José Cabascango: “For Ecuador it is of vital importance to have investors who bring innovation and technology”

José Cabascango is the head of the Commercial Office of Ecuador (Ecuador Pro) in Madrid. The GDP of the country grew by 4% last year, unemployment is the third lowest in Latin America and the Government is making efforts to attract foreign capital with tax concessions and measures to increase legal certainty. For these reasons and many others, responsible for foreign trade and Cabascango Ecuadorian recommend to European entrepreneur doing business there. Specifically, agribusiness and fresh and processed products are two of the sectors that the Ecuadorian government is giving priority to attracting investors. In this interview, agreed on a breakfast conference with businessmen which took place in Valencia last November, Cabascango tells the status of economic exchange between Ecuador and Europe and gives important clues about what you need to know to invest in their country.

e-Comercio Agrario: According to the EU, since 2005 there has been an increase in trade between European countries and Ecuador. In the latest available data, the 2012 trade totaled 4.708 million euros, making the EU’s second largest trading partner in Ecuador, representing 11.6% of its trade with the world. What role do food products in Ecuador exports to Europe? What are the products that are exported? What are the products that the Ecuadorian government wants to strengthen ahead of the export to the EU?

José Cabascango: Non-oil exports of Ecuador to the European Union have had an increasing trend in recent years; agrifood exports have submitted an irregular behavior, while products that are not of this type have been steadily growing. In 2014 the agri-food exports accounted for 41.24% of the total non-oil until September 2015 and accounted for USD 942 million (45% of total exports in that period).

The main food product exported between 2010 and 2014 were fresh Cavendish Valery bananas, with a share of 63.41% in 2014 of total agrifood exports in that year. Other important products were raw cocoa beans (12.89%) and extracts, essences and concentrates of coffee (8.98%); These three products accounted for 85.28% of the total in 2014.

Regarding the agroindustrial sector has as prime market in Europe for the following products: Palm oil, broccoli, chia, herbs and teas, brown sugar, pepper, quinoa, stevia, for it has been raised to working with the Commercial Offices of PRO ECUADOR in promotional campaigns, participation in fairs, business opportunities, etc. Europe is an important export market of the Agribusiness industry and it is expected that the trade agreement will enhance exports further.

With regard to processed food industry, the most representative to the European market are: palm, passion fruit pulp and mashed banana with a market share of 35%, 22% and 19% respectively. (Target market consider the European bloc). However it is important to emphasize that from 2013 exports of banana flakes (dry / dehydrated banana) currently reach 6% of participation were recorded. The intention is to continue positioning the mashed bananas and increase exports of flakes of bananas in the European bloc, which by their nature semifinished adapt to the food industry, major industry in that block.

ECA: Ecuador’s leading banana exports, but in 2013 the patron of this product in this country complained (see this article) that the export figures to Europe have fallen sharply since 2011. What is the situation now?

JC: In 2011 the highest banana exports by Ecuador to the European Union with USD 857 million was recorded. After declines in 2012 and 2013, an increase in 2014 of 19.87% in value and 21.46% was recorded in tonnes from its previous period, the increase of this consumption was mainly due to the eastern part of Europe, the markets decline was Africa and Middle East, which were by the political instability that was a difficult situation for the supply of fruit. So far in 2015 (January-September) the growing trend continues, with total exports of USD 640 million, representing an increase of 9.73% over the same period of 2014.

ECA: What is the forecast increase in agrifood trade between Europe and Ecuador when the FTA is launched? Will it grow, or is too expensive and costly to transport perishables many kilometers?

JC: It is hoped that an increase in Ecuador’s exports to the EU in the field of agribusiness. In the period 2010-2014 EU imports from the world had an average annual growth of 5%, which is expected to continue increasing. This is indicative for Ecuador to exploit this trend.

Among the main products imported by the EU from the world in the agribusiness sector and would enter with 0% tariff they are: other cheese, other binders preparations, whether or not broken soybeans.

By increasing trade with the EU transport demand would increase, so the freight would become more competitive. Shipping is the primary means used to this destination, for its low cost and because it allows high volumes of freight transported. Countries like Germany and Spain serve as a gateway to imports from countries within the region.

ECA: What kind of agricultural products that could be exported you from Europe to Ecuador believes successfully? That is, what business opportunities in Ecuador can see European farmers and agri-food industry?

JC: The European market has always been attracted to, because their characteristics have allowed agribusiness or agricultural products from Ecuador to gain international prestige and have become one of the most visited in South America. There are products whose international demand and supply that has Ecuador have greater potential than others, as detailed in the following table:

These products represent greater opportunities for export growth in the long term. Some of them occupy a relatively small position in the European market, but competing in a high growth industry. The description of “other fresh fruits” mainly includes passion fruit and passion fruit, passion fruit, dragon fruit, among others; which show a significant increase in consumption.

ECA: During the breakfast conference last November 11 in Valencia, several entrepreneurs stressed that there are cultural barriers that European entrepreneurs have to consider doing business in Ecuador. One is the language used by the Spaniards, too direct, that bothers Ecuadorians. Do you share this view? Do you think that cultural differences can be an obstacle in business between both sides of the Atlantic, despite sharing the same language?

JC: succeeding in international business, it is always important to consider the key issues within the culture of the country to which you want to export. While it is true that Ecuadorians and Spaniards share the same language, there are slight linguistic differences that must be considered when making business. Recall that make use of humor is an intrinsic feature of both Spaniards, as Ecuadorians. However it is worth highlighting that the voice and familiarity, depending on how they are employed, may generate some disagreement whether this area of ​​language in both cultures is unknown.

The Spaniards are direct and tend to more easily tutear between people of similar age, while Ecuador keeps a softer and friendly tone and reserves the use of you to develop a relationship of trust. During negotiations, the Spanish maintained a reserved and formal. For its part, the Ecuadorian is more expressive and prefers chatting before entering the subject of negotiation. It is also very common for Spaniards impact on the opinion of the other party, to the point of wanting to change it, but his counterpart should not feel alluded since this is one of the cultural characteristics that distinguishes them. Finally, you should avoid using words that can be double connotation, as these may be inappropriate. Taking into account these recommendations, the talks will be aimed at fluid and effective negotiation.

ECA: As you quoted during that conversation, agribusiness and the fresh and processed products are among the nine priority sectors of government. What are the main facilities that fact can bring to exporters and / or European agrifood investors interested in Ecuador?

JC: As we mention facilities external and internal factors. Whether they be external to the benefits that Ecuador as a country has to offer, because due to its strategic location, allows favorable climatic conditions for the cultivation of a number of foods, as well as fertile land, both in the coast region as the saw. At the same time, to be located in the middle of the world, Ecuador is established as a strategic logistics center for foreign trade activities.

And internal factors include tax incentives that are granted to new investments that are located outside of cities like Guayaquil or Quito, the same that are exempt for five years from payment of income tax, which allows Potential investors have a flow that helps them capitalize on their operations at the time of starting the business.

ECA: Should investors and / or European exporters fear that oil oscillations cause the Ecuadorian government set temporary tariff barriers to protect their domestic market?

JC: Currently, Ecuador and protects its business with tariff barriers, which may be generated by multiple macroeconomic factors that are not necessarily swings in oil prices. One aim of these barriers is to encourage domestic production, promote the development of value-added products, which in turn in a medium to long term generate an impact on the prices and volume of exports in the country’s trade balance. That is why our country is of vital importance to have investors who can contribute to changing the productive matrix, introducing innovation and technology in the development process and that results in a positive impact on exports which in turn will allow to eliminate trade barriers.

We consider it important to inform potential investors that in the options you have to invest in Ecuador, is the sign an investment contract with the state, where they can set taxes, as well as apply the tariff deferral of capital goods important and necessary for the development of its operations in the country.