Exports of Ecuador bananas to China are set to increase dramatically, after the recent signing of a memorandum of understanding (MOU) between the two countries set up talks to establish a bilateral free trade agreement (FTA).
Bananas are one of Ecuador’s most important export commodities and the South American country is the world’s largest exporter of the fruit, with exports generating more than $4 billion in 2020. (Note that Ecuador is one of Latin America’s dollarized economies, so all figures are in USD.)
According to the Banana and Plantain Cluster of Ecuador, an association that draws together the country’s biggest banana growers and exporters, 17.5 million boxes of bananas were sent from Ecuador to China in 2020. That number then dropped to 10.9 million boxes in 2021 – a 37.7% drop on the same period for the previous year.
However, according to a report from El Comercio, the association has said that the signing of an FTA would see exports rise to 53.6 million boxes over two years – or 26.8 million boxes per year, representing a 53% increase on 2020 exports and more than double those seen last year.
Ecuador’s only export commodity that is significantly more lucrative than bananas is crude oil, worth more than $7 billion per year, while seafood generates similar figures to the fruit crop.
The value of exports of Ecuador bananas represents more than 4% of the country’s GDP, with El Comercio reporting that the industry employs around 250,000 people and supports more than 8,000 small-scale producers.
In 2020, China was the sixth-largest importer of Ecuador bananas, with imports totalling $157.1 million. That placed it behind Russia ($673.7 million), the United States ($595.4 million), Turkey ($284.8 million), Italy ($193.9), and Germany ($173.01 million).
However, following Ecuadorian President Guillermo Lasso’s recent trip to China and signing of an MOU ahead of FTA talks, the Asian giant is set to become a significantly more important partner in this key industry.
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Ecuador bananas among numerous exports with strong prospects
The strong prospects for exports of Ecuador bananas are matched by encouraging signs across the country’s export economy, with overall exports growing by 31% in 2021 compared to the previous year.
That included a 23% increase in seafood exports, and came despite the turmoil caused by the global shipping crisis seen in 2021, which massively disrupted international shipping.
Among the emerging export commodities that have seen strong performance is cacao, which generated $950 million in 2021 – a $15 million increase on the previous year and new record for the crop.
Notably, the quantity remained similar, with 360,714 tonnes exported in 2021, compared to 360,800 the year before. However, that figure represented an almost 20% increase on exports seen in 2019, which stood at 301,337 tonnes, in a mark of the growth of the country’s cacao industry.
The strong showing of Ecuador’s export economy saw the country register a trade surplus of more than $2.87 billion in 2021, with imports totalling $23.83 billion, while exports stood at $26.7 billion.
Ecuador attracting interest among investors
Ecuador has seen consistent growth since the turn of the century, only witnessing GDP decline during two year between 2000 and 2020 – one of which being the final year of that period, as a result of the COVID-19 pandemic.
The country has become particularly interesting to foreign investors since the 2021 election of business-friendly President Lasso, who has publicly committed to entice investment and improve the climate for doing business in the country.
One of South America’s smallest countries by area, Ecuador is bordered by two of the region’s most popular destinations for foreign direct investment (FDI), in Colombia and Peru.
Along with its neighbors and Bolivia, Ecuador is a member of the Andean Community of Nations (CAN), which has been in existence for more than half a century, and has recently been implementing measures to deepen integration and facilitate business between the members.
Ecuador also recently formally applied to join the Pacific Alliance, an economic association that includes Chile, Colombia, Mexico, and Peru, and to which Singapore was accepted as an associate member last year, in a sign of the organization’s ambitions to expand into the Asia-Pacific region.
That could be particularly beneficial to Ecuador, given that despite its modest size, in Guayaquil it has one of the busiest container ports in Latin America, meaning the country is a hub for trade.
Guayaquil is where the majority of Ecuador bananas are shipped from, along with other key export commodities.
While the country’s use of the US dollar makes it particularly attractive to US expats and companies that do a lot of business in the currency, other draws include affordable real estate, low living costs, and a favorable immigration regime, contributing to the country being named among the top six in the world to retire to.
Biz Latin Hub can assist you doing business in Ecuador
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Our portfolio of services includes accounting & taxation, company formation, and corporate legal services, among others, and we have a team of experienced professionals ready to assist you in Ecuador.
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The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.