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White Paper: Ecuadors Cut Flower Industry

Jeremiah Granden: Georgia Tech


Top Left Image: Plane Wing by Creativity 103: http://www.flickr.com/photos/creative_stock/3468885533/ Bottom Center Image: Untitled by Procilas: http://www.flickr.com/photos/procsilas/388405293/

Introduction Since the mid-eighties Ecuador has experienced a boom in cut flower production and is now second only to Colombia in floral exports to the United States. This paper analyzes the Ecuadorian cut flower industry; focusing on geographic scope, prior land use, social implications, industry structure, environmental impact, and overall sustainability. Geography and Industry Basics The Andean mountain range, which runs through the center of the country, gives Ecuador an optimal environment for flower production. High elevation, year round temperatures that average between 70 and 45 degrees Fahrenheit, and ample sunlight are the core geographic advantages that the Andes provide, and these conditions make the landscape especially suited for the growing of long, straight roses. 1 2 The majority of planting occurs in the Pichincha province, whose largest city is Ecuadors capitol, Quito. The Cotopaxi province, immediately to the south, is second in production, and these two provinces contain approximately 88 percent of the countrys flower farms, or predicos floricolas, with substantially lower producing regions dispersed throughout the central and western parts of Ecuador.3 Roses dominate the Ecuadorian floral industry, accounting for 60 to 70 percent of the nations flower exports. Rose production is carried out on farms situated in cool, sunny valleys, where the flowers are grown in greenhouses, cut, and boxed. They are typically transported via

Hamilton, Courtney and Deb Tullman. Ecuador: Flower Power. Fair Trade Roses for Valentines Day. Frontline: Rough Cut, Feb 14, 2008. http://www.pbs.org/frontlineworld/rough/2008/02/ecuador_a_rosie.html 2 Weather.com. Monthly Averages for Quito, Ecuador. Accessed on September 3, 2011. http://www.weather.com/weather/wxclimatology/monthly/graph/ECXX0008 3 USDA Foreign Agricultural Service. 2009 Ecuador Fresh Flower Industry Situation. Accessed on September 3, 2011.http://gain.fas.usda.gov/Recent%20GAIN%20Publications/2009%20Ecuador%20Fresh%20Flower%20Industry %20Situation_Quito_Ecuador_6-9-2009.pdf

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refrigerated trucks from the growing site to Quitos Mariscal Sucre International Airport, where the majority of them are flown to Miami International Airport (MIA) for consumption in the U.S., with a lesser volume of roses destined for European markets.4 5 Historical Land Use The mountainous terrain of the Ecuadors primary flower growing province, Pichincha, makes much of it unsuitable for agriculture beyond livestock grazing. Whatever growing does occur in Pichincha takes place in the more fertile Interandean valley, but much of the land here has historically been devoted to cities and towns and their attendant needs (e.g. reservoirs, cemeteries, and roads) or large eucalyptus plantations outside of Quito.6 In short, the province is underdeveloped from an agricultural standpoint and the cut flower industry has not crowded out another sector in a meaningful way. In the Cotopaxi province to the south, land use has traditionally been devoted to the growth of cereals and tubers with significant dairy and livestock production. Historical land distribution here has followed patterns common to Latin America, with a minority of landowners possessing vast tracts of land while the majority operating at a sustenance farming level, owning less than five hectares.7

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USDA Foreign Agricultural Service. Vega, Henry. The Transportation Costs of Fresh Flowers: A Comparison Between Ecuador and Major Exporting Countries. (Background paper for the Inter-American Developing Bank report Unclogging the Arteries: The Impact of Transportation Costs on Latin American and Caribbean Trade. 2008), accessed September 3, 2011. http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=1801863 6 Smith, Vernon. Marketing Agricultural Commodities in Pichincha Province, Ecuador. Geographical Review. Volume 65. (1975). 353-363. 7 Weiss, Wendy. The Social Organization of Property and Work: A Study of Migrants in the Rural Ecuadorian Sierra. American Ethnologist. Volume 12. (1985): 468-488.

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Geographic Distribution of Flower Farms in Ecuador

Source: Ecuadors Ministry of Agriculture (2008)8 Social Implications Ecuador suffers from pervasive poverty and the economy has been in poor shape since the end of the countrys petroleum boom in 1982. The explosion of the flower industry can be interpreted as good news in the sense that it injects cash into the region, provides local jobs (especially for women), and is contributing to improved infrastructure in areas such as

USDA Foreign Agricultural Service.

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transportation.9 10 11 However, problematic working conditions and health risks related to pesticide use complicate this interpretation.12 Members of rural communities with little or no land holdings have had reason to welcome the flower boom. The wages are typically higher than those found in other types of offfarm employment available to peasants, such as unskilled construction and domestic service. It is also advantageous that flower production is a year-round activity that requires a permanent workforce. Owing to the quality demands of the international flower market, greenhouse and cutting house work requires a considerable amount of care and skill, and growers seek to attract and retain good employees. Furthermore, there isnt a meaningful presence of migrant workers to compete with the residents of flower producing regions for positions. However, the higher wages of the flower industry can barely cover sustenance needs and the flower boom has increased the price of land, making the purchase of family plots, often a core goal of Ecuadorian peasants, more difficult. Many workers are subjected to a punishing productivity system, or el sistema de rendemiento, that leads to actual hours worked by employees far exceeding the guidelines set forth in the Ecuadorian labor code. Much of this extra work is unpaid. Furthermore, there is chronic exposure to pesticides; one long-term industry employee reported greenhouses being fumigated with workers inside them with the opportunity to seek healthcare being denied to those who got sick as a result. While reckless and cruel practices like this may

Sawers, Larry. Nontraditional or New Traditional Exports: Ecuadors Flower Boom. Latin American Research Review. Volume 40, (2005). 40-67. 10 USDA Foreign Agricultural Service. 11 Vega, Henry. 12 The Economist. The Search for Roses Without Thorns. February 16, 2006, Accessed on September 3, 2011. http://www.economist.com/node/5526580

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not be the norm fertility problems, birth defects, respiratory disease, and other health issues have been linked to pesticide exposure among flower workers.13 14 15 Women are often treated as a beneficiary of Ecuadors flower industry. In 2008, 60 percent of workers were women. Income and decisional autonomy for female workers have been improved, albeit marginally, by their position in the flower industry but once again there is a darker side to this. Long working hours and commute times have led to persistent physical exhaustion with an adverse effect on child care. Often the burden of child care shifts to extended family members, who also have their own domestic responsibilities to attend to, resulting in a dynamic of near-child neglect previously unheard of in indigenous society.16Also, a study by the International Labor Rights Forum and its Ecuadorian NGO partners determined that 55 percent of flower workers have been the victims of sexual harassment with 19 percent having been coerced into sex with a coworker or supervisor and 10 percent having been the victims of sexual assault.17 Beneficiaries of the Industry One way that the Ecuador as a whole may continue to benefit from flower exporting is via improvements in infrastructure, particularly in the area of transportation. Cut flowers are a highly perishable good that necessitates a quick transfer from farm to market, hence a need for

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Korovkin, Tanya. Cut Flower Plots, Female Labor, and Community Participation in Highland Ecuador. Latin American Perspectives, Volume 30 (2003) 18-42. 14 Hamilton, Courtney and Deb Tullman. 15 International Labor Rights Forum. Flowers. Accessed on September 3, 2011. http://www.laborrights.org/creating-a-sweatfree-world/fairness-in-flowers 16 Korovkin, Tanya. Cut Flower Plots, Female Labor, and Community Participation in Highland Ecuador. 17 International Labor Rights Forum.

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quality roads and air travel facilities. The New Quito International Airport, necessitated in part by a need for more efficient outbound shipping, is slated to open in April 2012.18 The global flower market is a big winner in the flower boom since Ecuadorian roses are of unquestionably high quality and are immensely popular in the United States, Europe, and beyond. Another player that warrants mention, although it remains unclear whether it can be considered a winner or not, is U.S. law enforcement. Until recently, Ecuador was a beneficiary of the Andean Trade Promotion and Drug Eradication Act (ATPDEA), which will be discussed in greater detail later. This act was designed to promote economic alternatives to cocaine trafficking in the Andes. It is unclear whether the economic push that preferential trade practices offer in general, or the cut flower industry in particular, have diminished Ecuadors role in South Americas illicit drug economy. Ecuador has historically been a place to process Colombian and Peruvian cocaine and a maritime transport hub with negligible amounts of cocoa and poppy cultivation scattered throughout the country, and there is little to suggest that the flower boom has had a tangible impact on this, although the Andean cocaine trade has declined over the last decade.19 20 Structure of Ecuadors Cut Flower Industry There is little in the way of direct foreign ownership in the global flower industry. The Dole Corporation once had holdings in both Ecuador and Colombia, but the Ecuadorian
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Latin Business Chronicle. Quito Airport: Too Little, Too Late? March 21, 2011. Accessed on September 3, 2011. http://www.latinbusinesschronicle.com/app/article.aspx?id=4825 19 Department of State (US). 2010 International Narcotics Control Strategy Report. March 1, 2010. Accessed on September 3, 2011. http://www.state.gov/p/inl/rls/nrcrpt/2010/vol1/137196.htm 20 BBC News. Big Decline in Colombian Cocaine. August 11, 2004. Accessed on September 3, 2011. http://news.bbc.co.uk/2/hi/americas/3556464.stm

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properties were sold off in 2006 and the majority of flower farms in country are now independent or collectively owned enterprises. In terms of U.S. distribution, 70 percent of Ecuadors flowers traverse traditional importer to wholesaler to retailer channels rather than utilizing a vertically integrated alliance between several wholesalers and a major retailer such as Wal-Mart. There are over 130 separate flower importers in Miami alone, with no single organization monopolizing the supply chain. 21 22 23 From 1991 to 2011, Ecuadors status as a beneficiary of ATPDEA meant flower exports faced virtually no tariff barriers to entry in the United States. In February of 2011 the act was allowed to expire by the 112th U.S. Congress. A central reason for the failure to renew is that Republicans, who won the House majority in the 2010 election, object to funding the Trade Adjustment Assistance (TAA) program included in the ATPDEA framework. This program is designed to retrain American workers who have lost their jobs because of foreign imports. Duties now stand between 3.2 to 6.8 percent and this, combined with an increase in carriage costs, diminished Mothers Day 2011 exports to the U.S. by 5 percent.24 25 Environmental Issues The problem of pesticide use is the core environmental challenge that Ecuadors cut flower industry faces. As an agricultural crop, flowers must be pest-free in order to be received by the importing country, but are not subject to pesticide residue regulations in place for food
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US International Trade Commission. Los Angeles Times. Dole to Trim Its Flower Unit. October 13, 2006. Accessed on September 3, 2011. http://articles.latimes.com/2006/oct/13/business/fi-dole13 23 Vega, Henry. 24 Ecuador Times. Selling Flowers Dropped Due To Carriage and ATPDEA. May 12, 2011. Accessed on September 4, 2011. http://www.ecuadortimes.net/2011/05/12/selling-flowers-dropped-due-to-carriage-and-atpdea/ 25 Greenhouse Management. Colombian, Ecuadorian Flowers Lose Duty-Free Status. February 21, 2011. Accessed on September 4, 2011. http://www.greenhousemanagementonline.com/colombian-ecuadorian-flowers-lose-dutyfree-status.aspx

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products. This incentivizes heavy pesticide use among growers. Most of the risks incurred by pesticides exposure are assumed by flower farm workers, as outlined in the Social Implications section of this report. The hazard extends to livestock and other community members as well; dairy cows are known to eat contaminated flowers and the high concentration of young female employees on the farms creates a health risks for nursing infants. The demands of the global market may serve to mitigate some of the pesticide problem; there is a regimen of environmental certifications that growers can obtain (which will presumably make their product more attractive to ecologically conscious buyers).26 Sustainability The cut flower trade is one of the few economic advantages that Ecuador enjoys at this time, and it should be fostered and promoted. It has the potential to be ecologically sound; the greenhouses dont extract an unbearable toll on the land itself, heavy pesticide use can be addressed on a structural level, and irrigation issues have yet to surface as a major concern. The strain on Ecuadors social fabric has not been unbearable either, despite the health, worker rights, and quality of life problems that the industry has wrought on its employees. The issues here should be resolvable at the farm level, although meaningful and effective legislation (which Ecuadors government may be less than capable of implementing) will likely be required to accomplish this.27 There are two critical problems that the industry now faces, both of which are related to costs. The first is the expiration of ATPDEA protection. There are few indicators that Ecuador will return to the duty free status it has enjoyed since 1991; the inclusion of the TAA program in
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Tenenbaum, David. Would a Rose Not Smell As Sweet?: Problems Stem from the Cut Flower Industry. Environmental Health Perspectives. Volume 110. (2002) A240-A247. 27 US International Trade Commission.

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the ATPDEA framework has made cut flower protection into a casualty of an American political conflict over government spending, and the hysteria over illegal drugs in public discourse is hardly at the fever pitch it was twenty years ago. There is little incentive to take up the issue; in fact, one can hardly find a mention of ATPDEA in the English-language press over the last six months.28 Furthermore, diplomatic relations between the two countries have been strained by the expulsion of the U.S. ambassador to Ecuador in the aftermath of the WikiLeaks scandal.29 The second issue involves the supply chain. The floral industry near Quito relies on a single runway airport that charges the highest landing fees in Latin America, has insufficient refrigeration facilities (a complication that has been vaulted by the presence of multiple cargo companies), and is only able to support small to mid-sized aircrafts due to altitude constraints. Completion of the new airport has been delayed multiple times over the last few years. Since Ecuadors flower industry is not vertically integrated, product must pass through multiple links in a supply chain with some steps having a high potential to affect quality (e.g. flowers being flown in from Quito in a non-air conditioned cargo hold may be damaged if MIA is backed up and the plane is forced to taxi on the runway for an excessive amount of time). Despite the efforts of Exoflores, Ecuadors flower producer association, the industry has had less success in persuading the government to take business friendly measures then its Colombian counterpart has. Air infrastructure is handled in a parochial, revenue oriented fashion, highways are not built because of regional disputes, and high tariffs remain in place.30

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LexisNexis Academic search for terms Andean trade promotion on September 5, 2011 produced four hits later than Feb 2011. 29 Hoy. Gobierno pone en vigencia ayuda para afectados por suspensin de ATPDEA July 11, 2011. Accessed on September 5, 2011. http://www.hoy.com.ec/noticias-ecuador/gobierno-pone-en-vigencia-ayuda-para-afectadospor-suspension-de-atpdea-488832.html 30 Vega, Henry.

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Both the suspension of ATPDEA and structural supply chain give Ecuadors flower industry a precarious long-term outlook. Update: As of May 2012 ATPDEA protection was re-extended to Ecuador with expiration slated for 2013. It is the only beneficiary of the act as Colombia and Peru currently hold free trade agreements with the U.S. 31Furthermore, the completion date for the New Quito airport has been pushed back to February 2013.32

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Department of Commerce, Office of Textiles and Apparel (2012). Website. Accessed on September 21, 2012. http://web.ita.doc.gov/tacgi/eamain.nsf/6e1600e39721316c852570ab0056f719/53018ab5e2d8426a85257394004 9684c?OpenDocument 32 El Tiempo. Aeropuerto de Tababela operar en febrero de 2013. August 15, 2012. Accessed on September 21, 2012. http://www.eltiempo.com.ec/noticias-cuenca/103267-aeropuerto-de-tababela-operara-en-febrero-de2013/

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References BBC News. Big Decline in Colombian Cocaine. August 11, 2004. Accessed on September 3, 2011. http://news.bbc.co.uk/2/hi/americas/3556464.stm Department of Commerce, Office of Textiles and Apparel (2012). Website. Accessed on September 21, 2012. http://web.ita.doc.gov/tacgi/eamain.nsf/6e1600e39721316c852570a b0056f719 /53018ab5e2d8426a852573940049684c?OpenDocument Department of State. 2010 International Narcotics Control Strategy Report. March 1, 2010. Accessed on September 3, 2011. http://www.state.gov/p/inl/rls/nrcrpt/2010 /vol1/137196.htm Economist. The Search for Roses Without Thorns. February 16, 2006, Accessed on September 3, 2011. http://www.economist.com/node/5526580 El Tiempo. Aeropuerto de Tababela operar en febrero de 2013. August 15, 2012. Accessed on September 21, 2012. http://www.eltiempo.com.ec/noticias-cuenca/103267-aeropuerto-detababela-operara-en-febrero-de-2013/ Ecuador Times. Selling Flowers Dropped Due To Carriage and ATPDEA. May 12, 2011. Accessed on September 4, 2011. http://www.ecuadortimes.net/2011/05/12/sellingflowers-dropped-due-to-carriage-and-atpdea/ Greenhouse Management. Colombian, Ecuadorian Flowers Lose Duty-Free Status. February 21, 2011. Accessed on September 4, 2011. http://www.greenhousemanagement online.com/colombian-ecuadorian-flowers-lose-duty-free-status.aspx

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Hamilton, Courtney and Deb Tullman. Ecuador: Flower Power. Fair Trade Roses for Valentines Day. Frontline: Rough Cut, Feb 14, 2008. http://www.pbs.org/ frontlineworld/rough/2008/02/ecuador_a_rosie.html Hoy. Gobierno pone en vigencia ayuda para afectados por suspensin de ATPDEA July 11, 2011. Accessed on September 5, 2011. http://www.hoy.com.ec/noticias-ecuador /gobierno-pone-en488832.html International Labor Rights Forum. Flowers. Accessed on September 3, 2011. http://www. laborrights.org/creating-a-sweatfree-world/fairness-in-flowers Korovkin, Tanya. Cut Flower Plots, Female Labor, and Community Participation in Highland Ecuador. Latin American Perspectives, Volume 30 (2003) 18-42. Latin Business Chronicle. Quito Airport: Too Little, Too Late? March 21, 2011. Accessed on September 3, 2011. http://www.latinbusinesschronicle.com/app/article.aspx?id=4825 Los Angeles Times. Dole to Trim Its Flower Unit. October 13, 2006. Accessed on September 3, 2011. http://articles.latimes.com/2006/oct/13/business/fi-dole13 Sawers, Larry. Nontraditional or New Traditional Exports: Ecuadors Flower Boom. Latin American Research Review. Volume 40, (2005). 40-67. Smith, Vernon. Marketing Agricultural Commodities in Pichincha Province, Ecuador. Geographical Review. Volume 65. (1975). 353-363. Tenenbaum, David. Would a Rose Not Smell As Sweet?: Problems Stem from the Cut Flower Industry. Environmental Health Perspectives. Volume 110. (2002) A240-A247.
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vigencia-ayuda-para-afectados-por-suspension-de-atpdea-

USDA Foreign Agricultural Service. 2009 Ecuador Cut Flower Industry Situation. Accessed on September 3, 2009. http://gain.fas.usda.gov/Recent%20GAIN%20Publications/2009% 20Ecuador%20Fresh%20Flower%20Industry%20Situation_Quito_Ecuador_6-92009.pdf Vega, Henry. The Transportation Costs of Fresh Flowers: A Comparison Between Ecuador and Major Exporting Countries. (Background paper for the Inter-American Developing Bank report Unclogging the Arteries: The Impact of Transportation Costs on Latin American and Caribbean Trade.2008). Accessed on September 3, 2011. http://idbdocs .iadb.org/wsdocs/getdocument.aspx ?docnum=1801863 Weather.com. Monthly Averages for Quito, Ecuador. Accessed on September 3, 2011. http://www.weather.com/weather/wxclimatology/monthly/graph/ECXX0008 Weiss, Wendy. The Social Organization of Property and Work: A Study of Migrants in the Rural Ecuadorian Sierra. American Ethnologist. Volume 12. (1985): 468-488.

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