Miami Herald | 19 October 2006
Dole Fresh Flowers’ cuts hit small Ecuadorean town hard
BY STEVEN DUDLEY
MALCHINGUI, Ecuador — In many ways, the flower industry in Ecuador put this small town on the map. Now, just as quickly, it may be erasing it.
Miami-based Dole Fresh Flowers’ announcement last week that it would cut 3,500 jobs in Colombia and Ecuador has hit towns in both countries, but none more so than this small village about 25 miles northeast of Quito, home to about 300 workers at Dole’s Flores Mitad del Mundo plantation.
’’It was good. They were the best company,’’ said Teresa Ayala, 36, a mother of three who picked flowers at the plantation for seven years. ``Now, there’s no work.’’
Some here see the experience of Malchinguí as a harsh lesson in the world of global trade. For years, Ecuador and the United States have been negotiating a free-trade agreement. But talks have stalled repeatedly. And with special trade preferences that eliminated tariffs for industries like flowers set to expire at the end of the year, companies foresee costs rising, making Ecuador less competitive in the increasingly saturated flower market.
’’This is the alarm bell,’’ said Ignacio Pérez, the head of Expoflores, a flower growers’ association with 180 members. ``We were like Little Red Riding Hood, you know: The wolf is coming, the wolf is coming. Well, the wolf is here.’’
Contrast this situation to that of Colombia, which recently signed a free-trade agreement with the United States. While the same trade preferences are set to run out at the end of the year, the new trade agreement will likely take its place keeping duties out of the equation. Even if Colombia’s congress stalls on implementing the free-trade agreement, Colombian exporters expect that Washington will extend trade preferences until it comes into place.
’’You can be pessimistic or optimistic,’’ said Augusto Solano, the head of Colombia’s flower growers’ association, Asocolflores. ``We think this is a good thing. Dole is consolidating its business here.’’
THE CLEAR LOSER
Both Colombia and Ecuador will face layoffs, Dole said in its statement. But Ecuador is the clear loser in all this. While Dole maintains a strong presence in Colombia, which is the world’s second-largest flower exporter, Dole is exiting Ecuador altogether. In addition to the 850 jobs lost for mostly female workers, the impact may extend to other plantations as Dole could stop buying from other Ecuadorean producers.
’’They purchased from 80 other producers,’’ said Expoflores’ Pérez. ``This is where the major impact will be.’’
To be sure, free trade is only one factor in any company’s decision to operate in Ecuador or Colombia. In its statement about the restructuring, Dole did not mention free trade, and John Amaya, the president of Dole Fresh Flowers, said business costs more than tariffs played a role in Dole’s decision to dump its plantations.
’’It’s a factor,’’ Amaya said, referring to free trade. ``But for us it’s more of a cost issue, how to get a profitable business.’’
Amaya emphasized transportation costs from Ecuador, saying Colombia’s larger economy offered the possibility of sending products back from the United States to Colombia for sale but Ecuador’s did not. So the Ecuadorean flower export business is a one-way trip with a round trip price.
Dole said in its statement that competition is also rising worldwide from Asia and Africa. What’s more, costs have risen in Ecuador since the country adopted the dollar as its currency in 1999.
Analysts said Ecuador has other factors going against it as well, including its chronically unstable political and business environment. Last year, protesters unseated President Lucio Gutiérrez after he threw out the Supreme Court. A runoff on Nov. 26 will decide who will be Ecuador’s next president, its eighth in 10 years.
Fittingly, the race pits a candidate who supports free trade, businessman Alvaro Noboa, versus a candidate who is against it, U.S. trained economist Rafael Correa. But even if Noboa wins, a free-trade agreement still is a long way off.
In Malchinguí — a dry, chilly town with many crumbling, abandoned houses that looks like something out of an old Western — it’s hard to separate free trade from the layoffs.
’’We think it’s the government’s fault for not signing the free-trade agreement,’’ said Monica Nicolade, 38, who worked at the plant for five years. ``There are advantages and disadvantages [with free trade]. The disadvantages just appeared.’’
Dole’s decision hits hard and fast in this town of about 5,000 people. Former workers said they got no prior warnings, and many seemed to be walking around in a daze.
’’I was surprised because I worked there 16 years and from one day to the next they fired us,’’ said Rosa Caza, 41, a mother of eight who helped support her family with the $150 a month Flores Mitad del Mundo paid her.
From small shops to pickup trucks that transport people in this mountainous area, the town expects a big blow from the layoffs. Many workers bought their food on credit. And many others were still paying off debts to set up farming cooperatives.
At the Flores Mitad del Mundo plantation, the mood was just as somber. About 80 of the 500 former employees were still clearing the last of the flowers for export. At the entrance, a blackboard reads, ``Attention: positive attitude and commitment.’’
’’Malchinguí used to be lost on the map until the plantation came,’’ said Nicolade. ``Without this plantation, we have nothing. Now we’re going back to the old way.’’