APPENDIX B BEST PROSPECT SECTORS FOR U.S. EXPORTERS TO ECUADOR (US$ millions, unless otherwise noted) A. Rank: 1 B: Name of Sector: Telecommunications Equipment C. ITA OR PS&D Code: TEL 1993 1994 1995 D. Total Market Size 70.5 92.9 125.4 E. Total Local Production -- -- -- F. Total Exports -- -- -- G. Total Imports 70.5 92.9 125.4 H. Total Imports from U.S. 7.1 28.3 38.2 I. Exchange Rates: 1,918 2,200 2,600 Comments: Over the next three years the telecommunications sector will offer growing business opportunities for U.S. suppliers. A new telecommunications law is expected to be approved soon which will allow the privatization by concession of telephone and other telecommunications services. At present, a state-owned company, Emetel, controls the market. Major investments will follow privatization to expand services in public telephony, rural telecommunications, data transmission, integral systems, and value-added services. Demand will grow for public digital telephone switching, private business telephone systems, cellular telephones, fiber optic cables, satellite and radio telecommunications systems. The U.S. is the major supplier of cable, whereas European countries have traditionally provided central switching equipment. For 1995, Emetel's largest investment will be in expanding outside plant. Contracts for an additional 200,000 lines have been signed. A.Rank: 2 B.Name of Sector: Pollution Control Equipment C.ITA or PS&D Code: POL 1993 1994 1995 D.Total Market Size 11.6 14.0 17.0 E.Total Local Production -- -- -- F.Total Exports -- -- -- G.Total Imports 11.6 14.0 17.0 H.Total Imports from U.S. 5.0 6.0 7.3 I.Exchange Rate 1,918 2,200 2,600 Comments: Opportunities for suppliers of pollution control equipment and services are growing rapidly in Ecuador. The Ecuadorian government for the first time has begun to undertake programs to reduce air and water pollution and protect its environment, especially its rainforest areas. Demand is growing for air quality monitoring devices, waste water treatment facilities, emission control and solid waste processing plants. There will be a strong demand for services by the oil and mining sectors. A. Rank: 3 B: Name of Sector: Food Processing & Packaging Equipment C. ITA OR PS&D Code: FPP 1993 1994 1995 D. Total Market Size 88.2 110.2 137.8 E. Total Local Production 35.5 44.09 55.1 F. Total Exports 0.133 0.130 0.150 G. Total Imports 52.8 66.0 82.6 H. Total Imports from U.S. 12.7 15.2 18.3 I. Exchange Rates: 1,918 2,200 2,600 Comments: The growing demand for attractive and high quality packaging has increased the import of packaging machinery. An aggressive agribusiness sector looking to upgrade the quality of its products and expand its sales, both for domestic and export sales, has created a growing demand for food processing equipment. All food processing equipment is imported and U.S. products are well regarded. Principal competitors are Germany and Italy. Most promising subsectors include small processing plants for fruits and meat and packaging and labeling equipment. A. Rank: 4 B: Name of Sector: Electrical Power Systems C. ITA OR PS&D Code: EPS 1993 1994 1995 D. Total Market Size 42.9 45.1 50.0 E. Total Local Production -- -- -- F. Total Exports -- -- -- G. Total Imports 49.9 45.1 50.0 H. Total Imports from U.S. 23.5 25.0 30.0 I. Exchange Rates: 1,918 2,200 2,600 Comments: A new law is now before the Ecuadorian Congress which calls for the privatization of the electricity sector, currently controlled by the state-owned electric company, INECEL. When the law is approved, private companies will be able to provide generation, transmission, and distribution services under concession agreements. Separately, the development authority for the Guayas region is moving ahead with the USD120 million Daule- Peripa hydroelectric project. The project calls for the construction of a 130 mw power plant at an existing dam. Bids are to be announced sometime in 1995. The U.S. Embassy expects over the near term a need for new gas turbines. The U.S. is the major supplier. Japan and European countries provide most switchgear. Industry experts predict a conservative 10 percent increase in imports of electrical power systems in 1994 and 1995. Power generation will have to be expanded by an estimated 200-300 MW over the next four years if it is to meet the demand. A. Rank: 5 B: Name of Sector: Automotive Parts and Service Equipment C. ITA OR PS&D Code: APS 1993 1994 1995 D. Total Market Size 102.9 144.0 201.1 E. Total Local Production 1.6 1.8 2.0 F. Total Exports 0.6 0.2 0.1 G. Total Imports 100.6 142 199 H. Total Imports from U.S. 27.9 37 49 I. Exchange Rates: 1,918 2,200 2,600 Comments: The total automotive population of Ecuador has grown rapidly in recent years to some 540,000 units. This is due not only to increased imports but strong sales of locally-assembled cars. Some 65 percent of all cars are over 9 years old, creating an excellent market for automotive parts and service equipment. According to industry experts, it is expected that the average consumption of spare parts per vehicle will soon exceed USD400 per year. This means an annual consumption of over USD200 million per year. Most auto parts are imported from the U.S., Japan, and other Asian countries. Local production includes tires, batteries and filters. Imports from the U.S. are expected to grow 30 percent annually. A. Rank: 6 B: Name of Sector: Computer Software C. ITA OR PS&D Code: CSF 1993 1994 1995 D. Total Market Size 1.9 3.8 7.6 E. Total Local Production -- -- -- F. Total Exports -- -- -- G. Total Imports 1.9 3.8 7.6 H. Total Imports from U.S. 1.4 2.8 5.6 I. Exchange Rates: 1,918 2,200 2,600 Comments: The market for software is increasing dramatically. Industry experts predict an average growth of at least 100 percent per year in the next three years. The U.S. is the major supplier. At least two major U.S. companies have opened branches and established large distribution networks in the country. Base tools and LAN software will offer excellent opportunities. There are some formal 20 software distributors. The legal framework for IPR protection is in place and Ecuador and the U.S. have signed an IPR agreement, but it still needs Ecuadorian Congressional approval to take effect. This should provide protection against software piracy which is widespread. A.Rank: 7 B.Name of Sector: Computers & Peripherals C.ITA or PS&D Code: CPT 1993 1994 1995 D.Total Market Size 42.4 50.8 61.0 E.Total Local Production .21 .25 .31 F.Total Exports .04 .19 .21 G.Total Imports 42.2 67.4 108 H.Total Imports from U.S. 33.8 40.5 48.6 I.Exchange Rate 1,918 2,200 2,600 Comments: The Ecuadorian market for computers and peripherals is expected to grow at an average 15-20 percent per year over the next few years. The U.S. is the major supplier. The increased sophistication of the financial system, the modernization of the commercial, industrial, and educational sectors will drive the continued growth of this sector. There is marginal assembly of personal computers. PC's, point-of-sales terminals, multi- processors and the like will have a higher demand. The market which is very price competitive, is served by over 300 distributors representing well known brands. A. Rank: 8 B: Name of Sector: Plastics Materials and Resins C. ITA OR PS&D Code: PMR 1993 1994 1995 D. Total Market Size 83 90 99 E. Total Local Production - - - F. Total Exports - - - G. Total Imports 83 90 99 H. Total Imports from U.S. 40 42 45 I. Exchange Rates: 1,918 2,200 2,600 Comments: Consumption of plastic products in Ecuador has increased significantly during the last few years. There is no local manufacture of plastic materials and resins, imports of those materials supply the total production of a wide variety of plastic products. Estimated average annual growth rate is 6%. A. Rank: 9 B: Name of Sector: Paper and Paper and Paperboard C. ITA OR PS&D Code: PAP 1993 1994 1995 D. Total Market Size 34 44 49 E. Total Local Production 3 4 6 F. Total Exports - - - G. Total Imports 31 40 43 H. Total Imports from U.S. 8 9 10 I. Exchange Rates: 1,918 2,200 2,600 Comments: The Ecuadorian market will offer good business opportunities for U.S. suppliers of paper and paperboard over the next three years. Ecuador's printing industry has been modernized during the last few years in order to export books and notebooks to Andean countries. The graphic arts industry has also grown considerably and is producing text and writing materials for rural education programs and for export to neighboring countries. Most paper and paperboard is imported, although the recycling of paper locally is growing. BEST AGRICULTURAL PROSPECTS FOR U.S. EXPORTERS TO ECUADOR (Thousand Metric Tons, unless otherwise noted) (Preliminary data for 1993, forecast for 1994/1995) A. Rank: NA B. Name of Sector: Wheat C. PS&D Code: 0411000 1993 1994 1995 D. Total Market Size 355 355 375 E. Total local production 22 20 20 F. Total Exports* 45 30 20 G. Total Imports 386 360 390 H. Total Imports from U.S. 140 80 160 I. Exchange Rate 1,989 2,075 2,300 * It refers legal/and illegal trade of wheat products Comments: Ecuador was a 100 percent U.S. wheat market during 1982- 91 owing to a favorable Central Bank policy. This situation helped maintain imports of U.S. wheat through CCC GSM-102. Changes in policy such as liberalization in the economy and non subsidies for financed imports have diversified wheat sources. The lack of an U.S. alternate program to counter highly subsidized wheat sales have eased imports from Germany, France, Australia, Argentina, and Canada. Yet, U.S. wheat is very much valued by Ecuadorian millers that to a certain extent have compelled wheat importers to share sales of U.S. high quality wheat. There are great possibilities to regain the market, but it depends on international prices. A. Rank: NA B: Name of Sector: Cotton C. ITA OR PS&D Code: 2631000 1993 1994 1995 D. Total Market Size 76 78 80 E. Total Local Production 19 19 14 F. Total Exports 0 0 0 G. Total Imports 58 60 68 H. Total Imports from U.S. 28 35 40 I. Exchange Rates: 1,989 2,075 2,300 Comments: Ecuador's textile industry is starting to focus in developing export markets. The natural textile markets are in southern Colombia and northern Peru, which have shown signs of increased demand. However, the primary constraint facing U.S. cotton in Ecuador is the competition from alternative supplies from other producing countries such as Colombia, Paraguay, and Peru. Recently, the Ecuadorian textile industry has received imports from Russia. Local production has been reducing during the last three years that in turn has favored imports to meet domestic demand. A. Rank: NA B. Name of Sector: Soybean Meal C. PS&D Code: 0813100 1993 1994 1995 D. Total Market Size 90 92 100 E. Total Local Production 75 78 85 F. Total Exports 0 0 0 G. Total Imports 18 17 20 H. Total Imports from U.S. 6 10 12 I. Exchange Rates: 1,989 2,075 2,300 Comments: The domestic demand of soybean meal as a source of protein for feed compound has increased consistently during the last decade. This, in turn, has boosted imports of protein sources since local production does not meet local requirements. Poultry and shrimp industries have shown a sharp growth during recent years. Poultry production will likely increase to meet both domestic and external demand from the Andean Countries. A. Rank: NA B. Name of Sector: Inedible Tallow C. PS&D Code: 4113200 1993 1994 1995 D. Total Market Size 8 9 9 E. Total Local Production 0 0 0 F. Total Exports- 0 0 0 G. Total Imports 8 9 9 H. Total Imports from U.S. 8 9 9 I. Exchange Rates: 1,989 2,075 2,300 Comments: Production of soap and by products have increased significantly during the past years. There is no local industry of inedible tallow, therefore importation of this product is needed to meet domestic demand for producing a wide variety of soap and products. Most importantly, soap and products being produced in Ecuador are presently being exported to the Andean Countries with great success. A. Rank: NA B. Name of Sector: Consumer-Ready Food Products C. PS&D Code: NA 1993 1994 1995 D. Total Market Size* 21,000 22,000 26,000 E. Total local production* 2,900 3,000 4,000 F. Total Exports 1,200 1,500 1,800 G. Total Imports 19,500 20,700 23,800 H. Total Imports from U.S. 17,554 18,600 21,200 I. Exchange Rate 1,989 2,075 2,300 * It means consumption and production for medium to high level income. Comments: Ecuadorian economy has been characterized as exported-based and relatively closed for the past decade. However, the market oriented policy carried out since 1990, such as reduction on tariffs ranging 5 to 20 percent, and a reduction of non-tariff barriers, has resulted a sharply increase of imports of consumer-ready food products. Most of the imported ready-products are U.S. origin (90 percent). Ecuador primarily boosted imports of U.S. fresh and processed fruit & vegetables, dairy products, snack foods, poultry and red meats. There are great possibilities on market expansion of breakfast cereals, fruit & vegetable juices, tree nuts and wine and beer. The main non-tariff barrier is the issuance of the "Sanitary Requirement" from the Ministry of Health, which is burdensome and time consuming. Importers of consumer-ready products assured us that importations of these products will likely be increased if the labeling is in Spanish. A. Rank: NA B. Name of Sector: Sugars, Sweeteners & Beverage Bases C. PS&D Code: NA 1993 1994 1995 D. Total Market Size NA NA NA E. Total local production NA NA NA F. Total Exports NA NA NA G. Total Imports 15,200 16,250 18,500 H. Total Imports from U.S. 12,171 13,000 15,000 I. Exchange Rate 1,989 2,075 2,300 Comments: Ecuador during the last decade has developed local industry of canned foods, juice and canned fruits. This production not only meets the local demand but for exportation as well. This development has required beverage bases to contain high-intensity sweeteners such as spartame or saccharin, creams or milk substitutes, confectionery in addition to containing syntectic sweetening agents, etc. The Ecuadorian market has offered good business opportunities for U.S. suppliers for this new industry (In 1988 Ecuador imported just 2.9 million dollars). Industry leaders predict an increase in importations of this kind of products. Still, the increase in demand of these products is not limited. A. Rank: NA B. Name of Sector: Soybeans C. PS&D Code: 2222000 1993 1994 1995 D. Total Market Size 86 84 87 E. Total local production 92 83 85 F. Total Exports 7 6 6 G. Total Imports 12 25 20 H. Total Imports from U.S. 0 0 10 I. Exchange Rate 1,989 2,075 2,300 Comments: Ecuador's production, imports and exports of oilseeds and products are growing dramatically since the government of Ecuador has liberalized its foreign trade policy and dropped it price control policy for cooking oils. However, local production of soybeans has shortfallen due to, in part, an increase of exports to neighboring countries and of decreased local production. The vegetable cooking oil sector will continue importing soybeans to help compensate for the increase in demand of soybeans both for blended cooking oil and premium cooking soybean oil.