Consumer prices drop as EU trade deal takes full affect; tariff surcharges are eliminated and IVA tax drops in June

Ecuadorian consumers are finally seeing substantially lower prices for most consumer goods. Promised in January when a trade agreement with European Union (EU) went into effect, retailers say savings were delayed until recently as higher-priced inventories were reduced.

Prices on imported fruit have dropped dramatically.

In addition to the trade agreement with the EU, the reduction of a tariff surcharge imposed two years ago is also responsible for lower prices. The surcharge, which was 40% to 45% on most items, has been reduced in most cases to 10% and will be eliminated entirely June 1.

Additional savings are on the way when Ecuador’s national IVA tax returns to 12% from the current 14% in June. IVA was increased following last year’s earthquake to provide funding for reconstruction.

A spot-check of appliance prices in Cuenca shows that an imported washing machine that cost $630 in March is now $480, while the price of large-capacity side-by-side LG refrigerator has fallen from $1,800 to $1,350.

Throughout Ecuador, prices for imported perfume and liquor have fallen 25% to 35%, according to retail associations.

Prices for imported fruits, mostly imported from Chile, Mexico and the U.S., have also fallen dramaticaly. A vendor at Cuenca´s Diez de Agosto market says she can now sell seven apples for a dollar while that only bought five last month. “Things are finally improving,” says Gloria Parra, who sells a variety of imported fruits. “People are buying more and my sales are increasing.”

Price reductions for imported clothing are more modest, according to two sellers on Calle Simon Bolivar. “Now, they are 10% to 15% lower than they were in March but they will continue to drop as inventory is depleted and we finish relabeling,” says store owner Sonia Quinde. “Of course, there will be more savings next month when the IVA drops and the extra tariffs are gone.”

Automobile dealers say buyers should see price reductions of as much as 30% from late last year.