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SAP 2.79/WP.138
3. Institutional framework and sectoral policies
3.1. Industry organization and representation
Floriculturists belong to the Ecuadorian Association of Flower Producers and Exporters -- EXPOFLORES -- which includes marketing companies, exporters and plant dissemination companies. EXPOFLORES develops training and technical assistance programmes, enters into agreements with other public and private institutions, debates and formulates proposals for the development of the sector, compiles statistics, and disseminates information on the position of floriculturists on financial, social and environmental issues.
EXPOFLORES has agreements with PROEXANT, which is a private technology development corporation incorporated with the purpose of providing technical assistance, information and training to the non-traditional export sector. Through these agreements, PROEXANT monitors companies and issues quarterly reports, mainly evaluating work-related risks and suggesting how to face them and introducing new production technology.
FEDEXPORT is a private association of general exporters which promotes export, compiles information on international market matters and is the entity with close ties with the Government. It was FEDEXPORT which pressed for the Foreign Trade Act which resulted in the creation of the Corporation for the Promotion of Exports and Investments, financed by the private sector. This organization has a Strategic Plan to 2020 for the promotion of exports. It also has a support programme for flowers which is handled through PROMERCADOS.
Almost in its entirety, the flower workforce is not unionized. A few union organizations exist in the northern section and belong to the Ecuadorian Confederation of Independent Worker Unions -- CEOSL. This organization has taken special interest in work-related risks and offers training programmes on occupational health, hygiene and industrial safety.
During the 1980s, government policy aimed at the expansion of flower production. The creation of the Export Promotion Fund -- FOPEX -- in the National Finance Corporation, the support given by AID and the participation of entities such as the Ecuadorian Experts' Federation and the National Entrepreneurial Association focused on the extension of exports through a special credit line for new products with export potential. The sector which best met the requirements of the fund (generation of value added, knowledge of the international market, ecological impact, etc.) was floriculture. Flower producers were unable to obtain the funding necessary to improve production and infrastructure.
Foreign exchange policy also contributed to the growth of the flower industry. Sharp devaluations motivated the creation of new companies: there were 12 companies in 1984, 20 in 1988 and 39 in 1990; currently, there are 179.
It is evident that in the framework of globalization, promotional policies of the 1980s were increasingly obsolete, as they were protectionist, which in the long range created unsustainable comparative advantage for chosen products. Macroeconomic policies have accordingly been modified to comply with the current realities. At the centre of this is macroeconomic stability through control over inflation, foreign exchange, tax policies, etc. It was considered that with proper management of macroeconomic policies a sustained increase of exports could be attained. The most important macroeconomic policies have been as follows.
It was realized that attaining and maintaining international competitiveness required strict control over inflation. Ecuador managed to decrease the rate of inflation from almost three-digit figures in the late 1980s to 25 per cent a decade later. Even this inflation rate is too high, as compared to countries with similar characteristics to Ecuador. Luckily the low level of production costs in the flower industry has mitigated some of the negative effects of this still high inflation.
Foreign exchange policy aims at maintaining a realistic rate of exchange, unbiased towards exports or imports. There are no controls over the purchase or sale of foreign currency. An adequate handling of exchange-rate bands has guaranteed the inflow of foreign investment.
Reduction in the size of the State, more efficient collection of taxes, and tax incentives for exports are the main hallmarks of the Government's tax policy. The last, in the context of a free trade zone system, have yet to materialize. Exporters complain about the IVA tax (10 per cent on all commercial transactions).
Certain drawbacks of existing financial policy must be noted. Interest rates are high which makes reconversion impossible, compounded by low legal reserves. Absence of credit insurance for exports is a hindrance as are the difficult procedures for acquiring pre- and post-shipment loans.
Reforms are needed to rescind some of the general duties, particularly export duties. Customs procedures remain cumbersome. Ecuador needs to pursue trade agreements with existing and potential importing countries to gain preferential treatment for its flowers.
Employers are looking for ways to increase labour flexibility, so as to maintain low costs of production. There is much resistance against a proposal to pay 15 per cent of profits to workers. Employers support the idea of work training through SECAP.