Economy Mexico-Ecuador

Mexico-Ecuador Diplomatic Rift: Economic Ramifications

Mexico-Ecuador Diplomatic Rift: Economic Ramifications

Former Minister of Foreign Trade, Daniel Legarda, believes the rupture of diplomatic relations between Mexico and Ecuador on April 5, 2024, should not impede commercial and investment relations. He emphasizes that despite the diplomatic rift, trade activities between the two countries should continue unhindered, as reported by Primicias.

Legarda notes that private companies and commercial offices handle exports and imports, each bound by existing contracts and agreements. However, he acknowledges the potential for diplomatic tensions to lead to retaliatory measures against Ecuadorian exporters.

Julio José Prado, another former Minister of Foreign Trade, shares concerns about possible retaliations from Mexico, such as imposing sanitary and phytosanitary barriers that could harm Ecuadorian exports. Prado recalls a similar incident in February 2024 when Russia imposed trade barriers on Ecuadorian banana and flower exports following political tensions.

Despite these risks, Iván Ontaneda, chairman of the board of Anecacao, remains optimistic, stating that buyers understand the diplomatic nature of the issue and do not expect it to affect trade significantly.

Moving forward, Prado predicts that the rupture in diplomatic relations may hinder the progress of a potential free trade agreement between Ecuador and Mexico. Although negotiations were nearly finalized during Guillermo Lasso’s presidency, they stalled due to Mexico’s reluctance to include bananas and shrimp in the agreement.

Beyond bilateral agreements, Ecuador had been seeking membership in the Pacific Alliance, aiming for diversification of exports and market expansion. However, the rupture of diplomatic ties with Mexico complicates Ecuador’s aspirations to join the alliance.

Regarding Mexican investments in Ecuador, Legarda explains that while the rupture may not prompt immediate divestment, maintaining good diplomatic relations is crucial for attracting future investments.

Overall, while the rupture in diplomatic relations poses challenges, stakeholders remain hopeful for continued trade and investment opportunities between Ecuador and Mexico.

How much does Ecuador sell to Mexico?

In 2023, exports amounted to USD 202 million, solely from non-petroleum products. The primary export is cocoa beans. Until January 2024, the figures indicated robust growth, with exports increasing by 266% compared to January 2023, primarily due to soaring cocoa prices.

The main Ecuadorian products reaching Mexico after cocoa include minerals and metals, food preparations, plastics and manufactures, and sugar and confectionery. These top five products collectively constitute 73% of non-oil exports to Mexico.

Top Products Exported to Mexico, as listed by Primicias:

  • Cocoa
  • Minerals and metals
  • Food preparations
  • Plastics and manufactures
  • Sugar and confectionery
  • Machinery and mechanical appliances
  • Rubber and manufactures
  • Vegetable fats and oils
  • Wood panels
  • Cocoa derivatives

 

Additionally, imports of Mexican products to Ecuador totaled USD 701 million in 2023, according to Fedexpor.

Ecuador primarily imports pharmaceutical products, machinery and mechanical appliances, cars and their parts, machinery and electrical appliances, and cosmetics. These five products account for 57% of non-oil imports from Mexico. Fedexpor emphasizes that almost 55% of non-oil imports from Mexico consist of inputs used for the production of goods in Ecuador.

 

 


Soledad Quartucci | CEO/Founder, Latina Republic

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