2022 was a year of contradictions for Ecuador’s shrimp sector
Ecuador’s shrimp industry is a rising economic star both in the country and globally. The sector now produces more than USD 5 billion (EUR 4.6 billion) in annual exports and has solidified its position as the country’s second-largest industry after oil, building upon five decades of investments in infrastructure, genetics, and biosecurity.
On the surface, it would seem that in 2022, Ecuador’s shrimp sector continued along that trajectory, with production and volume exports increasing. However, numerous underlying issues are a growing source of concern for the industry overall, according to the executive president of the country’s National Chamber of Aquaculture (Cámara Nacional De Acuacultura, or CNA, in Spanish), José Antonio Camposano.
SeafoodSource spoke with Camposano regarding these issues and why he labels 2022 as “a year of contradictions.”
SeafoodSource: How would you describe the Ecuadorian shrimp industry's results for 2022?
Camposano: Last year was very particular because we had good industry performance. According to our own data, Ecuador grew close to 26 percent in volume terms. But that growth is confusing because you might think it was a very good year for the sector, and it really wasn't, it was a very hard year – a year of contradictions.
The problem is that in 2022 we had very low [sales] prices, including prices below what we saw during the pandemic in 2020.
The world market managed to absorb the growing production from Ecuador and other countries. That reality has a name to it, which is called China. Last year, China bought 50 percent more shrimp from Ecuador when compared to 2021, which was already a year of recovery. But some of the negative market situations are based on the problems that China had in opening up its economy. We saw that [its] zero-Covid policy reached an unsustainable point – consumption was affected and there was a contraction in demand.
We are exposed to external phenomena, and the one that sets the rules of the game is China, because of the volume it represents for Ecuador. Due to its own internal problems, demand decreased but the price contracted in a very concerning way.
We remained very active in the three main markets – the United States, Europe, and China, with the latter as the main actor. But there were problems that dragged on their own economies. Europe was suffering impacts from the armed conflict between Russia and Ukraine, with the increase in the cost of energy. An energy cost that affects the consumption pattern of the citizen, who has to decide whether to turn on the heating or consume luxury goods, among which shrimp may be considered. In many cultures, people can stop eating shrimp and replace it with chicken, tuna, or another protein. Not so in China, where consumption is culturally associated with celebration but is also consumed from day to day.
In the United States, inflation was very high in response to the monetary expansion policy during the Covid pandemic, and that took its toll. We saw very high inflation rates and that affects consumption directly.
SeafoodSource: And the dollar strengthening compared to other world currencies, did that impact Ecuador at all?
Camposano: That was a transversal effect. On the one hand, we saw inflation at levels comparable to the 1980s, with consumption affected by that inflation. [And] we saw how the price of the highly demanded U.S. dollar raised compared to other currencies.
Ecuador is a “dollarized” country [in 2000, the country adopted the U.S. dollar as its legal tender in response to deep economic crisis]. So the moment the dollar rises against the currency of other competing countries, our cost of production is automatically higher. And in the destination markets, in order to be able to buy dollars, the importer needs more euros, more yuan – the dollar-euro exchange even reached 1 to 1, something that had not happened for 20 years – that made our shrimp 20 percent more expensive. It affects all markets transversally.
The increase in the cost of money also makes it more expensive to keep inventory and more expensive to operate on credit. With the foreign trade operations to Europe and China, due to the few weeks it takes for the purchased goods to arrive at their destination, this operation is done on credit. And the cost of money complicated those operations as well as the cost of inventories, due to the cost of energy – shrimp is stored in refrigerated chambers – and because of the cost of financing that inventory. We will continue to face all these economic complications in 2023.
SeafoodSource: When we spoke in 2021, you said the fact that China’s decreased demand pushed Ecuador’s shrimp sector to diversify its markets and focus on the United States and Europe. Is China’s returning to growth a good opportunity or a threat, in that Ecuador might become very dependent on that market again?
Camposano: In 2022, Ecuador ended up selling 60 percent of its production to China, versus 2021, in which it was around 49 percent. In the last 10 years the Ecuadorian industry invested to serve China, but in the last three, it invested to serve the markets that demand peeled and value-added products.
When China began to rise again, it wasn’t difficult for Ecuador to say that we have all the industry installed to serve China, so that’s where we go.
We must also remember that we have a privileged position in China that has cost us more than a decade to achieve. We have more than 70 percent of shrimp imports in China, it is a market in which we have the leading position. We have it in Europe too, but with a more-distributed competition.
China imports almost 900,000 [metric] tons of shrimp, of which 70 percent comes from Ecuador and less than 19 percent is India, which is the second[-ranked] supplier country. You can’t afford not to attend that market because we would only lose market points.
From the phenomenon of diversification of Ecuador’s exports, today we return to serve our traditional market of the last decade – China. This doesn’t mean that we had not grown in the United States. In the U.S., our growth was only 8 percent in volume, while in China we grew 51 percent. But we grew in the U.S., and with that growth we are in a solid second place, while India remains the main supplier.
In the case of Europe, we had a volume very similar to that of 2021. But growing in China does not mean that we do not continue to serve our other markets.
SeafoodSource: You were quite critical of the government’s December 2022 decision to end diesel subsidies. Why?
Camposano: Last year was the worst time to make such a decision, because prices were way down and producers were losing money on the prices offered in the market. We have always said that the diesel subsidy is a type of compensation for the costs that we have to assume that other industries do not take on. We have to pay more than USD 80 million [EUR 74 million] annually in security, technology, and other areas to guarantee the security of the value chain, of the balanced shrimp feed due to the instability that exists in Ecuador.
SeafoodSource: Are you referring to infrastructure or more in terms of people’s safety?
Camposano: I’m talking about crime, because we have ...
Photo courtesy of Ecuador's National Chamber of Aquaculture