March 30, 2023

Great Indian Mutiny

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Ecuadorian shrimp is losing competitiveness against India and Vietnam

Shrimp production in Ecuador is expected to be 24% higher than in 2021 due to rising costs and the revaluation of the dollar against other currencies, the South American country’s National Fisheries Chamber said. This situation complicates competitiveness with respect to its competitors in India and Vietnam, who “have many advantages over our country” such as lower wages, input subsidies and their own currency, they point out from the Chamber.

Although this is an issue that has been raised on several occasions with government officials, especially the Minister of Production, Foreign Trade, Investment and Fisheries, Julio José Prado, “they do not have an answer or a proposal for any concrete measures to increase the competitiveness of Ecuadorian shrimp”. On the contrary, “the cost structure of this sector is constantly under pressure, it is experiencing difficulties due to the lack of motivation and attention from internal politics and the impact of external factors. As the price of international markets”.

There are many factors that increase costs. On the one hand, removing the differential price of diesel increased shrimp prices by 16 euro cents per pound at the end of last year, affecting 82% of the area dedicated to production.

Another factor is the increase in raw material costs worldwide compared to 2019 for feed production, which accounted for 55.2% of total shrimp costs. Among others, wheat rose 71%; Soybean paste, which is up 45%; Fish oil accounted for 105% and fishmeal, 24%.

Security costs are up to $80 million a year due to the implementation of video surveillance, monitoring and communication systems. In addition to paying private guards to avoid the constant daily robberies experienced by producers. According to statistics from the National Chamber of Aquaculture’s Directorate of Conservation, “a fixed amount was imposed to deal with the crime that incessantly attacks the sector by land and river, resulting in one death and 20 injuries.”

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At the same time, they said from the chamber, “As the current interest rates, amounts or loan terms do not match the reality of the sector, it is necessary to look for credit alternatives for the shrimp farmer.”

Faced with these circumstances, the Department is of the opinion that the use of a mechanism for exporters and recovery of indirect taxes will partially mitigate the above problems, which include the depreciation of competing countries’ currencies or target markets such as the Euro. It reached parity with the dollar in 2022, which automatically made our exports more expensive because Ecuador is a dollar country.

Regarding these problems that make Ecuador’s shrimp industry less competitive, José Antonio Camposano, executive president of the National Aquaculture Council, clarifies that the figures for the end of 2022 “do not reflect the harsh reality facing the industry.” Camposano points out that the year 2022 is “a very complex one that we will have to face,” with sluggish markets, a strong dollar, rising production costs, inefficient public services and unprecedented levels of insecurity.

Shrimp, as he notes, is the country’s leading non-oil export and “is a fundamental pillar of the country’s economy, generating 290,000 direct and indirect jobs. According to Water Spurrier and Alberto Acosta Burnio’s weekly analysis newsletter, for every 1% decline in shrimp production, 791 jobs will be destroyed. In addition, there will be a $19.7 million increase in value added and a $1.5 million reduction in income tax payments.