Although Ecuador's recent trade agreement with the EU is great news for banana producers, exports to Europe might be limited in the long-term due to new opportunities opening up in the Chinese market, according to shipping company Seatrade. 

The South American country is set to receive a significant tariff cut for Europe-bound banana exports of up to €39 (US$52) more per metric ton (MT) than previous schedules for 2020.

With all other factors held constant, this would equate to €51.5 million (US$69 million) in savings based on last year's volume.

Seatrade Ecuador managing director Ivo Ravelli told www.freshfruitportal.com he was delighted with the news, but criticized the fact the tariff would likely only come into effect in 2016.

"We are of course very pleased with that development of the agreement with the EU. It is a very positive thing for everybody involved in trade between Europe and Ecuador," he said.

"I am personally a bit worried about 2015, because it seems that this agreement only comes into effect in 2016, and so it's quite far away.

"So it would be good if it could come into force earlier, or maybe if there could be an intermediate arrangement made for 2015, because particularly for that year there is a big difference from the other countries that already have trade agreements."

He added that once the agreement does come into effect he was convinced it would 'definitely stimulate and generate trade' between Ecuador and northern Europe.

'They will start to recover what they've lost'

Ravelli also said although it was too early to give any growth expectations, Ecuadorian banana exporters would initially be aiming to recuperate their position in the European market which had diminished over the last two or three years due to considerably higher tariffs than competitors like Colombia and Costa Rica.

"They have been losing a market share in Europe and I think that they will target to start gaining that back, and apart from that it will depend also in general on banana trade and in general on markets for Ecuador," he said.

"Ecuador is always looking for new markets in order to have a stable and continuous banana business all year round.

"So I'm sure that they will first start to recover what they've lost, and then it's to be seen how the general Ecuadorian trade will go."

Ravelli went on to say that China could be a prefered destination for Ecuador's banana exporters, even with the recently negotiated tariff cut.

Chinese imports of Ecuadorian bananas shot up by 541% in the first five months of this year, largely as a result of typhoons hitting key growing regions in southern China and the Philippines.

Ravelli descried this boom as something he 'had not seen in years', and said it would leave Ecuador's growers with the choice of either diversifying their markets - splitting trade between the EU and China - or ramping up production and supplying large volumes to both markets.

"[The increased trade with China] is something that could affect how keen Ecuadorian are on even growing further on exporting to Europe, because if there is an alternative market like China then maybe there is not a direct need to do that," he said.

"Or maybe there could even be grounds for expanding the production level.

"So I think it's good in all senses and there a lot of opportunities for Ecuador. And they can then decide whether it means they need more production or they just have to diversify where the produce will flow."

Ravelli added the relatively long time needed for shipments to travel from Ecuador to China was becoming less of an issue in the Asian country as the quality of produce from the South American country was such that consumers and importers were seeing it was still able to arrive in good condition.

Despite the recent boom in trade, shipments to China would likely start to slow down for a few months now as local producers started to supply heavy volumes to the market, but Ravelli said this was perhaps a positive thing as exporters could now focus on Europe.

"Now there will be Chinese produce coming to into market and that will put a cap on the need for Ecuadorian produce, but to some extent in my opinion it will come at a good time because soon we expect that the European market will kick in again and there will be more demand there," Ravelli said.

"So in that sense it's a nice cover of the low season. I think that that's a very nice way that's happened this year."

Mangoes are 'a sensitive business'

Along with bananas, Seatrade transports a wide range of other crops from Ecuador including mangoes and pineapples.

Ravelli said although there was potential for mango shipments to be increased this was unlikely to happen to a large extent for fear of market prices dropping.

"The mango season in Ecuador is very short, and it is an interesting moment. It's a good time in the year because it's just before the Peruvian big volumes, so it's just the right timing," he said.

"There is possibility for growth, but I think they are very careful there because it is a very sensitive business there with the prices."

As for pineapples, the regional Seatrade head said there was also room for a possible increase in production, although this too was unlikely given the extremely strong competition Ecuador faces from the well established Central American pineapple exporter Costa Rica.

"I know Ecuador producers very good pineapples but of course you have Costa Rican pineapples which are much larger in numbers and have a preference in the market," Ravelli explained.

"So Ecuador struggles to compete with Costa Rica."

Photo: Wikimedia Commons

www.freshfruitportal.com