Free trade vs. economic pain in Ecuador

The country is split over a possible permanent trade deal with the US.

A quarter of the bouquets of roses sold across the US are first cultivated, cut, and bundled in Ecuador – in greenhouses that dot this valley of snow-capped peaks near the equator where roses are said to strive straight for the sun.

Ecuador's $350 million flower industry has transformed communities across the Cayambe Valley, nestled in the Andes about 37 miles north of the capital, Quito. Thanks in large part to US trade benefits that have been in place for 15 years, 70 percent of Ecuador's flowers head to the US.

But the heady days for rose growers here could be numbered. Congress agreed Dec. 7 to extend benefits for six months that allow roses and other goods to enter the US duty-free. But the trade perks, which were originally conceived to ply Ecuador, Colombia, Peru, and Bolivia away from producing narcotics, are not permanent. Bilateral trade agreements were intended to eventually replace them.

While Colombia and Peru have each agreed on bilateral deals that are now awaiting ratification by the US Congress, Ecuador's newly elected leftist president says he is adamantly opposed to a permanent trade deal. President-elect Rafael Correa, an American-educated economist, said such a pact could be "tremendously harmful" – a stance that puts the Cayambe region on edge and the country's 65,000 flower jobs in question.

"The industry is very nervous," says Pablo Monard, Cayambe's regional representative for Expoflores, a national flower growers' association, under a greenhouse where rows of brilliant orange and pink roses bloom.

In Cayambe, as in agricultural regions across Peru, Colombia, and Bolivia, the US Congress's six-month extension of the Andean Trade Promotion and Drug Eradication Act (ATPDEA), which was set to expire at the end of this month, will provide temporary relief. Exports of covered products reached $11.5 billion in 2005, up 37 percent from the year before, according to the US International Trade Commission.

But few see an extension as a long-term solution. As long as the country appears unwilling to press forward with a bilateral agreement, some fear that Ecuador could also lose out on its preferential trade benefits.

"You have to reward your friends, those who do their part," says Fernando Santos, a law professor at Las Americas University in Quito, "not the rascals."

With roses generating thousands of jobs, the Cayambe Valley is today one of the few regions in Ecuador that attracts new residents. The valley's natives remember the area when it was a tiny community of agricultural producers.

"What would we do without the investment of flowers?" says Mario Castro, the head legal counsel at the regional government of Cayambe. Nearly 50 percent of cultivable land in the region is dedicated to flowers, and the population has increased by 30,000 in the past 15 years, he says. "Cayambe would turn into a bunch of ghost towns."

Despite Ecuador's dependence on the flower industry, trade liberalization remains controversial. Last spring, thousands of citizens blocked roads and burned tires in the northern Andes, fueled by rumors that the government was on the verge of sealing a free-trade agreement with Washington.

"Common people in Ecuador associate free trade with part of the privatization process," Mr. Santos says, "which they think is supported by stealers, thieves, the oligarchy."

Ecuador's rising tide of anti-free trade political will put talks with the US on hold last spring. That's when Ecuador passed a law that raises tariffs on private firms when oil prices increase. And in May, Ecuador's state oil company seized an oil field operated by US-owned Occidental Petroleum Corp, citing a breach of contract.

By the time the presidential campaign kicked off, the agreement had become a key point of contention between candidate Alvaro Noboa, who promised to reignite talks and Mr. Correa, who promised to refuse.

Now Ecuador is divided on the issue. According to an Oct. 1 poll by the Quito-based firm Cedatos-Gallup, 42 percent of those surveyed said they are in favor of a free-trade pact, while 44 oppose it.

In October, Dole Fresh Flowers announced that it will close down farms in Ecuador and Colombia, cutting 3,500 jobs. That worries Jenny Chimarro, who was recently bundling a dozen roses bound for Russia for the Floreloy company, which employs 132 workers to cultivate and export some 800,000 roses a month.

"There was no work when I was growing up," she says. That's especially true for women, who dominate the region's greenhouses. Despite the risks of losing her job if the US trade benefits expire – as well as the jobs of her husband, two sisters, and every one of her friends – Ms. Chimarro remains ambivalent about permanent trade liberalization. "It just helps the businessmen, not us," she says. "We the workers don't gain anything."

Manuel Chiriboga, the former chief trade negotiator in Ecuador, says that small farmers, many of them indigenous, are among the fiercest opponents.

But Mr. Chiriboga, who has worked with peasant groups throughout his career, says free trade is the only way to obligate the government to support farmers who can't compete in a globalized world. Currently only 8 percent of farmers receive subsidies, mostly from NGOs, he says.

"I see free trade as a way to adjust institutions," he says. "We have to do something or we'll continue to export people."

Ms. Llana is Latin America correspondent for the Monitor and USA Today.

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