Page 51 - Ecuador's Banana Sector under Climate Change

chapter 2: economic and policy analysis of the banana sector in ecuador and implications for social and environmental sustainability
The new Banana Law No 99-48, formally known as the Law of Production and Marketing of Banana Intended for Export, came into effect in July 2011 and consists of several components:
(a) Regulate the relationship between banana producers and exporters by establishing mutually agreed prices paid by exporters to producers, to be enforced through contracts;
(b) Formalize the relationship between plantation owners and hired workers and ensure improved wages and working conditions.
(c) Manage banana oversupply and control its impact on prices.
(d) Improve banana yields and productivity among small-scale producers.
(e) Enforce environmental regulations in relation to banana production.
(f) Pursue active trade policies to maintain current markets and expand into new
ones.
4.1 Minimum price and producer/exporter contract enforcement
The new Banana Law establishes that the minimum price for bananas should
be agreed through negotiations between the producers and exporters. In the absence of an accord, MAGAP and the Ministry of Foreign Trade will establish the minimum price. No banana fruit can be exported without a contract between the producer and exporter, and it is imperative that the minimum price be paid.
The Government of Ecuador periodically sets the minimum fair pre-shipment price that the banana growers should receive and the minimum FOB reference prices that the exporter has to declare. To establish the minimum price, MAGAP organizes bargaining tables between producers and exporters every three months, in order to reach a consensus. In the absence of an agreement, the Ministers of Agriculture and of Foreign Trade will establish prices on the basis
of the average cost of national production, plus a profit. At the end of 2013, the official minimum price was USD 6 per box (18.5 kg of bananas) implemented under two seasonal prices: USD 6.75 per box for the high-price season (22 weeks of the year) and USD 5.40 for the low-price season (remaining 30 weeks of the year). Ecuador usually exports approximately 52 percent of its bananas during the first 22 weeks and 48 percent during the remaining 30 weeks (LACENA).
The law also requires the signing of contracts for the purchase of fruit with the support price. There are various types of contracts. The first is a contract in which the exporter buys all the fruit that is produced all year. The second is an area- based contract, specifying the area of the banana plantation on which the exporter lays claim to the harvested fruit. A third contract establishes the average number of weekly boxes to go to the exporter; these boxes may include price variations from 5 to 20 percent, based on the season. All contracts are valid for one year
and obligate the exporter to purchase 100 percent of the production during the
52 weeks of the year. Failing this, the exporter is compelled to pay the producer the value of the unsold boxes. It also obliges exporters to pay for the boxes of fruit through the Interbank Payments System of the Central Bank of Ecuador.
Noncompliance by exporters is met with a fine equal to the value evaded. The contract also forces producers to register the fruit or be prevented from selling
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