7/31/2019 2011 09 Lombana Ecuadors Banana Act Has Not Ironed Out the Debate - Fresh Produce Journal -FPJ

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ECUADORS BANANA ACT HASNOT IRONED OUT THE DEBATE

Ecuadors internal revenue service Servicio de RentasInternas made a call to order earlier this year to twosubsidiaries of the banana export giant Noboa Group forthe non-payment of taxes. That move may be a sign of ashift in the governments regulation of the banana sector, achange underpinned by the passing into law of the so-called Banana Act last March. The legislation states that theminimum price paid by exporters must cover the producersaverage cost plus a reasonable profit.

The debate between both sides over the payment of fairprices for bananas to producers continues to rage. Underthe new law, the government is expected to exert greatercontrol, forcing producers and exporters to sign purchasingcontracts in line with a price agreed between the twoparties, thus regulating the market to avoid ongoingdiscussions about a reference price. Until now, thisreference has always been set by the government, sincegrowers and exporters were unable to agree an amount.

It is no surprise that this new law has not ironed out theups and downs of this debate. On one side you have theproducers, who are generally risk-averse and of course, thegovernment. Their main arguments are in favour of industry

regulation to avoid unfair competition. On the other side,there are the defenders of free trade, larger enterprisesthat regulate purchases in Ecuador and adjust demandaccording to international market prices.

One economic argument is to achieve a pricing balanceduring the production year, with a period of good prices forgrowers far above the reference price and a period of lowerprices, which have to be at least equal to the referenceprice that producers receive or should receive. Mostdiscussions centre around what level the lower pricesshould be at, but the Banana Act still includes a referenceprice the law only ensures certainty in terms of time, ascontracts cannot be signed for less than a year.

Among the biggest opponents to Ecuadors Banana Actare producers who dont have contracts. Until they are

regulated, they cannot market their products abroad andhave to sell them on the domestic market. Given thatcontracts must be registered with the government, its fairto say that bureaucracy can be a silent accomplice to theineffectiveness of the law.

The struggle between ideologies is clear. President RafaelCorrea continues to pursue a general policy of regulation,which has even slowed trade agreements that neighbourssuch as Colombia and Peru have tried to forge with majorbuyers such as the EU and US.

Ecuadors banana sector is dependent not only on itsexports and imported inputs from the EU and US, but alsoon the political issues that surround it.

Jahir Lombana lectures in global trade and competitiveness at

Universidad del Norte in Barranquilla, Colombia. I

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There was hard evidence last week that at

least three countries are worried about the

overvaluation of their currencies, writes

Moneycorps Chris Redfern. Japans finance

ministry announced that it had sold

4.5 trillion yen (35.4 billion) on 4 August to

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crisis. This means that more than six weeks on from the summit

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HOW KEY CURRENCIES ARE PERFORMING AGAINST :

This week on thecurrency markets

1. NZD 0.2%

2. AUD 0.6%

3. NOK 0.2%

4. ZAR 0.7%

5. SEK -0.3%

6. CAD 0.4%

7. EUR -1.2%

8. USD 1.3%

9. JPY 1.3%

10. CHF 5.2%

OpinionJahir

Lombana

COMMENT

8 FPJ 9 SEPTEMBER 2011

p.8 + opinion.indd 8 07/09/2011 16:38