Colombia has begun to occupy spaces in providing fruit to South Korea and Peru in non-traditional foods in Japan.
Ecuador looks to Asia with high expectations for the growth of its foreign trade, even more so with the trade agreement with China that came into effect in May. According to the Export and Investment Promotion Corporation (Corpei), Ecuador has established trade relations with 42 of the 51 countries on that continent.
China has established itself as the main destination for Ecuadorian exports, with US$ 5.2 billion in the last year, equivalent to 63% of the total exported to the Asian continent. South Korea and Japan follow, with exports of US$ 725 million and US$ 628 million, respectively, the latter representing 7% of the total.
Xavier Rosero, executive vice president of the Ecuadorian Federation of Exporters (Fedexpor), explains that in practice what has happened with Asia is that it has become a good platform for insertion and exposure for traditional products that are very volume-intensive, particularly driven by China, because the consumption capacity with its number of inhabitants and the disposable income of its growing middle class has given the possibility to products, such as shrimp, to position themselves in that market.
From January to June, according to Fedexpor figures, Ecuador exported shrimp to China for US$ 1.631 billion, although 2024 has not been a good year due to the contraction of the Asian giant's economy, which has meant that the crustacean has invoiced 27% less than in the same period of 2023 and exported 12% less in volume.
However, the expectations of the export sector, according to Rosero, is that the country's brand - which has been positioning shrimp and, to a large extent, bananas - can continue to expand with the tariff reduction schedules that are planned in the trade agreement so that products that are volume-intensive can enter a market that is very demanding in terms of product volumes.
Meanwhile, in destinations such as South Korea and Japan, he analyses that market niches are more important than volume due to the high quality standards that are common in Asia, but in those countries they are more so. “Other types of things are valued that can make other products in the food supply, but not traditional ones, continue to position themselves,” says the executive vice president of Fedexpor.
He added that in the case of South Korea, there are significant possibilities for expansion of fruits such as bananas, explaining that there are tariffs on food products that exceed 20%.
“Tariffs are quite high in Korea and Japan, I think that will allow, in the case of South Korea, to compete on equal terms with Colombia, which has begun to occupy leading positions in the supply of fruits such as bananas, and in the case of Peru, in non-traditional foods, which have a trade agreement with Japan that we do not have and which they are taking advantage of,” says Rosero.
Bananas have experienced what it is like to export without tariffs to that destination this year, and have shown unprecedented growth of 271%. Ecuador exported 2.2 million boxes of the fruit to South Korea, when in the same period last year it only exported 600,000 boxes. This is due to the temporary elimination of tariffs on 28 fruits and vegetables, including bananas, as a measure by the Government of that country to combat inflation. According to figures from the Banana Marketing and Export Association of Ecuador (Acorbanec), in the first half of 2024.
Will China overtake the US and Europe as an export destination?
For the export sector, the prospect of Asia is not that it will displace or replace other markets such as the European Union and the United States, but rather that it will complement the effort to diversify markets, says Rosero.
He explains that, for example, products that go to the European Union have a different distinctive range or another type of presentation or certifications that are more valued than what may occur in markets such as Asia and China specifically. In the case of the United States, the level of involvement of companies and the number of products is so diversified that one in two exporting companies has the United States as its destination.
“So this diversification process does not have to be replaced but rather expanded with what can be achieved in the Asian market. Our perspective is that the scales of traditional products can be expanded and that products that are in a niche market can begin to position themselves and find better alternatives in the Asian market,” says Rosero.
What are the challenges?
According to Rosero, the challenge is that Ecuador must reach a second stage, taking advantage of the trade agreement. The first was to finalize the agreement and it is positive because the treaty has given a signal of predictability to Chinese buyers and in South Korea there is already that expectation and there are preliminary contacts that have begun to be made with buyers from both markets.
However, he clarifies that the important thing to be able to take advantage of the agreement is to adapt the logistics infrastructure of foreign trade. This means taking advantage of the geostrategic position of the port terminals in the port of Guayaquil and accompanying them with a modernization of the trade facilitation system so that export cargo and imports can move more quickly.
For Felipe Ribadeneira, president of Fedexpor, today there are several problems that have characterized the cargo logistics of Ecuador's international trade that have been accentuated since the beginning of the post-pandemic.
Among the most recurrent problems, there is a lack and imbalance of refrigerated and dry cargo containers, and access infrastructure to the different port terminals. There is a need to modernize the customs control system to facilitate the processes and simplify the times and procedures that the exporting company must comply with in order to be able to load the cargo.
“While in Ecuador we are still trying to establish a starting point in addressing these problems, Peru is close to starting operations at the port of Chancay, which is expected to have the greatest cargo connectivity with China in the region. This will further widen the gap in logistics lag that we have with competing partners,” says Ribadeneira.
To address these opportunities and challenges, Corpei is organizing “Doing Business: Ecuador-Asia” on September 12 in Guayaquil, where Vice Admiral Carlos Tejada, Deputy General Manager of Cosco Shipping Ports Chancay Peru, will address the importance of the Chancay megaport, the first Chinese logistics hub for the Pacific side of Latin America.
In addition, experts in foreign trade and international relations will analyze business opportunities with the Asian market. Topics such as the impact of the trade agreement with China and commercial and cultural strategies to connect with Japan, South Korea and Singapore will be discussed.
“Doing Business: Ecuador - Asia 2024 will offer successful commercial experiences, extensive knowledge on the different topics of trade with China, and also aspects that allow us to expand this negotiation to other neighboring countries of China such as, for example: Korea, Japan, Singapore,” says Eduardo Egas, CEO of Corpei.
