The Packer’s National Editor Tom Karst chatted (by e-mail) on June 9 with Ronald Bown, chairman of the Santiago-based Chilean Fresh Fruit Exporters Association (ASOEX). Several thousand Chilean growers and exporters rallied near Requinoa, Chile, June 7, protesting high currency values unfriendly to fruit exports and rising costs tied to energy and labor.
Tom Karst: What kind of problems is the exchange rate causing for Chilean growers and exporters?
BownRonald Bown: The main trouble we are seeing in the growers and exporters is the reduction on their operational income in pesos. But this is explained by two factors — the strength of our currency and climbing production costs, specifically wages and energy. Meanwhile the exchange rate has declined 31%, the cost of wages has risen 27%. So, we are not worried for the short run, but for the long term. In these conditions, it is very difficult for us to think in investments.
Karst: Is the industry in a crisis?
Bown: No, not currently, but if the situation happened to be the same for a couple of more years, the economy’s fundamentals would change and the country as a whole would be facing heavy problems because of the concentrations of exports in mining. That is why we are demanding policy changes.
Karst: How did the exchange rate affect exports in 2010-11 and how do you think it may affect exports next season?
Bown: In 2008 exports were 2.41 million tons of fresh fruits. In 2009 we exported the same volume, 2.41 million tons. And in 2010 the exports rose 3%. In dollars in 2010, the returns rose 22%, but in Chilean pesos the returns only rose 10.2%. If we add to that the rise of the costs, it is easy to imagine the situation in which the Chilean fruit industry is passing through. Because of the exchange rate, this year, in comparison to ten years ago, we need twice as many dollars to pay our debts in pesos.
Karst: What should the government of Chile do to improve the outlook for growers?
Bown: We are requesting the (formation) of a roundtable of analysis and discussion, with workers, growers, exporters, congressmen and the government. We are proposing a really powerful package of measures, which include:
- an Agricultural State Policy, to develop the investment and production of the sector;
- to extend the benefits of the DL701, a government program that today supports the forestry, to the fruit sector;
- to foster a financing policy for the agriculture, through the foundation of the Agrarian Bank of Chile and a budget for $2.5 billion to refinance liabilities and reconverts plantations;
- to create an annual promotional fund for food exports of $150 million;
- the creation of a stabilization competitive fund for $30 billion, in order to significantly raise the savings of the country abroad;
- to install a long-term strategy for the opening and defense of the external markets;
- to modify the organic constitutional law of the Central Bank of Chile, making it in a bank of reserves, such as are the majority of the central banks in the world, preventing operating with negative share capital, preventing the use of the exchange rate as a tool to fight against inflation; and
- to define a control policy for speculative capital against our currency, through all channels, with a mechanism of different types of taxes.