Page 53 - 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
with the minimum price system has been the creation of a stabilization fund for contributions from producers during the high-price season for use during the low-price season. In parallel, a line of credit has been extended to exporters to assist them to meet their contractual price arrangements with producers during times when market prices are low. The line of credit, administered by Ecuador’s National Financial Corporation and overseen by MAGAP, compensates exporters by paying out the difference between the lower market price and the official minimum price.9
Responding to exporters’ criticism that establishing a minimum price has put Ecuador at a competitive disadvantage in a globally unregulated banana value chain, the Ecuadorian Government has responded by using the tax code to sustain the sector’s competitiveness. Ecuador, for example, has eliminated the special tax on bananas10 and the special charge of USD 9 per 1 000 boxes, applied by the Ecuadorian Agency for Agriculture Quality Assurance (Agrocalidad) for the inspection performed on each 1 000 boxes of bananas exported.
4.2 Managing the oversupply and variability of bananas
As part of Ecuador’s efforts to overhaul the banana sector, improve farm productivity and ensure compliance with official minimum price policy, the Government has undertaken a comprehensive census of the banana plantations in the country. MAGAP and Agrocalidad have validated the census data collected to date. The census is intended to assist in the optimization of use of land,
water and resources through strategic zoning, and to better distinguish which plantations or agro-ecological areas are suitable for improved productivity and which are better suited for crop conversion. The plantation census is also critical in tackling the issue of abandonment of banana plantations, which is causing the spread of disease to neighbouring plantations, including those that are utilized only part-time during the high-price season.
According to data from 2012, Ecuador has a total of 165 132 ha of banana crops, managed by 12 000 farmers.11 Approximately 25 percent of existing plantations do not have the required permits. There have been new plantings in several areas of the banana-producing regions, in particular the province of Santa Elena, a new region for banana expansion due to its drier weather and lower rainfall, which is suitable against BS disease.
Another way to manage the oversupply of bananas in the market is to implement a crop conversion plan for low-producing plantations located in unsuitable areas. Efforts are underway to convert some banana plantations into crops such as sugar cane, coffee or cocoa, oil palm and timber. Starting in 2012,
The interest charged on the loan is set at 8.5 percent and loan repayments with interest are due during the high-price period (December or January). Exporters may apply for the loan until November and use the money to pay farmers within the eight days established by the Banana Law (LACENA).
10 The special tax was 0.7 percent under the National Banana programme to transfer resources to Corpecuador for the rebuilding of roads, following the El Niño phenomenon.
11 MAGAP - Communication to author.
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