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ECUADOR - Agriculture

Julio José Prado

Minister, Ministry of Production, Foreign Trade, Investments and Fisheries

Bio

Julio José Prado has led projects at a national level, such as the Sectorial Action Plan and the Month of Innovation for the Coordinating Ministry of Production, Employment and Competitiveness (2010), the First Market Intelligence System for the Competitiveness and Industry (2009), and the Economic and Social Impact Study of the New Airport of Quito (2006). He is the author of over 100 academic publications, scientific conferences, and other publications in specialized economic magazines, research, cases, and academic notes. He is also author of “From Shock to Action: Mindset and Indispensable Tools to Resurface and Adapt in the Midst of Chaos.”

"Being transversal in nature means that we focus on industries and sectors in our cluster strategy of 20 clusterized sectors of the economy."

TBY talks to Julio José Prado, Minister of Production, Foreign Trade, Investments and Fisheries, about private sector partnerships, project clusters, and increasing FDI to Ecuador.

How is the Ministry working with private companies to help them face specific challenges?

With our project Mesas Productiva (Productive Tables). It is a productive taskforce between the public and private sectors to decrease the level of red tape in Ecuador, which is the first strategy. The second is related to opening up the economy. The third part of Ecuador Compete is what we call Innovative Ecuador. This is trying to build a more dynamic ecosystem in our country to create and foster more value-added, new economic clusters and innovation in our industries. Through this program, we are fostering digitalization. During the pandemic, everybody took this direction by obligation, but after the pandemic, most SMEs are returning to former ways. Meanwhile, we pursue a range of projects at the ministry. For example, we launched Tech Explorer a couple of months ago, a program we designed with our commercial and trade offices to bring more entrepreneurs from the services sector. So, from fintech or Agritech and others, the goal is to position them outside the country and establish the necessary contacts to start exporting services. We have conducted three different Tech Explorers abroad, one in Madrid and one in Mexico, and we will shortly realize the third in Miami to promote our exports and further digitalize the economy. The other thing we just started is the Mesas Productivas, which focuses on eliminating minor problems that burden companies keen to invest in Ecuador. We created five working desks and launched one recently called La Mesa de Transformación Digital (Digital Transformation Table). So, the desk will work towards creating a more digitalized economy in Ecuador. We work with the Comité Empresarial Ecuatoriano, a business committee. They tackle issues businesses face regarding productivity and costs. They bring to the desk particular topics they want to eliminated, and we have managed to move quickly thus far. We are discussing with the private sector the main problems it faces. We then cluster those with similar problems at a specific desk. Not every problem is sector-specific, but may be transversal, pertaining to the wider economy. And where a problem is faced by numerous economic sectors, we bring it to the Mesas Productiva.

How does this project work, and what do the clusters comprise?

Being transversal in nature means that we focus on industries and sectors in our cluster strategy of 20 clusterized sectors of the economy. We explore how to move forward, explicitly reducing burdens and problems for that cluster, and innovate and collaborate more. We are looking forward in the long term to eliminate short-term burdens, but that is more vertical. The clusters are related to sectors and industries like textiles, medicinal cannabis, logistics, plastic, finance, wood, alcohol, and high-tech. This is a new approach for Ecuador, but a familiar one in Colombia, Spain, France, Ireland, and Mexico. A cluster is a business ecosystem in which you work with the business representative of that sector and other areas in the public sector, for example, from the government and academia. Thereby, a cluster assembles everything required to build a long-term strategy. For example, they discuss in depth how to transition towards a greener economy in the plastic industry in response to public pressure. The mining clusters are also under scrutiny, and must establish means of operating in the future.

What is Ecuador’s potential as an investment destination?

Ecuador traditionally has a structural problem when it comes to attracting direct investments. In Ecuador, the ratio of FDI to GDP in Ecuador has been at 0.7% for the past 15 years. In Panama, the Dominican Republic, Uruguay, Peru, and other countries in Latin America, the story is different. They attract four, five, or six times more FDI than we do to Ecuador. And yet we are a dollarized economy with great industries that could benefit from those investments. Over the past decade, the government has neglected the potential contribution of FDI for the economy. But the government of President Lasso now believes that we must create greater prosperity, jobs, and relevance in this globalized world. Particularly after the pandemic, there is a pronounced need for FDI. We need to collaborate with firms keen want to enter Ecuador to benefit from the sound macroeconomic environment. Two years ago, everybody doubted the sustainability of Ecuador’s dollarization. Now it seems certain that the dollar is here to stay for the long term. The country risk at the moment is at around 1,900 basis points, which is a challenge to FDI. The level of local and foreign investment in Ecuador last year was USD2.6 billion compared to 2021’s USD1.7 billion, 2020’s USD1.6 billion, and USD1.4 billion prior to the pandemic. So even with all the problems facing Ecuador, FDI and local investment has been on the rise. That’s the good news. Nevertheless, we must attract FDI investment to change our business development model.

What is the export outlook for 2023?

In terms of exports, it has been exciting because Ecuador has done well despite the prevailing issues impacting the supply chain and the high cost of export and shipping worldwide. This, despite the post-pandemic climate and the war between Russia and Ukraine. We observed YoY growth of 16.5%; hence, more than USD3 billion for 2021. And all our export products have been booming globally. For example, we exported over USD7 billion worth of shrimp exports in 2022, marking growth of 37%. We faced a problem with banana exports, however due to the situation with Russia. Meanwhile, tuna and cut flower exports, were on the rise. Mining is a new venture; this is the third year in a row that we have exported raw minerals. Adding everything from copper to gold and iron, the sector generated roughly USD3 billion in 2022. And for 2023 we expect over USD5 billion in mineral exports. Ecuador has some of the best products in the world: the best bananas, flowers, cocoa, the best tuna, and prime broccoli. But we don’t have the best market access because Ecuador has been a closed economy to international trade. Only 40% of our exports are covered by free trade agreements (FTAs). So, our strategy is to have 10 new FTAs during this administration. This amounts to the most ambitious trade agenda ever seen in Ecuador and Latin America. In 2022, we launched four simultaneous negotiations with Mexico, Korea, China, and Costa Rica. Of those four, three are almost complete. And in 2023, we are starting negotiations with Panama, the Dominican Republic, and Canada.

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