Interesting article about the Covid impact to shrimp farms in Equador. This region is a primary source of imported shrimp to US.
Ecuador shrimp capital is coronavirus epicenter
By Matt Craze April 20, 2020 15:44 BST
Guayaquil, Ecuador, is one of the world’s seafood hubs where thousands are employed in the business of farming shrimp and processing tuna, and it’s been devastated by the COVID-19 pandemic.
The city is currently in a state of siege. Dozens are dying every day of coronavirus, and the government is trying to find ways to bury hundreds of victims, according to Jorge Wated, who leads a government COVID-19 taskforce. Ecuador’s shrimp producers are working at partial capacity because of a curfew and absenteeism.
Producers are also stymied by the fact that most of their competitors in other parts of the world have the relief of lower operating costs since the pandemic spread, because of the sell-off in emerging economies. Ecuador is a dollarized economy.
“There is no state help and we are dollarized,” the CEO of one major exporter told Undercurrent News. “That makes us dependent on our efficiency only, and the current situation with the virus is that we have lost efficiency because the attendance of our workers is low and our supply chain is broken.”
Like in many other parts of the world, Ecuador’s shrimp exporters continued to operate at near full capacity during the initial few weeks of the pandemic as countries ruled to allow foodservice industries to operate as essential businesses amid lockdown measures. But the curfew aimed at controlling the severe outbreak of coronavirus in Guayaquil has changed that scenario. It’s compounded by absenteeism as many workers decide to stay away from the crowded environment of a processing facility.
Ecuador reported 8,225 confirmed cases and 403 deaths as of April 17, behind only Brazil with 38,654 infected and 2,462 deaths, according to the US’ John Hopkins University. Most of the deaths have occurred in the metropolitan area of Guayaquil and the surrounding province of Guayas, where most of Ecuador’s shrimp farms are located.
The Guayaquil curfew begins at 2 p.m. daily, meaning plants can only operate one shift a day, a third of their normal capacity, Jose Antonio Camposano, director of the National Aquaculture Chamber (CNA) said in a letter to the country’s Internal Revenue Service. The CNA requested a deferral of tax payments for this year as they combat the crisis.
“By working at a third of their capacity, the processors cannot buy shrimp from producers at normal volumes,” Camposano said in the letter. “A producer that cannot harvest to deliver shrimp to a processing plant loses his working capital and his business runs the risk fo going bust.”
Most global seafood industries are suffering, from aquaculture hubs such as Puerto Montt in Chile or Bergen, Norway, for salmon farmers, and Ho Chi Minh City in Vietnam for pangasius and shrimp exporters. Guayaquil is exposed to a perfect storm of currency issues, the earlier collapse of the Chinese economy where 60% of Ecuador’s shrimp is sold, and a lack of government aid from a country that is teetering on the brink of default with government debt.
Some shrimp farmers have suspended payments to key service companies, a situation that is starting to slowdown farming and processing activities.
“Farmers are panicking and taking more than 30 days for payments due since COVID-19 started in China,” said one supplier of key materials to the industry. “Shrimp prices are really low and it’s almost a miracle that farmers are still on their feet.”
The government is doing nothing or really little to protect this industry, the executive said.
“It’s chaos. Workers do not want to work on farms as they are afraid of getting COVID-19, and the media is talking this up,” he said.
The Ecuadorian industry is pinning its hopes on the recovery of the Chinese economy, even though the country’s gross domestic product slumped 6.8%, the worst quarterly performance on record. There is even less hope of a quick recovery in export volumes to Europe, due to the shutdown of the hotels, restaurants and bars, the foodservice trade, and the slow return to normal.
Ecuadorian President Lenin Moreno has little room for maneuver in helping key industries. Standard & Poor’s said Ecuador’s default on government bonds in “inevitable” in the next six months, suggesting that the country can ill afford to allow all of its key industries to defer tax payments. The government already bond interest payments on March 23, exercising a 30-day grace period. However, Ecuador’s shrimp industry already benefits from a generous fuel subsidy.
Ecuador’s stellar export
Shrimp overtook the banana trade in recent years as Ecuador’s biggest export business after crude oil exports. The rise of the Ecuadorian shrimp industry helped turn Guayaquil into a glittering international hub, from a relative tropical backwater in a decade ago.
Ecuador’s shrimp exports have risen exponentially as a result of China’s demand for high-quality, vannamei shrimp. As a farmer of excellence, Ecuador specializes in producing the head-on, shell-on (HOSO) white shrimp in smaller sizes that China craves. That’s the reason why Ecuador sells so much of its shrimp to China while countries closer to China such as India uses its abundant labor force to sell processed shrimp to the US.
Ironically, Guayaquil’s status as perhaps the worst affected city in Latin America is partly the result of the success of the shrimp industry. Companies come into daily contact with buyers from Asia. The virus may have spread as many affluent Ecuadorians were able to travel abroad during the recent vacation season, coming into contact with the virus, said Guayaquil’s mayor Cynthia Viteri. She is also recovering from the virus.
Contact the author matt@sphericresearch.com
