Ecuador Accepts Russian Invitation To Consider A Eurasian Economic Union Free Trade Agreement
An EAEU-Ecuador FTA would be the first in Latin America
The Russian President Vladimir Putin has held discussions with Ecuador’s President Guillermo Lasso concerning developing trade between the two countries. This has extended to an invitation for Ecuador to participate in a free trade agreement with the Eurasian Economic Union.
Ecuador’s President was sworn into office in May this year. The country is a significant oil producer, yet in need of infrastructure development. Lasso said after the discussion with Putin that “We are making up a roadmap that includes the production of vaccines, railway, energy and oil projects as well as free trade agreements.” He called the conversation with Putin ‘productive’ and characterized bilateral relations as ‘excellent’.
Ecuador is an associate member of the Latin American Mercosur Free Trade Bloc, which also includes Argentina, Brazil, Paraguay, and Uruguay as full members and Bolivia, Chile, Colombia, Guyana, Peru, and Suriname as associates. Venezuela is also a member but has been suspended since late 2016.
Mercosur’s purpose is to promote free trade and the fluid movement of goods, people, and currency. Since its foundation, Mercosur’s functions have been updated and amended many times; it currently confines itself to a customs union, in which there is free intra-zone trade and a common trade policy between member countries. In 2019, the Mercosur had generated a nominal gross domestic product (GDP) of around US$4.6 trillion, placing the bloc as the fifth largest global economy. Mercosur has signed free trade agreements with Israel, Egypt, Japan, and the European Union, among others.
Brazil is Mercosur’s largest trade member and is a partner with Russia in the BRICS grouping.
Having an FTA with Ecuador would give the EAEU members states Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia leverage into the Mercosur trade bloc. Russian trade with Ecuador was worth US$400 million in Russian exports to Ecuador in 2019, with the majority of products in the oil and gas industry. Ecuador exports to Russia amounted to US$888 million with 2/3 of this being in exported fruits, with the bulk of these being bananas.
Ecuador also exports cut flowers, seafood, cacao, coffee, and wood and there may be opportunities for Russian and EAEU member states to trade in these commodities. The country is also likely to be a target for Russian built vehicles exported via the Egypt-Mercosur FTA from the Russian Free Trade Zone in Port Said.
Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at email@example.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.