I’ve visited Ecuador twice now. It’s a very interesting country, with a lot of potential.
After a controversial election earlier this year, Lenin Moreno is now president. The previous president, Rafael Correa, was a very controversial figure, particularly in his approach to media relations and freedom of speech. He perhaps stayed in power for too long, over ten years, but on the other hand his populist policies enabled many people to benefit from social welfare and poverty alleviation programmes. Moreno has inherited a country with serious macroeconomic problems:
“Between 2006 and 2014, GDP growth averaged 4.3 percent, driven by high oil prices and substantial external financing. This stimulus enabled increased social spending and important investments, especially in the energy and transportation sectors. During that period, poverty declined from 37.6 percent to 22.5 percent. The Gini coefficient fell from 0.54 to 0.47, given that income growth of the poorest population segment was higher than the average for the remainder of the population.
These achievements are threatened by declining oil prices and the stronger U.S. dollar, however. This situation was exacerbated by the devastating April 16, 2016 earthquake on the northwest coast of Ecuador. Between 2014 and 2016, urban unemployment rose from 4.5 percent to 6.5 percent and urban underemployment increased from 11.7 percent to 18.8 percent. During this period, the poverty rate and the Gini coefficient remained largely unchanged.” (World Bank)
Socialist, protectionist but, hang on, isn’t there a free trade agreement with the EU?! Well, that’s what happened, which means that for as long as the UK remains in the EU, UK exporters can benefit. However, remember that post-Brexit, your competitors in EU countries will continue to benefit, but for the UK, free trade agreements with nations such as Ecuador will not be high priorities – after all, it took the EU 10 years to achieve this! And apparently, this is Ecuador’s only free trade agreement. What this means is that perhaps now is a good time to start exporting and build networks, and to establish your products and brand? It’s important to highlight that without a free trade agreement, import duties are quite high in Ecuador.
How much is this free trade agreement worth?
“Bilateral trade in goods between the EU and Ecuador was € 4.6 billion in 2015: the EU exported € 2 billion to Ecuador and imported € 2.6 billion.” EC Trade
So what are the terms of this agreement? What does it cover?
“The deal, which will come into force for Ecuador from 1 January, means than almost all its exports will enter the single market without paying tariffs.
It will apply to all industrial and fisheries products, increase market access for agricultural products, improve access to services and public procurement, and reduce the main technical barriers to trade.
The reduction in tariffs will be carried out over the course of 17 years. The EU will liberalise about 95% of tariff lines when the deal first comes into force and Ecuador 60%.”
What does Ecuador export, its strongest export industries that you could sell into? Think about:
- Shrimps and prawns
This is a good time to consider Ecuador – time will tell how things develop for this country, but for now, there are definite opportunities to be had.
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