In January, the export volume of non-traditional products experienced a decline of 16.8%. The manufacturing sector is currently one of the poorest performing industries.
According to data from the Central Bank, Ecuador started 2023 with a significant drop in exports of non-traditional products. In January, volume and value decreased by 17% and 10%, respectively, when compared to the same period in the previous year. Non-traditional products refer to goods that are not traditional to Ecuador’s export ‘basket,’ such as manufactured goods and processed food.
Manufacturing sector among poorest performing industries
The manufacturing industry, which includes subsectors such as wood, leather, plastic and rubber, paper and cardboard, and textiles, was one of the least performing sectors, according to Xavier Rosero, Vice President of the Ecuadorian Federation of Exporters (Fedexpor). The reduction in exports of manufactured goods began in 2022 and was further accentuated at the beginning of this year. For the most part, Ecuadorian manufactured exports go to markets in the region, such as Colombia, Peru, and the countries of Central America.
One of the main factors behind this decline is the slowdown in growth expectations for these economies, leading to a reduction in their demand for imported products. Additionally, regional markets are becoming more competitive on prices, and their currencies have depreciated against the dollar, making Ecuadorian products more expensive. If the competitiveness of these industries is not strengthened, it will be challenging to recover the region’s markets, according to Rosero.
Among the manufacturing sectors with significant falls are other metal, paper and cardboard, and textiles, which have decreased by around 40% in volume and billing. In terms of wood products, Ecuador exported 46,000 tons in January 2023, a 15% decrease compared to last year. In value, these exports represented $26.3 million, which is 7.4% less than in January 2022. Declines in demand in Central America and China explain this drop.
Mining products, canned fish, vegetable oils sufffer
Exports of mining products, which have the most weight in non-traditional products, fell 27% in volume and 23% in value in January, reaching 60,000 tons and $208 million, respectively.
Canned fish is the second most important non-traditional export product. In January, this sector exported 18,000 tons, 23% less than in the same month of 2022, and the value decreased by 6%.
The drop in exports of canned fish to the European Union resulted in partial stoppages of production plants in Ecuador, according to Rosero. The reduced demand for canned tuna in Europe is because, in the first months of the year, the European Union allows Asian countries to enter their products without tariffs.
Vegetable extracts and oils are another industry that suffered a significant drop of 52% in both volume and value exported.
The export sector is observing events in the United States and Europe with caution due to a possible financial crisis after the collapse of two banks, including the Silicon Valley Bank.
Uncertainty is always negative for exports as buyers put contracts that are negotiated in advance on hold, which can slow down shipments to the main markets.
“These are initial signs that must be monitored. The reaction of the markets will be fundamental. For now, the information we have on our destination markets does not make us foresee a massive drop in demand,” says Rosero.