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International Sourcing: Ecuador

Country's fisheries sector makes a comeback with shrimp, tilapia

By Nicholas Gill
September 01, 2007

The combination of warm El Niño and cold Humboldt currents off Ecuador's small coastline has created an idyllic environment for vast quantities of marine life. The lush, equatorial mangroves on the Guayas and Santa Elena peninsulas are superb homes for the country's shrimp and tilapia industries, and the commercial fishing industry stretches as far north as the Esmeralda province at the Colombian border.

The country has rebounded from a series of unstable governments, an extensive white spot virus outbreak, and a complete dollarization of its economy in 2000 to reach seafood production numbers that are significantly higher than those in the 1990s. The margins are relatively low so the windfall isn't exactly soaring, but the numbers are increasing.

The past decade has not been overly kind to Ecuadoran seafood farmers. The white spot virus nearly wiped out the shrimp industry in 1999. The disease also gave Thailand and Vietnam the opportunity to gain ground on Ecuador, as both countries increased their shrimp production.

The value of the country's shrimp exports reached a record high of $875 million in 1998, but shrimp prices have fallen and keep declining. Penaeus vannamei , also known as Pacific whites, or white gold, isn't bringing in the dollars it once did, even though production levels are at their highest ever.

Worldwide output of farmed shrimp is inching higher and higher, but many feel the ceiling has been reached. Farmed shrimp prices will not drop anymore beyond the current rock-bottom levels, say experts. Inflation is hurting the seafood industry as a whole.

"[Ecuador] is pegged to the struggling U.S. dollar, and the seafood is produced with the U.S. dollar," says John Schramm, president of tilapia distributor Tropical Aquaculture in Rutland, Vt.

However, Ecuadoran seafood shipments to the United States have increased over the past five years. In 2006, Ecuador shipped 110 million pounds of seafood to the United States, consistent with the previous year, according to the National Marine Fisheries Service. The figure is well ahead of contenders Costa Rica, Honduras and Colombia and reflects Ecuador's dominance in Latin America. Ecuador has also benefited from the recent decision by the Department of Commerce to eliminate the country's shrimp tariff.


Overcoming white spot

The highly infectious white spot disease ripped through Ecuador like a knife in 1999 and nearly wiped out the country's shrimp industry. Ecuador's annual farmed-shrimp output sunk to a low of 37.7 million pounds and production hovered around 20 percent of normal rates. Most farmers began to treat the disease with fungicides, antibiotics and pesticides, resulting in the destruction of the mangroves and polluted ponds, exacerbating production woes even more.

"The shrimp production almost collapsed at that time," says Carlos Sanchez, sales manager at Promarisco, an Ecuadoran seafood company. "We lost approximately 75 percent of our [shrimp] production.

"The industry's hard work through those terrible years finally resulted in better production management and recovered the record production levels of 1998 last year," notes Sanchez.

To mend the situation, farmers had to reduce pond stocking densities to natural levels and improve larvae selection. Thus far, subsequent outbreaks have been controlled using this method. Nearly 200 hatcheries and more than 150,000 hectares of shrimp farms are in operation, and more than 250,000 people are employed by the country's farmed-shrimp industry. The money isn't like it was in the '90s, but production is as good as it has ever been, according to the 2006 numbers.

White spot turned out to be a blessing in disguise for some. After the disease destroyed much of the industry on the Guayas and Santa Elena peninsulas, many shrimp farmers seized the opportunity to switch to organic farming.

"Sustainability and traceability are key factors for the whole industry now," says Sanchez. "The market for organic is still small, but could become important in the future."

The tropical mangrove forests that line the Ecuadoran coastline were practically destroyed by farming, but have been rebuilt with organic farming.

"We are reducing the wild fishmeal percentage and using less and less everyday," says Santiago Salem, founder of Industria Pesquera Santa Priscila S.A. in Guayaquil, Ecuador.

"We are using low-density ponds and we aren't depending on the feed. We push a natural feed. If you go to the ponds you will see that they are surviving," adds Salem. "We use 100 percent organic feed and no antibiotics," said Salem. "We don't need antibiotics or chemicals the way 
we produce."


Shrimp industry rebounds

The country has a mild climate and year-round farming season where three annual shrimp harvests are the norm. Combined with implementing modern aquaculture techniques, Ecuador has become the second largest producer of cultivated shrimp in the world and the largest in the Western Hemisphere. More than 20 different shrimp products are exported from Ecuador, ranging from whole shrimp, tails and breaded to frozen blocks.

Shrimp production has recov-ered to 1990s levels, though the earnings are lagging due to low shrimp prices.

The country's shrimp exports drew $597.6 million in revenue in 2006, weighing in at 264.3 million pounds, with approximately 50 percent exported to the United States. Comparatively, in 2005, the country earned $480.2 million for 212.5 million pounds. This year's U.S. exports are on schedule to match last year's, with 70 million pounds of shrimp being shipped to the U.S. market from January to June, with a monthly high of 25 million pounds in May, according to Ecuador's Cámara Nacional de Pesquería, or National Chamber of Fisheries.

Dropping prices due to growing global output account for the lower-than-hoped earnings. By comparison, the country's earnings reached a record-setting $875 million in 1998.

"We aren't making any money, but the way we do it is the right way," says Salem.

Peeled frozen shrimp is the country's single largest revenue gainer and fetched approximately $78 million with 12.2 million pounds in 2006, down slightly from 13.4 million pounds in 2005. Shell-on shrimp shipments are nearly as strong. In 2006, exports of 41/50-count shrimp were 9.3 million pounds, up from 7.1 million pounds, while exports of 51-60s were 11.2 million pounds, compared with 8.7 million pounds the previous year.

Varying factors contribute to the country's farming success. For one, the low salinity in the brackish water allows shrimp and tilapia to thrive in natural conditions and give the shrimp their flavor, firmness and color. Ecuador is the only country to not farm in freshwater. The natural salinity of the water is sufficient for shrimp to reproduce, while the addition of salt to freshwater ponds for shrimp farming has been proven to have drastic affects on soil conditions. Two, the low-density ponds allow for greater control and a better product than Asian farms, which tend to use 10 times the density, according to Salem. Some producers even use polyculture, where tilapia and shrimp are raised in the same pond at the same time.


Tilapia's ascent

In addition to shrimp, other products are gaining ground. Since 1999, tilapia has been one of Ecuador's most significant exports, with numbers that have risen steadily annually. With approximately 80 percent of the country's tilapia production going to the United States, Ecuador maintains approximately 45 percent of the U.S. fresh tilapia market, with products found in nearly every major supermarket, while Colombia, Honduras and Costa Rica make up the rest. Total output is expected to rise 10 to 15 percent annually, and prices are expected to remain stable.

Ecuador sent 23.9 million pounds of fresh tilapia fillets to the United States in 2006, and the 2007 numbers are projected a bit higher, at about 2.3 million pounds a month. Americans ate 0.99 pounds of tilapia per capita in 2006, making it the fifth-most consumed fish in the country, according to the Top 10 seafood list released by the National Fisheries Institute in McLean, Va., and compiled by H.M. Johnson & Associates of Jacksonville, Ore. Tilapia consumption was up from 0.84 pounds in 2005. Catfish dropped to 0.96 pounds in 2006 from 1.02 pounds in 2005.

In January, Ecuador became the first Latin American country to export more than 1,000 metric tons of fresh tilapia fillets to the European Union.

During the white spot outbreak, many shrimp farmers turned to tilapia, and the shrimp industry's aquaculture expertise made the transition to tilapia fairly easily.

"Ecuador's naturally brackish [water] is ideal for tilapia, maybe better than any country in the world," says Schramm of Tropical Aquaculture.

Tilapia "is a whitefish that people have come to rely on," adds Schramm. "The fluctuation in price is never more than 10 to 
15 cents a pound over a 10-
year period."

Frozen tilapia is still dominated by China. "The Chinese factor," as Schramm calls it, has led Ecuadoran producers to focus solely on fresh tilapia, as it is nearly impossible to compete with Asia on frozen product. Asia's frozen tilapia exports rose 43 percent in 2006, to 139.5 million pounds, and 7- to 9-ounce fillets are offered at $1 a pound less than fresh fillets from Latin America.

Another one of Ecuador's principal seafood exports is tuna, which has a growing success in Europe, South America and Japan. It comes fresh, frozen and canned in brine and oil.

Approximately 25,000 metric tons of tuna in various forms were exported to the Unites States in 2006, according to NMFS.

Other marine products such as mahimahi, swordfish, flounder, sardines, crabmeat and squid also draw significant numbers.

Packaged ceviche, a dish that uses whitefish marinated in lime juice and chili peppers that's popular in Ecuador and much of Latin America has also been a big hit with several producers as the dish gains in international popularity. Mexican-style versions that come packaged with a spicy salsa are also offered.


U.S. antidumping laws

The United States slapped antidumping duties on shrimp from six Asian and Latin American countries, including Ecuador, in 2005. In late July, the U.S. Department of Commerce issued a final rule revoking antidumping tariffs on Ecuadoran shrimp by Aug. 20. The agency issued a preliminary rule on May 31 eliminating Ecuadoran shrimp tariffs, which ranged from 2.35 to 4.48 percent. The DOC recalculated the tariffs without the use of "zeroing" and found that the dumping margins totaled less than 2 percent, effectively eliminating them.

However, the tariffs have created competitive problems against duty-free countries and cash flow limitations due to the continuous-bonds issue.

The U.S. tariffs have forced many companies to turn toward Europe, particularly Spain, France and Italy, which are slowly gaining more market share. They pay the same prices, without the antidumping tax.

"We still believe in production improvements for continued growth of our exports," says Sanchez, "and the solution of the dumping issue by end of this year, which would give Ecuador a better position in the U.S. market."

Seafood in the future

Aquaculture in Ecuador is the oldest in Latin America at 27 years and has survived many challenges. In the past seven years, shrimp prices have continued to drop and many companies have gone bankrupt, but many see that the worst is behind them. It isn't expected that China will destroy prices any further and while no one expects prices to rise to levels seen in the '90s, they do expect them to become at least reasonable.

"People are leaving the industry because it's not a place to make money," says Schramm. "It's high risk, and little return."

Schramm claims that Tropical Aquaculture started early and maintained its position in the market. Several major tilapia producers will be pulling out by the end of the year because the money just isn't there, he concludes.

"In the future there will be bigger volume, but fewer players," says Schramm.

Global production is rising and many major seafood suppliers are being tested around the world. Ecuador has overcome several major hurdles, from a devastating white spot outbreak to the disadvantageous U.S. tariffs, proving it is in the game for the long haul.


Nicholas Gill is an author, writer and photographer based in Columbus, Ohio, and Lima, Peru


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