets. However, it has negatively affected the price and the payment, for we used to receive payment within weeks of delivery, and now it takes up to three months. Therefore, the economic flow within the sector has been affected and exporters have needed to appeal for external credits in order to pay producers, who by law have to receive their payment within eight days of having made a shipment.

How significant are the latest trade agreements with the EU?

Ecuador is the main supplier of bananas to the entire EU, and we have recently signed two trade agreements with the bloc. For example, we signed an agreement regarding banana prices; €148 per ton during the first year, and €114 per ton until the 10th year. However, I regret that Ecuador walked out of the FTA between the EU and several South and Central American countries, which clearly does not benefit our sector and puts us at a disadvantage to our competitors. The AEBE would like against ask the government to reach an agreement with the EU so we can enjoy the same customs tariffs as Colombia, Peru, and Central American countries, because by not doing so we can easily lose around 100 million boxes of bananas per year.

What is the trade situation with the US and Russia?

As for the US, the banana enjoys zero customs tariffs because several US companies dominate the market. In Russia, the situation differs from the one in the US; there used to be four large companies that were taking up almost the entire market. However, during the economic crisis, three of these companies went bankrupt, and that opened many doors to international producers like us, because a wide range of buyers were established and they are now coming directly to us. However, the crisis did affect the price of bananas and related payments.

What are the main strengths of the sector?

Ecuador, which straddles the world's equator, enjoys banana production all year long thanks to its fertile soil and perfect weather conditions. In addition, over the years we have become a very recognized and well-known producer of bananas, and all the main brands in the world buy bananas from Ecuador. On the other hand, I would say that the political aspect of the banana is one of our weaknesses, and we lack a medium- to long-term vision, as well as suffer from unfair competition.

What business opportunities does the sector offer investors?

It offers a lot, because at each stage of production a return on investment can be secured. The AEBE can advise any investor interested in entering the Ecuadorean market by offering information about players and their reliability as a company. Also, since 70% of the exporters belong to the association, it is a very large and professional network.