Palm hearts have been bolstering Ecuador’s export figures for years. Domestic agribusiness giant Inaexpo is the world’s largest exporter of the vegetable, shipping canned palm hearts all over the globe – its order book fills up a year in advance. France is a particularly good customer and Inaexpo has a longstanding arrangement with Carrefour to supply products that are then sold under the retailer’s own brand.
The vegetables have even found their way to China where they sit on Carrefour’s shelves in Shanghai – labeled as a product of France.
Palm hearts typify the unrealized potential of Ecuadorian agricultural products in China. Coffee, chocolate, seafood, fruit, flowers, vegetables; in each category farmers from the mangrove-dotted coastal planes to the foothills of the Andes can claim to grow produce that is among the world’s best. Yet Chinese consumers are largely unaware of what Ecuador has to offer.
Inaexpo has dipped its toe into China before. About five years ago the company tasked Asiam Business Group, a procurement agent for Latin American firms sourcing goods from China, to do some market research.
"The product was well received by Chinese consumers. Inaexpo wanted to work with the government on positioning the product through joint activities but the support wasn’t there," said Carlos Moncayo, CEO of Asiam. "If they came back now they’d be successful."
One of the problems Inaexpo faced was that launching palm hearts in China involved wholesale consumer education. It decided that, without assistance, such an undertaking would be too much of a financial risk.
Rise of the consumer
How times have changed. The emergence of a more discerning consumer class in China has begun the process of creating a sustainable market for high-end food products. Current volumes may be tiny, but the long-term potential is strong and a string of Latin American countries are looking to get in early and secure market share.
Diversity is another consideration. Ecuador – which relies on oil and related products for 97% of its export revenues from China in 2009 – is one of several nations in the region keen to sell more than just natural resources.
"The Chinese are now looking at higher quality products and Ecuador can provide these at reasonable prices. Right now we export shrimp to China and it is very popular because of its quality," said Jorge Hidalgo, consul-general of Ecuador in Shanghai. "We are working hard on promoting Ecuador’s exports. The first step is to let the Chinese people know what we have to offer and we are using the World Expo as a platform for this."
The country’s Expo pavilion is essentially an immersive experience in local culture. It introduces visitors to Ecuador, highlighting the nation’s biodiversity by going through each of its four distinct regions: the Amazon basin, the Pacific coast, the Andes and the Galapagos Islands. This geographical tour is also infused with local products, noting, for example, the established global credentials of Ecuadorian chocolate and coffee, and how these can be traced back to the country’s unique climate.
For all the fun of the Expo – live performances by an Ecuadorian band have proved particularly popular – there is a serious commercial undertone.
"We are making a list of all the possible companies in China that might be interested in importing Ecuadorian products," said Paul Penaherrera, director of the Ecuador pavilion. "We are also trying to show Ecuadorian companies how to export to China."
The big question is what next. The Expo has given Ecuadorian products some visibility in China but moving to the next level means spending big on marketing and distribution. This is beyond the means of most firms. Penaherrera sees joint ventures as the answer and notes that efforts are being made to match capital-rich Chinese companies with suitable Ecuadorian partners.
Asiam’s Moncayo, meanwhile, believes the process should start with a more focused national strategy that seeks to promote one or two specific product lines in China. He points to Brazil and Peru as Latin American countries that have managed to position themselves in the Chinese consumer psyche as purveyors of certain high-quality goods.
"When you come to China to a certain extent you trade on stereotypes of your country," he said. "When people hear ‘Peru’ they think of top quality fresh fruit. Palm hearts and chocolate, for example, could become key products for the growth of Ecuador’s exports."
Peru has also made business easier on a practical level. Three years ago Interbank, a Peruvian bank, set up a representative office in Shanghai to facilitate transactions between Chinese buyers and Peruvian sellers who were wary about taking a step into the unknown.
Though encouraged by Ecuador’s Expo-related efforts, Moncayo argues that the country’s China strategy currently lacks the level of public-private sector cooperation implemented by some of its Latin American neighbors.
Flowers are a case in point. The Chinese market for premium flowers, once restricted to five-star hotels, is moving more into the mainstream. Ecuador’s roses, chrysanthemums and hypericums are popular in Europe but – as with other industries – no single company has the scale to make the push into China.
"There is an association of flower exporters in Ecuador and it needs to create a unified effort," said Moncayo. "The association needs to bring over flowers and the sell them at low margins in order to create a reputation for the product."
There are signs that the foundations for these coordinated efforts are being put in place. The Ecuadorian consulates in Shanghai and Guangzhou recently set up commercial offices – there used to be only one, in Beijing – and are reaching out to the local business communities. Hidalgo, the consul-general, adds that an Ecuadorian chamber of commerce in Shanghai is in the pipeline.
One issue that remains outstanding in the commercial sphere is the absence of a free trade agreement (FTA) between China and Ecuador. "Other countries have already signed FTAs with China or initiated trade negotiations with a view to building long-term stable relations. Ecuador is thinking about it but it must push forward," said Cheng Dawei, a professor at Renmin University and chief expert at the WTO Affairs Center in Beijing, who has studied Ecuador.
According to Hidalgo, Quito would prefer a trade for development agreement to a standard FTA. He envisages a more nuanced document in which the terms reflect the potential of the countries’ trade relationship – a deal which addresses Ecuador’s long-term development and how China can benefit from it.
"Right now we are attracting Chinese investment by offering special economic terms," Hidalgo said. "Once we get to know each other we would like to talk about this trade agreement."