China offers technical assistance, innovation and investment that require follow-up. Alliances, agreements and exclusive products - all these opportunities lie before us.
America Economía - May 2006
The Wong family has what it takes for business. Five thousand hectares belonging to the Wong Group located in Quevedo and Santo Domingo are now ready to begin exporting teak to China. Wood exports represent the come-back of the Wongs to trade with the Land of the Dragon, after the downturn of banana exports, the flag product of their agro-exporting company.
In 1981, one of the first to head for China was precisely their father, Segundo Wong, a banana exporter. Known as the Ecuadorean Marco Polo due to his vision of always aiming at being the first, he traveled to the land of his ancestors with the intention of establishing a market for the main export produce of Ecuador.
Thus, in the early 80s, they exported 10 thousand tons of bananas to China, and came to reach a volume of 300 thousand tons of banana. However, those prosperous times came to an end when China started to produce bananas and the Philippines lowered banana export prices. Ecuadorean bananas were no longer competitive.
However, if Ecuadorean banana no longer had a market in China, there were other markets to be conquered. That is what the Wongs thought when planning their forest venture with wood from Rainforest Alliance certified plantations. "We shall not be concerned with volume; rather we shall offer quality," said Vicente Wong, President of Favorita Fruit Company, when speaking of the teak business they began 15 years ago.
"China needs a great amount of wood, specially because they are the main manufacturers of furniture and ship it worldwide," says Esteban Ponce, President of Pacifico Trading Services, a service enterprise that provides advisory assistance to Ecuadorean companies that wish to enter the Chinese market.
The Wongs however, not only have wood in mind with regards to the goldmine China represents. Upon Segundo Wong's death, his children have continued to diversify their business activities. Following the agriculture line, they made a foray in the rice business once visualized by the patriarch.
China is the major rice consumer in the world, and consequently they are experts in this field. Thanks to the business relationships of their office in Beijing, they obtained the support of Chinese scientists for a three-year research. Now, after a US$ 5 million investment, they have completed a technological transfer process in order to produce rice seeds in Ecuador.
"China is a country that has much to teach us," says Vicente Wong. "In the case of rice seeds, we have adapted and multiplied them. Now we are in the process of certifying these seeds with the pertinent Ecuadorean agency (INIAP)." After Brazil, Ecuador is the second country in the region to have its own rice seeds.
The goal is to achieve a greater yield at the lowest price, without affecting quality. The new hybrid seed allows a productivity of eight to nine metric tons per hectare, which complies with American standards and surpasses the current levels of rice output in Ecuador - three metric tons per hectare. Higher productivity means less cost, and if exported it will be competitive with the US and even the Chinese rice.
THE DRAGON IS GETTING AHEAD. The Wong experience represents a case of technological transfer by China. "Placing our products in the Chinese market cannot be seen only as a purchase and sales process, but also as a series of corporate alliances," explains Eduardo Egas, the CORPEI advisor, who has closely followed the development of business relations between Ecuador and China. (CORPEI is an Ecuadorean non-profit organization that promotes exports and investment.)
The advice comes just at the right moment. The difference in the balance of trade between both countries is not favorable for Ecuador and it gets worse each year. Last year Chinese imports grew by 36% and Ecuadorean exports decreased by 53%. Whereas China is selling US$ 467 million to Ecuador, Ecuador only exports US$ 42 million, oil being the main export. This literally reminds us of David and Goliath.
CORPEI has identified other potential areas of joint cooperation, such as the use of Chinese expertise regarding the processing of vegetable fibers to manufacture paper, and the culture of aquatic species. Alternative forms of electric power generation such as the use of wind are being promoted. In Santo Domingo de los Colorados, there is a project for the production of silk from the worm. As both countries have similar climatic conditions, they have shown interest in mango and other fruits, but due to Ecuador's phytosanitary restrictions, they cannot enter China. Another product being exported is buttons made of ivory nut (tagua).
In summary, isolated corporate efforts have been made to penetrate the Chinese market. As Egas points out, "Our business relationship with China must be taken seriously." Thus, it is necessary to analyze each product, investigate what products they need, who their providers are and then assess our competitiveness with respect to those providers in order to ascertain actual opportunities of penetrating the market. These are the data that will help us determine Ecuador's possibilities to export new products to China.
