Ecuador to invest $1.2bn in palm oil sustainability & innovation: ‘There is a tremendous opportunity here’
In March this year, the Ecuadorian government brought together major actors from the country’s palm oil supply chain, from producers to processors, and developed an ambitious and far-reaching five-year action plan to make Ecuador’s palm oil supply chain more sustainable, including a USD$1.2 billion investment.
Signed by the minister of agriculture and livestock, Rubén Flores, and minister of the environment, Tarsicio Granizo, the interministerial agreement establishes the Inter-institutional Committee for Sustainable Palm Monitoring (CISPS) and includes three technical working groups each with a specific angle.
One will focus on sustainable development, good agricultural practices and achieving RSPO certification; the second on promoting sustainability and innovation in commerce and trade; and the third on technical and phytosanitary issues, such as bud rot disease.
In order to incentivise this drive towards sustainability, the government has created tax breaks for palm oil exporters on condition the money raised through the tax returns will be put in a dedicated fund that is controlled by both private-public actors, and is used to support smallholders switch to more sustainable methods, including getting organic or RSPO certification.
So why this investment in sustainable palm oil and why now? Meeting with FoodNavigator and other journalists at the national bank BanEcuador in Quito the day after the agreement was signed, minister Flores said: “There is an important growing market in demand for organic and sustainable products in the US and Europe of around 20 to 23% annually, so there is a tremendous opportunity to be grabbed here.
“The options are not taking it and stagnating, or taking the necessary steps to capture those markets."
A $1.2bn injection
Although the scheme is coordinated by the Ecuadorian government, the $1.2 billion will not be drawn from public funds but from BanEcuador’s some 300,000 private sector investors, 70% of whom come from the agricultural sector.
The money will be used to consolidate and strengthen agricultural associations, such as Ancupa, the national association of palm growers. These associations will then decide how best to dispatch the funds to growers and processors or for innovation projects, research and product development.
According to Francisco Naranjo, liaison consultant for RSPO Latin America, implementing the plan through these agricultural associations and syndicates, such as the Gran Minga Agropecuaria makes sense.
“These organisations have been very successful in Colombia in conducting research and transferring technology and technical assistance so I think this is a really great idea to strengthen the main association of oil palm growers or each different agricultural chain association.”
The plan is ambitious and unique to the agri-food sector – similar sums of money are not being granted to other sectors, Flores noted – but the idea is the investment will be spread throughout the value chain so that a variety of actors receive funding to become more sustainable and generate more income.
More processed products
Investing in certification and innovation in the palm sector is therefore a way to ensure higher and more equally distributed economic margins.
The country is a leading exporter of palm oil, bananas, flowers and tuna but most of the value generated by its agri-food sector is also exported. For example, Flores said, only 22% of the final consumer price paid for a crate of bananas stays in Ecuador with the remaining 78% going to Europe.
The government has also begun consulting stakeholders in the banana and plantain sectors with a view to launching a similar plan for those industries.
Developing higher-value and on-trend downstream products in Ecuador – as opposed to simply exporting crude palm oil (CPO) – is a priority for the country, and it has some catching up to do.
In 1996 Flores personally received a Malaysian government minister, who showed him a room with 317 Malaysian-made consumer packaged goods containing palm oil. Ecuador at the time had just three.
“I believe that at that moment, Ecuador lost an opportunity to create an alliance with Malaysia,” he said. “Colombia took it.”
The country is therefore keen to foster strategic, external partnerships to develop such products – with other producer countries having expressed an interest – but Ecuador will first need to evaluate the macro-economic realities of such a move.
With a fully dollarized economy since a political and financial crisis in 2000, Ecuador’s economy is highly dependent on investment and exports, and demand today is largely for exports of CPO.
Flores said it was important that Ecuador’s sustainability efforts were visible “for the simple reason that it’s about reaching out to consumers” - and such visibility tends to come in the form of on-pack logos.
Ecuador already had a success story with consumer-facing logos, he said – its traffic light nutrition logo has been praised for encouraging healthy eating habits and it also has a logo for family farmed and artisan products – and the RSPO logo could add value in a similar way.
The Ecuadorian government chose to take a jurisdictional approach to RSPO certification back in 2016, and Flores said it took a conscious decision not to create a national scheme, such as Malaysian Sustainable Palm Oil (MSPO) or Indonesian Sustainable Palm Oil (ISPO).
RSPO certification was well-known throughout the world and benefitted from an “institutional credibility […] in terms of traceability and origin”, he said.
‘We can differentiate ourselves’
Asked if Ecuador wanted to invest in sustainable palm oil to counter the oil crop’s increasingly negative image, associated with deforestation and habitat loss, providing buyers with ‘clean slate’ palm oil, Flores said: “This is precisely the difference.
“There are signs today of messages being generalised from important NGOs and their publicity campaigns. It is their job to do so but they warn not to consume products that are associated with problems such as child labour, poor and unsafe working conditions or that contain ingredients with residual trace pesticides.
“We can clearly differentiate ourselves from the palm oil that is being produced in other countries in terms of aggressive deforestation and labour practices.”
Conservation International is an NGO that is engaging with both the Ministries of Agriculture and Environment on public policy to promote sustainable development and improve agricultural practices.
Project manager Carolina Rosero said Ecuador’s palm oil sector doesn't exactly have a 'clean slate'. “[It] is similar to other countries in that it has a historic debt to the country with regards to deforestation and biodiversity loss,” she said, but added that CI sees the sector at a turning point.
“The political will is there and that’s one of the key components for change.
“At the minute crude oil is the number one export in Ecuador, it is really important for Gross Domestic Product. In order for the country to move away from that extractive industry we need to make other industries more productive – it’s green oil versus black oil.”