Case Study: Roses with altitude: why Ecuadors flower industry

stands out

You might think of Ecuador as an ultimate banana republic by victim of being the worlds

biggest exporter of bananas, but over the past two decades it has become famous for a rather

more fragrant crop. Ecuador is the worlds third-largest exporter of cut flowers, 73 per cent of

which are roses. It is an industry that employed 103,000 people and generated $837m of

business in 2013. According to guidebooks, Ecuadors success comes down to its latitude: only

on the equator, so the story goes, do roses grow perfectly straight. But, attractive though it

sounds, this is a myth, according to Ad van Rooijen, research and development manager at the

Dutch floriculture multinational De Ruiter. Ecuador is a great place to cultivate roses, but they

are no straighter, he says. The real advantage is that you get natural light all year round, so

you can grow in winter and dont have to use a lot of artificial illumination.

Most of Ecuadors rose plantations are found in the province of Pichincha in the Andes at an

altitude of between 2,800 and 3,000 metres. This too has a significant impact. Roses grown at

high altitude have a much longer growing cycle than those cultivated at sea level, up to 15

weeks as opposed to eight, so it is perfect for long-stemmed varieties with big heads, says van

Rooijen. The cold nights mean that you get a lot of bicolours, with contrasting hues on the

edges and the insides of petals, which are very sought after in certain markets. The growth of

Ecuadors floriculture industry was kick-started in 1991 by the Andean Trade Preference Act,

brought in by the US to promote legal industries such as flower growing as alternatives to drug

trafficking in four Andean countries: Bolivia, Colombia, Ecuador and Peru. By the time the

program expired in 2013, the industry was well-established in both Colombia and Ecuador, also

aided by preferential trade agreements with the EU.

In the early years, rapid growth was accompanied by criticism of the wages and working

conditions of flower workers, but after a lot of labor unrest, the industry has cleaned up its act.

Regulations covering the use of chemical pesticides are much more strictly enforced and today

Ecuador has one of the highest minimum wages in the region; it currently stands at $354 per

month, almost $100 higher than that of Columbia, its biggest South American rival in the flower

business. In a spin-off from the improvements in working practices and conditions, Ecuadorean

rose plantations have now become visitor attractions. It receives about 100 organized visits

every year, ranging from parties of tourists to groups from local embassies.

Growth has been rapid. BellaRosa began commercial cultivation in 1996 with four hectares of

roses. Today the plantation has 31 hectares and 320 workers. Its flowers are grown in vast,

silent polytunnels, and then taken to a much noisier processing facility where they are sorted,

graded and bunched before being shipped off in refrigerated trucks to destinations around the

world. On average the plantation produces 90,000 roses per day, but in peak periods that

number can double. The process does involve chemical treatments, but plants are also sprayed

with natural insecticides made from garlic and chilies. Rows of mint, another natural pest

repellent, are planted in the growing sheds. Like many local plantations, BellaRosa specializes

in the premium long-stemmed varieties with large heads that are particularly prized in Russia.

The signs dotted around the reception area are in both Spanish and Cyrillic script to guide

Russian buyers and visitors around the plantation.

Traditionally, the US has been the biggest market for Ecuadors flowers, accounting for 88 per

cent of exports in 1990. Today that figure has fallen to 41 per cent and exports to Russia have

increased to 23 per cent. Whereas US supermarkets and their customers prefer shorter flowers,

Russian consumers like large roses of between 90cm and 100cm, which can cost significantly

more. Or at least, they used to.The recent economic crisis in Russia, prompted by the fall in oil

prices and sanctions over Ukraine, has had a significant impact on the Ecuadorean rose

industry. In the second half of 2014, exports to Russia fell 30 per cent in value, and 26 per cent

by volume.

To add to Ecuadors problems, other equatorial countries are rapidly developing their own

industries. De Ruiter has plantations in both South America and Africa and, as Ad van Rooijen

explains, the contrast is stark. Africa is booming, particularly Kenya, followed by Zimbabwe and

Uganda. In Kenya the plantations are going to higher and higher altitudes so you can grow the

same long-stemmed varieties as they do in South America, and of course Africa is much closer

to the big markets of Europe and Eastern Europe, he says. Ecuadorean plantations are now

attempting to re-orientate themselves to the US market and its preference for shorter, cheaper

roses, but it takes time to replant.

Santiago Luzuriaga, BellaRosas deputy director, is confident that in the long term the industry

will continue to thrive, but he is realistic about the challenges. Ecuadors competitive

advantages are its unique climate conditions and its innovation, he says. With the present

world situation, an important group of companies has shifted markets without having time to

change product characteristics and marketing strategies, having much lower prices than

expected. And its more likely that more Russian-oriented companies will keep changing part of

their sales to destinations like the US and Europe. A complete process of change can take no

less than six months. At the moment, the lorryloads of roses are still trundling down Ecuadors

highways, but the Russian market offers little to be optimistic about. On International Womens

Day, March 8, which is traditionally the most important date in the calendar for sales to Russia,

exports from Ecuador were down 16 per cent. Whether the signs on the BellaRosa plantation

will soon change from Russian to English remains to be seen.

Questions: Each question carries 2 marks

1. What is the basis of Ecuadors comparative advantage in the production of

roses? WL- 20; Marks-2

2. What are the key reasons that facilitated the growth of the Ecuadorian rose

industry? WL- 50, marks-2

3. How does the rose export industry benefit Ecuador? WL- 50, marks-2

4. Which group of people in these countries (USA, European and Russian market)

benefits from the importation of Ecuadorian roses and how do they benefit? WL-

20; Marks-2

5. Who are the main competitors of this Ecuadorian rose industry? WL- 20; Marks-2,