Trade future isn’t rosy in Ecuador
Andean nations hope U.S. won’t start imposing duties on imports
By Doreen Hemlock
South Florida Sun-Sentinel
May 20, 2007
PIFO, Ecuador · Rose grower Gustavo Alzate knows how competitive it is to sell his blooms through South Florida for the U.S. market. He’s lucky to profit a few cents on roses that sell in U.S. stores for a dollar or more. And he can lose plenty by planting the wrong color flower, as U.S. fashions change.
But his future could look worse: Washington might decide this summer not to renew the trade benefits that allow Ecuador to sell roses and other items duty-free to the United States. And even if Congress keeps the benefits short-term, he faces the prospect of duties later, crimping his U.S. sales.
As many as 250,000 jobs are at risk in Ecuador’s flower industry alone. Job losses also could extend to South Florida, the hub for U.S. flower imports. Miami-based Choice Farms Corp. already is looking to rely less on Ecuador, in case Washington slaps an almost 7 percent import duty on its blooms.
"Companies like mine might have to reduce sales or even disappear, if we can’t find a new source of flowers," said Choice Farms President Jorge Constaín, who employs two dozen people in South Florida.
Throughout this Andean nation, exporters face an uncertain future, squeezed between shifting trade politics in Washington and a new leftist president at home who has nixed a White House offer for free trade. Some U.S. Republicans want to cut off Ecuador’s export benefits, unless it signs on to free trade.
"This is a fight between two governments, and we’re stuck in the middle," said Alzate, who runs the Hacienda Santa Fe farm employing 215 people.
Washington extended trade preferences for Ecuador and other Andean countries in 1991 to spur their exports of legal goods and combat illegal drugs. Rose farms boomed. Many young women in Ecuador’s otherwise blighted rural highlands found steady jobs for the first time.
"It would be grave if the trade benefits aren’t renewed. I’d probably have to move to get a job," said Marlene Guatemal, 22, who works with her sister and two brothers-in-law at Qualisa rose farm in highland Cayambe.
Ecuador and its flower industry last year escaped the ax, when Congress agreed to renew the Andean preferences for six months until June 30.
Another reprieve now seems likely: The new Democratic majority in Congress has recommended an extension of the benefits for two years. But Ecuador’s export lobby knows it didn’t sway Congress much. Analysts say decisions on Capitol Hill relate mainly to thorny politics within Washington.
Question of fairness
Congress now is looking to extend the benefits largely because of hurdles to pass pending U.S. free-trade agreements with two of the Andean nations, Colombia and Peru. Democrats want more protections on labor and the environment, and they’re adamant that Colombia stem violence against union leaders.
But analysts said it would seem unfair to end existing benefits to Colombia or Peru after they signed free-trade deals — just because of a U.S. power shift. And it could seem cruel to single out struggling Ecuador and Bolivia for exclusion, while Washington works out its own trade agenda.
"Andean sales to the United States are rather small. So, if we don’t approve the benefits, we’ll look like we are swatting at flies," said Carl Cira, who heads the Summit of the Americas Center at Florida International University.
Some Republicans still favor a harder line. Sen. Chuck Grassley of Iowa would cut off U.S. trade benefits to those nations that reject free trade and pursue leftist agendas.
"Why should Congress be in the business of rewarding bad behavior?" Grassley told the Senate Jan. 30, favoring an end to trade benefits for Ecuador.
But even the White House is moderating its tone this year, as the left gains in Latin America. The Bush administration is touting U.S. efforts to combat the poverty that helps fuel the left. It is pushing both the Colombia and Peru free trade deals, while also seeking extension of benefits for all the Andean nations.
"Grassley is living in an old world where the U.S. could tell these countries what to do. Now they can’t," said Mark Weisbrot, who leads the Center for Economic and Policy Research in Washington.
Latin America is more independent these days, he said, because the U.S.-led International Monetary Fund plays a smaller role and because Venezuela under Hugo Chavez offers ample aid to its neighbors. "It wouldn’t do any good for the U.S. to cut off money to Ecuador or Bolivia, because they’d just get money from Venezuela," Weisbrot said.
Such U.S. policy debates hold little immediate promise for Alzate and other Ecuadorean rose growers, as they face political dilemmas at home.
Questions abound over the policies of leftist President Rafael Correa, who took office in January as Ecuador’s eighth president in only a decade.
Correa is pushing a government overhaul, with a special assembly planned to rewrite the constitution. He pledges to restructure Ecuador’s debt and boost social spending, with few details on funding. And he nixes U.S. free trade, arguing that sales of U.S. subsidized grains would hurt Andean farmers, among other points.
The Qualisa rose farm that employs 430 people has halted investment — pending a clearer view on U.S. trade and Ecuador policies, said general manager Francisco Artera.
"There’s so much uncertainty," Artera said during a tour of his computer-aided farm. "We don’t know what will happen with this government."
The political woes coincide with rising financial pressures in the global flower industry.
Gone are the boom years when Ecuadorean rose farms could expect to earn back their investments in five years. Now, with higher costs and rising competition worldwide, it easily takes 10 years to earn back new farm investment in Ecuador, Artera and others said.
New fashion trends also add risk. Growers must wait six to nine months to harvest a new color rose from a new plant. Existing plants tend to give four harvests a year. Planting anew and offering an unfashionable color can be costly.
"A few years ago, gray was in style, then brown. Now, it’s fuchsia," Artera said.
To ease pressures, Ecuador’s flower group Expoflores seeks to boost U.S. demand long-term. It backs programs like Flowers for Kids, teaching American children to make and care for bouquets.
"If you could boost U.S. consumption by just a small percent, there’d be so much demand Ecuador couldn’t produce enough — even with the U.S. import duty added," said grower Gustavo Montejo, general manager of the Florifrut farm in Tabacundo.
Meanwhile, Alzate and other growers dream of when the U.S. and Ecuador governments resolve their differences and guarantee U.S. duty-free entry long-term. "I’d be happy," Alzate said, "with a free-trade agreement that would give me stability for 50 years, instead of extensions of trade benefits for six months or two years."
Doreen Hemlock can be reached at email@example.com