Please update us on the chamber’s activity since we last heard from you in 2015.
Nick Armstrong: A lot has happened since 2015, with the main development being Brexit. Our chapter of the chamber here in Guayaquil is particularly focused on trade, as obviously all the ports are on the coast and our members tend to be importers and exporters. At the beginning Brexit created a measure of uncertainty but we’ve been working with HM Ambassador, Katherine Ward and her team to explain the potential impact to our members.
Fortunately, the recent Continuity Trade Agreement that the UK signed with Ecuador, as well as Peru and Colombia, will ensure that the terms of trade between the two countries will remain the same as they currently are under the EU Association Agreement. That should ensure that there is little or no short-term disruption to trade, while in the long-term UK firms can look for opportunities in Ecuador without having to worry about any Brexit repercussions further down the road. That’s important because in recent years the better terms of trade of the EU Association Agreement have helped boost UK exports to Ecuador. Scotch whisky sales to Ecuador are booming, benefiting from the reduction of import duties, while cars, such as the UK-produced Nissan Qashqai
Ecuador has opened its first deepwater port; how will this impact trade logistics?
NA: DP World Posorja is a cracking project. For years Ecuador has been planning a deepwater port and now it’s finally built it. The existing port at Guayaquil is efficient and run by a well-respected international ports operator but it is limited by its access river. Ships visiting the port have to negotiate 60 kilometres of river, which is complicated by changing tides that prevent larger ships from making the journey. Posorja is a purpose-built port on the coast, which can handle the biggest ships in the world. The fact that it can serve larger ships, and that they don’t have to deviate much from already established shipping routes, means that shipping containers to and from Posorja should be much cheaper than to Guayaquil port.
[quote]Of course, in South America and Ecuador you can never be completely sure when the political situation will change. Although given everything that has happened with Brexit they could say a similar thing about the UK. …[/quote]
However, the challenge is the supporting infrastructure. Speaking as a businessman, at Agripac we import lots of grain and agrochemicals every year but at present it would be more expensive to truck our containers to Posorja than Guayaquil. DP World has some ambitious plans to build a barge service, so I am sure that over time they will reduce the infrastructure challenge. In the long-term it can only be a positive for importers and exporters in Ecuador as it is also encouraging the existing ports in Guayaquil and Machala to improve their offer. So, it gives us more options and it will make Ecuador more competitive. Eventually it should make Ecuadorian goods cheaper to bring to the UK and vice versa. Moreover, Ecuador has a strategic location so a deepwater port here has potential as a regional transhipment hub.
This government says its investor friendly; has the business environment improved?
NA: Yes, this government has a completely different approach to the predecessor. When President Moreno came to power his administration passed the Ley de Fomento Productivo in a bid to boost national and international investment. They asked for a commitment from some of Ecuador’s biggest companies, where we pledged to invest money under the more favourable conditions they were offering. Along with other leading firms, Agripac made an investment commitment, because the new law offered tax incentives for investors. That encouraged us to buy a seed business from Pronaca and also to upgrade our feed mill and double its capacity so that it can meet growing domestic and international demand.
There is definitely an improvement. Of course, in South America and Ecuador you can never be completely sure when the political situation will change. Although given everything that has happened with Brexit they could say a similar thing about the UK. But the fact that local companies like Agripac are investing more is a positive sign. Likewise, we have seen significant inward foreign investment from Mexico, Peru and Central America in Ecuador in recent years. Perhaps investors from those countries feel they understand markets like Ecuador. There are definitely exciting business opportunities here. My advice to UK firms would be to use assets like the British chamber, local business associations and Ecuadorian partners to increase their understanding of this market. Because despite being a city of 3 million people Guayaquil is definitely a place where local relationships help in business. Once you do that, and learn to navigate the waters here, it is a very attractive market. It is a country where there is still a lot to be done, profit margins can be high and there is less competition. Education, mining and agro-exports have a lot to offer UK companies. I can only draw on the experience of my own company, Agripac. Ecuador has been good to us. We have been here for 40 years and plan to be hear for at least another 40.
I am an optimist by nature and the fact that the relationship between the UK and Ecuador is improving so quickly makes me bullish on the prospects for British firms in the country. We have had lots of visits by UK ministers to Ecuador in recent months while the Ecuadorians have reciprocated and sent members of their government. Traditionally the British Chamber of Commerce in Guayaquil mainly helps companies who are involved in import or export and agribusiness. However, now lots of new investment opportunities are opening up along the coast, for example there are ambitious energy, logistics and infrastructure projects, so we are also ready to help British firms interested in these areas.