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The national and international scientific community considers Ecuador’s biodiversity to be a comparative—even competitive—advantage of a new development paradigm, which could pave the way for a future that is less dependent on non-renewable resources. Accordingly, the concept of bioeconomy has raised attention from different sectors, but its understanding and policy development to exploit its potential are still very limited. In the present work, we propose a methodological approach to assess the economic and social contribution of the bioeconomic sector in Ecuador. First, the theoretical and empirical foundations are delineated, based on conceptual aspects and similar previous case studies. Second, three available models (input–output model, general equilibrium model, and social accounting matrix) are evaluated in terms of comparability, applicability, external validity, and scalability. Based on a comparison of the models, the input–output matrix ranks best in terms of comparability and external validity. Aware that other countries in the region are also interested in implementing similar efforts, we have completed this exercise prioritizing the comparability (across and within countries) and external validity aspects. Thus, this work may aid in the elaboration of future evaluation approaches in other Latin American countries.
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Social and Economic Contribution
of the Bioeconomic Sector in Ecuador: A
Methodological Approach
3
Daniel Ortega-Pacheco, Pedro Luis Castro-Verdezoto,
María-José Mendoza-Jiménez, Eduardo Almeida Benalcázar,
and María-Pilar Castro
Abstract
The national and international scientic community considers Ecuadors biodi-
versity to be a comparativeeven competitiveadvantage of a new develop-
ment paradigm, which could pave the way for a future that is less dependent on
non-renewable resources. Accordingly, the concept of bioeconomy has raised
attention from different sectors, but its understanding and policy development to
exploit its potential are still very limited. In the present work, we propose a
methodological approach to assess the economic and social contribution of the
bioeconomic sector in Ecuador. First, the theoretical and empirical foundations
are delineated, based on conceptual aspects and similar previous case studies.
Second, three available models (inputoutput model, general equilibrium model,
and social accounting matrix) are evaluated in terms of comparability, applicabil-
ity, external validity, and scalability. Based on a comparison of the models, the
D. Ortega-Pacheco
Faculty of Life Sciences, Center for the Development of Public Policy, Escuela Superior Politécnica
del Litoral (ESPOL), Guayaquil, Ecuador
P. L. Castro-Verdezoto
Faculty of Mechanical Engineering, Energy Planning Departament, State University of Campinas,
Campinas, Brazil
M.-J. Mendoza-Jiménez (*)
Faculty of Social Sciences and Humanities, ESPOL, Guayaquil, Ecuador
e-mail: mjmendoz@espol.edu.ec
E. Almeida Benalcázar
Faculty of Chemical Engineering, State University of Campinas, Campinas, Brazil
Faculty of Applied Sciences, Delft University of Technology, Delft, The Netherlands
M.-P. Castro
Research Center for the Economic Development of Energy and the Environment (CIDEEM),
Guayaquil, Ecuador
#Springer Nature Singapore Pte Ltd. 2021
V. Venkatramanan et al. (eds.), Sustainable Bioeconomy,
https://doi.org/10.1007/978-981-15-7321-7_3
35
inputoutput matrix ranks best in terms of comparability and external validity.
Aware that other countries in the region are also interested in implementing
similar efforts, we have completed this exercise prioritizing the comparability
(across and within countries) and external validity aspects. Thus, this work may
aid in the elaboration of future evaluation approaches in other Latin American
countries.
Keywords
Bioeconomy · Bioindustry · InputOutput model · Sustainable Development
Goals · Latin America
3.1 Introduction
The Ecuadorian economy is highly vulnerable to external factors. The oil sector
represents more than 40% of total exports and 20% of the public sector income (BCE
2018). Since the dollarization in 2000, the country has experienced an average
growth rate of 3.7% but also negative growth (around 1.23%) in 2016, due to a
fall in international oil prices and an earthquake in the northern coast of the country
(BCE 2018). The dollarization of the Ecuadorian economy marks a turning point in
the countrys economic history, in which the loss of monetary policy, dependence on
foreign currency, competitiveness, and other factors investigated by local authors
(Acosta 2004; Correa 2004; Falconí 2004) are characteristics to consider when
executing public policies. The national and international scientic community,
bearing in mind that Ecuador is a megadiverse country, considers biodiversity as a
comparative advantage (even competitive) of a new development paradigm that may
contribute to the construction of a post-oil Ecuador (MAE 2016).
The bioeconomy has the potential to coherently address the complex challenge of
generating from agricultural production, new sustainable sources of economic and
social growth that contribute to the achievement of most Sustainable Development
Goals (SDGs). In fact, promoting the bioeconomy and its subsectors in Ecuador
allows the country to avail itself of a strategic resource that has been neglected so far,
biodiversity and its genetic wealth. Despite the local interest awakened by the
bioeconomy (Ortega-Pacheco et al. 2018), its understanding and the development
of policies that could exploit its potential continue in an incipient stage.
In this context, the increasing exhaustion of natural stocks and volatility in prices
of raw material (e.g. oil prices) raises the need to promote public policies towards a
socio-economic transition that guarantees the environmental, social, and economic
sustainability of the country, particularly the rural sector. This context provides an
opportunity for the bioeconomy. In the same vein, the fall in prices of raw materials
has an impact on agriculture, generating a crisis of alternatives for the rural sector
and an opportunity for biodiversity-based production schemes that reduce vulnera-
bility to external shocks. Indeed, the National Biodiversity Strategy (NBS)
20152030 has been designed to give way to the industrialization of biodiversity
36 D. Ortega-Pacheco et al.
based on bioknowledge (MAE 2016). It is a structure to protect biodiversity and
catalyse a sustainable transition of the Ecuadorian economy. The bioeconomy is
compatible with this approach to Ecuadors development.
One of the main problems in the analysis of alternative development models are
the opportunity costs between the relative GDP participation of the sector, labour
migration, deforestation, loss of biodiversity, and the expansion of industrial and
service sectors. Any conguration of the bioeconomy must then consider the
complex interdependencies between these variables and the dependence of national
incomes on extractive economies. Falconí and Vallejo (2012) argue that the key
determinants that promote socio-ecological transitions in Andean countries such as
Ecuador are economic efciency, income redistribution, and physical sustainability.
As extractive economies exert environmental pressure and deepen inequalities, their
prospects for economic growth are limited by the carrying capacity of the ecosystem.
Taking these factors into consideration, we have conducted this assessment of the
bioeconomic sectors contribution to the Ecuadorian GDP.
The following section introduces the concept of bioeconomy and how it is
understood by the most relevant organizations. In Sect. 3.3, the Ecuadorian eco-
nomic structure is presented in terms of GDP components and bioeconomic shares
within the economic subsectors. Section 3.4 presents the different models available
for the assessment of the contribution of the bioeconomy. Section 3.5 compares the
models considering the criteria mentioned above. Section 3.6 presents the estimates
of the bioeconomy to the Ecuadorian economy, and Sect. 3.7 introduces ve sectors
in which the bioeconomy has exceptional potential to contribute. Section 3.8 offers
nal take-away ideas and suggests future research avenues.
3.2 Conceptual Framework
The present section aims to explore different denitions of bioeconomy to parame-
terize the identied methodology but not to critically compare the different theoreti-
cal proposals that are available nor to implement a normative analysis (Vivien et al.
2019). Relevant to the operational denition of bioeconomy is facilitating its appli-
cability in other examples, within a time frame that permits the evaluation of its
evolution. In other words, the concept of bioeconomy should be compatible with the
incorporation of items and sub-items of a national system within the methodology to
assess bioeconomy, as well as with the differentiation between the possible scenarios
for the implementation of bioeconomy in a context of productive development.
About these possible scenarios, it is important to consider that bioeconomy
requires the utilization of more resources, processes, and biological principles,
only possible if there is a utilization of new knowledge, technology and information,
and the availability of capacities that are related to its use. Accordingly, it has been
identied that, in the short-run, a technological hybridization would be observed,
whereby traditional technologies and new biotechnologies interact to pave the way
for more efcient and environmental friendly production models (i.e. increase ef-
ciency in the agricultural sector) (IICA 2019). In the long-run, progress in the
3 Social and Economic Contribution of the Bioeconomic Sector in Ecuador: A... 37
biological sciences and information technologies will bring about better varieties and
new uses for biomass. The element that underlies the analysis of the possible
scenarios is the increase and focalization of investments in innovation and develop-
ment (I & D) and the commercial scaling of biodiscoveries, as well as the formation
of scientic and technological capacities, strategies to develop industrial clusters,
support programs, and equitable distribution schemes of the added value that has
been generated. Of particular interest is the possibility that these development
bioeconomy scenarios promote social inclusion by means of the increase of
opportunities in rural areas.
The Economic Commission for Latin America and the Caribbean (CEPAL, by its
Spanish acronym) denes bioeconomy as (Rodríguez et al. 2017):
(a) an economy based on the consumption and production of goods and services
derived from the direct use and sustainable transformation of biological
resources, including biogenic waste generated in the transformation, production,
and consumption processes,
(b) taking advantage of the knowledge of biological processes and principles, and,
(c) technologies applicable to the knowledge and transformation of biological
resources and to the emulation of biological processes and principles.
Other authors and FAO sources (Bracco et al. 2018) consider that bioeconomy
includes:
(a) use of renewable biomass and efcient bioprocesses to achieve a sustainable
production,
(b) use of converging technologies, including biotechnology, and,
(c) integration between applications such as agriculture, health, and industry.
Likewise, there is an increasing interest in the literature in dening bioeconomy
as technological solutions or other articial solutions intended to complement or
substitute non-renewable resources with alternatives with biological base (DAmato
et al. 2019). These solutions are based on:
(a) the idea of applying principles and biological processes in all economic sectors,
(b) the replacement of fossil-based raw materials with biologically based resources
and principles in the economy (Dietz et al. 2018).
Thus, some authors conceptualize bioeconomy as the industrial transition towards
the sustainable use of aquatic and terrestrial resources through the generation of
intermediate and nal products that involve the displacement of the use of products
derived from fossil-based raw materials (Golden and Handeld 2014). Note that
within these approaches, primary biobased products, such as those generated by
agriculture or livestock, are not considered, but only the transformation of these
products by means of an intensive use of knowledge. Therefore, combining these last
approaches, the bioeconomy does not only refer to an industrial sector but also to the
38 D. Ortega-Pacheco et al.
set of economic activities related to the invention, development, production, and use
of products and processes based on biological resources within the national economy
(OECD 2009). That is, a productive transformation that is both biologically based
(Trigo et al. 2013) and circular (Giampietro 2019) as the ground for a socio-
ecological transition (de Schutter et al. 2019; Ortega-Pacheco et al. 2018).
In summary, a denition could be posited: The production and use of biological
resources, biological processes and principles to provide intermediate and nal
goods and services in a sustainable manner in all economic sectors through the
intensive use of knowledge that displaces the use of products derived from fossil
fuel.
From this discussion, it is evident the need for a concept of bioeconomy that
contributes to the comparability, applicability, external validity, and scalability of
the applied methodology. Indeed, this concept should allow the incorporation of the
different groups of sectors and subsectors that each country considers to be
bioeconomy. Similarly, it should allow to interpret the role over time of actions
such as the provision of biomass resources, economic specialization, and
investments in research and development (R + D) in a context that ensures an
effective governance framework for a sustainable bioeconomy(El-Chichakli
et al. 2016; IICA 2019).
3.3 Sectors in the Ecuadorian Bioeconomy
3.3.1 The Ecuadorian Economic Structure
Before detailing the methodology used to identify the sectors that compose the
bioeconomy in Ecuador, it is worth describing the composition of the countrys
economy. Considering the traditional classication of three economic sectors, the
Ecuadorian GDP is distributed as follows: primary 22%, secondary 24%, and tertiary
54% (BCE 2018). Considering a more disaggregated categorization, Fig. 3.1
displays the GDP contribution shares of the most relevant subsectors. Note that
the contribution share of the manufacturing industry is equivalent to that of the Oil
and Mines subsector. In other words, the wealth generation of the countrys indus-
trial apparatus is similar to the contribution of a single natural resource. Such a
characteristic is relevant when determining the contribution of the bioeconomy and
the planning of scenarios for a productive transition.
A priori, an assumption is that the bioeconomy participates more predominantly
in the primary and secondary sectors. Despite the fact that the GDP contributions
from these two are similar, the way their contributions come about is not. Note that
the participation of subsectors in the primary sector (green bars in Fig. 3.1) is mostly
composed of the Agriculture and Oil subsectors, whereas participation in the sec-
ondary sector (orange bars in Fig. 3.1) is less concentrated. The tertiary or service
3 Social and Economic Contribution of the Bioeconomic Sector in Ecuador: A... 39
sector contributes to the GDP the most, as shown by the numerous blue bars in
Fig. 3.1; however, its bioeconomy-related contribution is expected to be low.
1
Based on the concept of resource-industry supply chains, Fig. 3.2 displays the
participation of the main primary (Fig. 3.2a) and secondary (Fig. 3.2b) subsectors.
The agricultural sector has a 39% share of the total primary sector, whereas the
primary resources coming from non-traditional sources, such as aquatic spaces, have
minimal participation due to the specic weight of oil extraction (56%). In the
secondary sector, oil rening has a relatively low participation (8%), whereas the
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
USD (in millions)
Fig. 3.1 Disaggregation of GDP by economic sectors. Green bars denote subsectors of the primary
sector, orange bars denote subsectors of the secondary sector, and blue bars denote subsectors of the
tertiary sector. Source: Central Bank of Ecuador (BCE) (2018)
(a) (b)
39%
2%
3%
56%
Agriculture Aquaculture
Fishing Oil and Mines
52%
8%
5%
35%
Manufacturing Refining
Electricity & water Construction
Fig. 3.2 Disaggregated share of GDP in (a) primary and (b) secondary sectors. Source: Central
Bank of Ecuador (BCE) (2018)
1
Considering the conceptual framework described in the next section, assessing the role of the
bioeconomy in the traditional tertiary sector is less straight-forward than in the primary and
secondary sectors. Mainly for this reason, we will not address this sector.
40 D. Ortega-Pacheco et al.
manufacturing subsector has the highest participation (52%). Note also, the signi-
cant contribution of the construction subsector (35%).
3.3.2 Selection of Bioeconomy Subsectors
The methodology used to measure the contribution of bioeconomic activities to a
countrys GDP is based on the proposal of the Buenos Aires Grain Exchange or
BCBA by its Spanish acronym (Trigo et al. 2015). This methodology proposes the
creation of a satellite account within the system of national accounts (SNA) that is
specic to the bioeconomy. Based on this account, the gross value added
corresponding to the bioeconomy is calculated.
The dimensioning of this satellite account is done by using shares of the contri-
bution to the bioeconomy within each productive sector of the SNA. The denition
of these shares is done only by consulting experts, which can render a high degree of
uncertainty and also limit the reproducibility of the calculation. Another aspect
adopted from the methodology proposed by the BCBA is the consideration that all
biomass is a bioproduct, not only those produced through the use of genetic
engineering. This consideration is also supported by the denition of bioeconomy
selected for this study.
Considering that the methodology proposed by the Buenos Aires Grain Exchange
(Trigo et al. 2015) has advantages and limitations, for the development of a new
methodology, some steps of the base methodology are adopted while other steps are
modied in an attempt to improve them. Thus, in the new methodology for measur-
ing the contribution of the bioeconomy, the use of the SNA as the economic database
of a countrys production is maintained. The use of the SNA guarantees the
applicability of the methodology in countries where it is updated, since its construc-
tion is based on standards set by various international and regional organizations
(Trigo et al. 2015). For countries where national accounts are not public or are
outdated, the methodology presented here will be applicable only after the construc-
tion of an equivalent economic database.
The SNA additionally allows considering the linkages of raw materials and
products between the different productive sectors, for example, the processing of
palm oil uses the palm fruit production, a primary subsector, as its basis. In this way,
the bioeconomic part of the primary production of the fruit of the palm is transferred
directly to the production of the oil by means of the share of bioeconomic contribu-
tion of the fruit production.
Additionally, the creation of a satellite account within the SNA is not included as
part of the methodology of this study due to restrictions on the availability of
information, as well as the low level of disaggregation in the national accounts.
This particularity makes it difcult to estimate specic parameters for the productive
sectors, due to the high aggregation in the sectors of the economy. Nevertheless, this
activity could be carried out based on estimates of productive parameters to deter-
mine the contribution of the bioeconomy for each aggregated sector (Table 3.1).
3 Social and Economic Contribution of the Bioeconomic Sector in Ecuador: A... 41
Table 3.1 Economic sectors considered to be part of the bioeconomy in Ecuador
Economic sector
Fraction of contribution to the
bioeconomy
Primary sector
Banana, coffee, and cocoa farming 0.67
1
Cereal cultivation 0.41
2
Growing owers 0.62
3
Cultivation of tubers, vegetables, melons, and fruits 0.68
4
Oil and industrial crops 0.53
5
Crop support activities 0.09
a
Raising of livestock, other animals; animal products; and
support activities
0.95
6
Forestry, logging, and related activities 0.98
7
Aquaculture and shrimp shing 0.89
8
Fishing (except shrimp) 0.87
9
Aquaculture (except shrimp) 0.87
9
Secondary sector
Meat processing and preservation 0.77
6
Shrimp processing and preservation 0.89
8
Processing of sh and other processed aquatic products 0.71
9
Conservation of aquatic species 1.00
Processing of oils and fats of vegetable and animal origin 0.43
5
Dairy product processing 0.95
10
Production of milling products 0.39
11
Production of bakery products 0.83
12
Manufacture of noodles and other farinaceous products 0.85
b
Sugar processing and rening 0.85
b
Processing of cocoa, chocolate, and confectionery 0.85
b
Prepared animal food processing 0.85
b
Coffee processing 0.85
b
Processing of various other food products 0.85
b
Production of alcoholic beverages 0.85
13
Production of non-alcoholic beverages 0.41
c
Manufacture of tobacco products 0.85
b
Manufacture of threads, yarns, fabrics, and clothing 0.68
d
Manufacture of leather, leather products, and footwear 0.85
b
Production of wood and wood products 0.96
e
Paper manufacturing and paper products 0.95
14
Manufacture of rubber products 0.85
b
Furniture manufacturing 0.88
8
Generation, collection, and distribution of electrical energy 0.02
f
a
Fraction of organic fertilizers, herbicides and pesticides used in Ecuador (INEC)
b
Economic sectors of low contribution. Their contribution to the bioeconomy was not analysed in
detail and only assumed with an average value derived from the other economic sectors
c
Soft drinks are not considered within the bioeconomy considering their contribution to the per
capita consumption of non-alcoholic beverages (Valverde Obando 2018)
(continued)
42 D. Ortega-Pacheco et al.
The main modication made to the methodology proposed by the BCBA lies in
the denition of the SNA productive sectorsbioeconomic contribution shares. In
this study, the calculation of these shares is not only based on the consultation with
experts, but also seeks to dene the part of the production costs of the representative
products of each sector of the SNA that are based on the bioeconomy.
Within the production costs, variable costs and xed costs are considered. The
differentiation of the bioeconomic part of the variable costs is simple, because raw
materials and inputs from bioeconomic activities are considered and those from
non-bioeconomic activities are excluded. For example, in banana production, the
bioeconomic part of variable production costs is the acquisition of young trees and
agricultural inputs of biological origin. If, for example, this activity uses biofuels for
transport, energy production or machine operation, the costs related to the purchase
of biofuels would be included in the bioeconomic part of the production costs. On
the contrary, if the fuels are of fossil origin such as gasoline or natural gas, these
costs are excluded from the bioeconomic part. Similarly, the costs of pesticides and
fertilizers of non-biological (mineral) origin are not included in the bioeconomic part
of the production costs. If these were of biological origin, they would indeed be
added to the bioeconomic part.
Electricity is an additional important item to consider in the contribution to the
bioeconomy. In the proposed methodology, the bioeconomic part of electricity costs
would depend on the bioeconomic part of the local electricity grid. Biological
sources for electricity production are biomass and biofuels. Although wind, solar,
water, and geothermal energy have a smaller carbon footprint than energy derived
from the combustion of fossil fuels, they are not of biological origin, which is why
they are excluded from the bioeconomic part of the local electricity grid.
Within the xed costs, however, are items related to labour, maintenance of
machinery and civil construction, payment of taxes and the monthly payment of
economic investments made for civil construction, acquisition of machinery,
processing equipment, tools, land, and vehicles, among others. Since the economic
activity could not take place without this part of the production expenses, the xed
costs are assumed to be totally bioeconomic.
Table 3.1 (continued)
d
Number obtained from the total number of garment manufacturing enterprises that use cotton and
wool as their raw materials (Ordoñez 2015)
e
Value was assumed as an intermediate between wood production and paper production
f
Fraction of the energy produced from the combustion of biogas and biomass with respect to the
total energy produced in the country (INEC)
1
Guevara Ramia (2015);
2
Baca (2016);
3
Chiluisa Fogacho (2002);
4
Instituto Nacional Autónomo
de Investigaciones Agropecuarias (2002);
5
Mosquera Montoya et al. (2016);
6
Jaramillo Orozco
et al. (2017);
7
Organización de los Estados Americanos (1977);
8
Lalangui Balcázar et al. (2018);
9
Ochoa Vivanco (2015);
10
Córdova Valverde and Valverde Peralta (2015);
11
MSME-Development
Institute (2011);
12
Muenala Colimba (2018);
13
Guadalupe García and Sánchez Estevez (2014);
14
Chiluiza Benítez (2009)
3 Social and Economic Contribution of the Bioeconomic Sector in Ecuador: A... 43
The inclusion of 100% of xed costs in the bioeconomy, however, has
consequences for the measurement of the contribution of the bioeconomy. For
example, if excess machinery is purchased for an activity, the share would
incorrectly suggest that this purchase favoured the bioeconomic part of the produc-
tive activity. On the contrary, if only variable costs are taken into account for the
calculation of the index, the purchase or lease of land is excluded from the
bioeconomic part, which would not be very accurate either since the use of land is
necessary for the economic activity. The advice of experts could be used for the
resolution of this type of conicts in the methodology.
In the specic case of Ecuador, the economic activities considered are included in
the SNA classication of the Central Bank of Ecuador. These economic activities
belong to the primary and secondary sectors. Table 3.1 lists all the sectors considered
as part of the bioeconomy in Ecuador. In addition, the right column includes the
bioeconomic contribution shares calculated for each productive subsector.
In the primary sector, the costs excluded from bioeconomic accounting are
mainly those derived from the use of fertilizers and pesticides of non-biological
origin and from the use of fossil fuels used for transportation and the execution of
other reported mechanical tasks. In the secondary sector, costs related to the pur-
chase of raw materials and inputs of non-biological origin, non-biological packaging
materials, and fossil fuels used in transport are excluded. The item of expenditure on
electricity used during industrial processing was assumed to be non-bioeconomic in
its entirety because energy produced in Ecuador from biogas and biomass accounts
for less than 1% of total production.
Considering the primary subsectors, the bioeconomic contribution shares deter-
mined in this study are lower than in the case of Argentina (Trigo et al. 2015), where
the bioeconomic fraction of these sectors is 100%. Although in the secondary
productive sector, the BCBA study uses varied value indices, in general the shares
determined in this study are lower than those of the Argentine case.
Finally, it should be noted that the sources on which the calculation of contribu-
tion (to the bioeconomy) shares was based were mostly technical-economic studies;
we gave preference to those developed in Ecuador. Additionally, emphasis was
placed on using studies that contain real production data, that is, reported by
operating companies. However, it should be stressed that this calculation is not
without uncertainty. A sensitivity analysis is recommended to verify which rates
should receive additional attention and to reduce such uncertainty.
3.4 Available Models to Determine the Contribution
of the Bioeconomy in Ecuador
Considering the different alternatives to address the contribution in the economy, a
macro-economic perspective is proposed to quantify the contribution share of the
bioeconomy in Ecuador. François Quesnay is one of the rst references for
evaluations of ows of goods and services in the productive apparatus of a society
in order to understand the interactions of its actors. In his model Tableau
44 D. Ortega-Pacheco et al.
économique, he established the bases of the economic theory of the physiocrats.
Chronologically, it is also worth acknowledging the contributions of Leon Walras
theory of general equilibrium (Walras 1874), Wilfred Paretos study of private
property tenure and, at the same time, the contributions of Kenneth Arrow and
Gerard Debreu on the balance between supply and aggregate demand for each good
or service of a specic set of prices (Arrow and Debreu 1954; Pareto 1906).
A study carried out by the FAO (Bracco et al. 2018) estimated the contribution of
the bioeconomy in various countries. It concluded that the most appropriate
approaches are descriptive macro-economic models with a top-down structure that
allow for the evaluation of interactions between different actors in the economy.
Such models include the inputoutput model, the general equilibrium model, and the
social accounting matrix. Therefore, this study focuses on and carries out a literary
review of the analysis of these types of models.
3.4.1 InputOutput Model (IOM)
The inputoutput model (IOM) was proposed by Nobel laureate economist Wassily
Leontief. It consists of a system of linear equations that quanties the
interdependencies between the different sectors in an economic system, which are
then compiled into a set of matrices to evaluate the behaviour of all actors in the face
of external variations. Hence, the matrix representing the productive structure is also
called Leontiefs matrix (L).
The inputoutput model is based on existing transactions in all economic sectors,
information that may generally be obtained from the countriesofcial economic
policy agencies. In the model, the quantity of goods and/or services demanded by
sector jof sector ioutput, measured in monetary terms for a given period, is the result
of a z
ij
ow of goods and services across sectors. Thus, the production of sector i,
denoted as x
i
, is demanded by all intermediate sectors and nal consumers (y
i
) such
as households, government, xed capital formation, and net exports.
xi¼zi1þ...þzij þ... þzin þyi¼X
n
j¼1
zij þyið3:1Þ
where nrepresents the total number of sectors in the economy. In the case of Ecuador
there are 71 economic sectors. By arranging the matrix, the economys total produc-
tion (X) can be dened in terms of all the intermediate consumption (Z
i
) plus all nal
consumption (Y), as shown in Eq. (3.2).
X¼ZiþYð3:2Þ
In the IOM structure, a basic premise is that the demand/production ratio between
sectors is xed, i.e., the amount of inputs that sector jrequires to carry out its
production does not vary (Miller and Blair 2009). This ratio, referred to as a sectors
technical coefcient, is presented in Eq. (3.3).
3 Social and Economic Contribution of the Bioeconomic Sector in Ecuador: A... 45
aij ¼zij
xij ð3:3Þ
According to the structure of the IOM, these coefcients (a
ij
) are xed because
they represent the technological capacity of the society. They only vary if there are
signicant technological changes that modify the productive structure of the society.
Thus, the matrix of technological coefcients (A) can be dened. Through a series of
algebraic operations from Eq. (3.2), the following expression can be obtained:
X¼IAðÞ
1Yð3:4Þ
In Eq. (3.4), the element (IA)
1
is known as the Leontief inverse matrix (L).
The structure of this equation will be used to determine the impact of the technolog-
ical change in Ecuador on the national economy, considering the impacts per se due
to the change in the rening structure, known as direct effects, and the impacts along
the productive chains, known as induced effects.
Following the national accounts provided by the Central Bank of Ecuador, the
models reference year is 2015, generating an inputoutput matrix of 71 sectors (Z
I
).
Based on the theory shown, we obtain the respective technical coefcients (a
ijI
) and
consequently an initial matrix of technical coefcients (A
I
), considering Ecuadors
current rening capacity.
The literature review about the application of this model to the Ecuadorian
economy includes estimates of the transport sector demand (CEPAL 2017), analysis
of the impact of variations in the agricultural sector (Banderas and Hidalgo 2013),
identication of key sectors in the national economy (Fernández 2009), estimates of
the contribution of the construction sector to national GDP (Yagual Velástegui et al.
2018), and estimates of inputoutput matrices for the provinces of Guayas (Palma
Luna and Vega Ramírez 2016) and Carchi (Fundación Alianza Estratégica 2015).
3.4.2 General Equilibrium Model
The general equilibrium model (GEM) is based on the theory of general equilibrium
proposed by Walras. It is worth noting that the complexity of the model due to the
signicant number of equations, number of variables and iterations between them,
made it difcult to enhance its development for several years. However, due to
advancements in computer and high-speed processors, the development of models
based on this theory was possible.
The theory of general equilibrium stems from the premise of the existence of an
equilibrium between the different actors in the market. As such, this type of model
seeks to explain the behaviour and interactions of the actors when faced with
alterations to the condition of equilibrium, using mathematical equations for the
supply (producers) and demand (consumers) of products or services according to the
realities of each society.
46 D. Ortega-Pacheco et al.
This type of model combines the assumption that all markets are in perfect
equilibrium with realistic data derived from social accounting matrices (SAMs) to
represent the initial reference points in equilibrium, after a political intervention.
Equilibrium is guaranteed by price adjustments that cannot be inuenced by internal
agents, such as households, rms, and government. Since they are sensitive to price
variation, consequently, they act as decision makers trying to maximize their welfare
(in the case of consumers) or prots (in the case of producers) under certain
constraints and quantity adjustments (Table 3.2).
The above is linked to a dispute between the actors over the factors of production:
labour (L) and capital (K); the labour factor refers to the remuneration received by
the companys workers as a result of their labour activities, while the capital factor is
reected in the remuneration of the capital produced by an investment. Conse-
quently, workerswages (P
L
) and capital interest (P
K
) are the main elements of
analysis for the labour and capital factor, respectively.
Similarly, considering that society interacts with other economies, i.e., external
sector. The GEMs express through mathematical functions that reect actors
behaviour before the import and export of local and foreign products (Table 3.3),
where the equations are sensitive to variations of the rates (γ
A
,γ
T
) and parameters
(ρ
A
,ρ
T
) that reect the internal productive and consumption structure of the society
both for imports (M) and exports (E).
It is also frequent to refer to this type of models by the name of computable or
applied general equilibrium models. This nomenclature refers to simulations made
by computer systems that combine the concept of equilibrium with realistic eco-
nomic data of the society, to solve numerically the levels of supply, demand, and
prices that support the equilibrium in a set of markets. Therefore, the GEM is useful
for the evaluations of energy policies, as in the case of the bioeconomy and
particularly for policies that imply transitions in the productive and consumption
structure of a country.
With respect to its application in Ecuadorian reality, there are no specic studies
that use the GEM for evaluations to assess the impact of the bioeconomy in the
country; however, in 2005 the Ecuadorian Model of Applied General Equilibrium
Table 3.2 Supply and demand equations (GEM)
Demandconsumers Supplyproducers
Max U ¼βxαi
ixαj
jMin C ¼P
K
K+P
L
L
Subject to: P
i
X
i
+P
j
X
j
¼MSubject to: Q¼tK/KL/L
Optimal allocations: Xi¼
/iM
Pi;Xj¼/jM
Pj
Optimal allocations: K¼1
t
QPL
PK/L;L¼
1
t
QPK
PL/K
Table 3.3 GEM external sector equations
Imports Exports
X¼AðγAMρAþð1γAÞXddρAÞ1
=
ρAXd ¼TðγTEρTþð1γTÞXddρTÞ1
=
ρA
3 Social and Economic Contribution of the Bioeconomic Sector in Ecuador: A... 47
(MEEGA by its Spanish acronym) was developed, which includes households,
government, the external sector, and industry based on the 2001 SAM. This model
was designed to raise the level of discussion about the impact of economic policies in
the country. Its main application evaluated the possible effects on the Ecuadorian
economy of the Free Trade Agreement with the USA (Pérez and Acosta 2005).
Based on the structure of the MEEGA model, in 2007 the Model of Tributary
Applied General Equilibrium Model for Ecuador (MEGAT by its Spanish acronym)
was developed in order to conduct a comprehensive analysis of tax policies, taking
into account the evasion of the value added tax (VAT) and income tax (IRC)
(Ramirez 2007). In 2010 the model for evaluating exogenous shocks, economic
and social protection (MACEPES) was developed. Based on this model, studies
were conducted for seven Latin American countries, including Ecuador (Cicowiez
2012; Cicowiez and Sánchez 2010). More recently, Castro et al. (2018) developed
a General Equilibrium Model for Ecuador to asses the socio economic impacts due to
renery matrix change.
3.4.3 Social Accounting Matrix
The social accounting matrix (SAM) is dened as the matrix representation of the
circular ow of income of a socio-economic system in a given period (BCE 2017a).
It has three main objectives: (1) to organize the economic and social information of
a country in a given period; (2) to provide a synoptic view of the ows of receipts
and payments in an economic system; and (3) to form a statistical basis to build
models of the economic system to simulate the socioeconomic impact of policies
(Giovanni Bellu 2012).
It is a complete and disaggregated data system that is one of the fundamental
elements in economic modelling and descriptive socio-economic analysis. It is
complete and disaggregated because, due to its construction process, it is established
under the Top-Downmethodology, where each element at the macro level
represents a transaction within the same economic system involving different agents
such as households, rms, government, and the rest of the world; and the micro level
explains the disaggregation of different transactions, providing an analytical and
mathematical description to obtain the macro SAM (BCE 2017b). This matrix is
used for economic modelling, as it is the numerical basis for calibrating different
economic models, such as general equilibrium models (Ramajo et al. 1998), and for
socio-economic analysis, as it is a tool for analyzing and applying policies and
planning, since it covers the economic and social structure of an entire country.
The SAM is built under the guidelines established by the United Nations System
of National Accounts. It has a square matrix representation whose structure is fed by
the transactions of different accounts, organized in row (income) and column
(expenditure), or in its representation iand j, which represent the interconnections
between the different economic agents (BCE 2017b). The accounts involved in the
SAM are goods and services (origin and destination of nal goods), production
activities, factors of production, economic agents, capital account, and the external
or so-called rest of the world account (Ramajo et al. 1998).
48 D. Ortega-Pacheco et al.
3.5 Comparative Analysis of the Models
Considering the criteria of comparability, applicability, external validity, and scal-
ability, this section compares the available models to assess the bioeconomys
contribution to the Ecuadorian GDP. The rst consists of the structure of a model
that allows for the comparison of scenarios and policy implementation alternatives,
in order to obtain a broader response to the implications of the bioeconomy. With
respect to applicability, the following are considered: criteria of information avail-
ability, reality of the productive structure, and availability of natural and economic
resources. In other words, the model should prioritize the validity of the results,
considering the existing limitations in its development.
In terms of external validity and scalability, there is a need to structure a model
whose results can be generalized to different populations, whether at a local or
regional level, and whose methodology can be replicated in different economies or
with characteristics similar to those of Ecuador. In this context, it should be noted
that the System of National Accounts and the Social Accounting Matrix are
standardized information in several countries, which allows for external validation
of the results obtained. The scalability is related to the technical and process
engineering aspects. An analysis in this regard will conclude up to what levels the
system could be expanded or adapted, while maintaining or increasing the growth
levels.
In addition, apart from the main criteria, the authors argue there is a need to
include a criterion of easiness by users or readers of the present study. In other
words, it is important that electronic tools are available for users to, by means of the
methodological sheets, evaluate different scenarios or alternative analyses to those
presented in this study.
Without a doubt, the use of the social accounting matrix has been historically and
widely disseminated in several economies, as it is a tool that effectively reects the
socio-economic characteristics of countries. However, this study will refer to the
locally developed SAM model, which is based on Ecuadors system of national
accounts. The use of this model would imply a high applicability since it considers
all conditions of the Ecuadorian system. As a counterpoint, it would be of low
comparability and external validity because it is restricted to the countrys
characteristics, and not necessarily to local or regional characteristics. As a conse-
quence of the contemporaneity of the model, it is probable that there are few studies
or applications based on it, implying a medium scalability, since it has few
references to the economic-technological relations with the aspects of process
engineering.
On the other hand, IOM and GEM models would have better scalability, based on
previous experiences and applications presented earlier, as is the case with the
development of IOM for specic provinces. The previous studies contributed to
the development of economic-technological parameters that would allow the extrap-
olation and evaluation of the conditions of the bioeconomy. Considering the higher
level of mathematical complexity and specic information involved in the
3 Social and Economic Contribution of the Bioeconomic Sector in Ecuador: A... 49
development of a GEM, the applicability criterion would be restricted to the avail-
ability of information.
Without a doubt, one of the strengths of the GEM is the responses of actors in the
economy to possible price variations, a characteristic that is difcult to evaluate in
the IOM. However, its comparability and external validity would be limited to the
availability of economic information from other rms under the same conditions. On
the other hand, the IOM, by not considering this type of conditions, allows structur-
ing versatile models that can be validated and compared with characteristics of other
rms.
Regarding ease of implementation by the user or reader of the report, the IOM and
the SAM score favourably. The former can be structured in a spreadsheet using a
standard operating system, while the latter could be run by the simulators available
from ofcial sources. In contrast, the development of a GEM would involve the use
of more complex computer tools, due to the greater number of variables and
equations.
Therefore, considering the criteria set out in Table 3.4, this study proposes to use
an inputoutput model (IOM) as a basis. By providing methodological sheets, the
model will allow replication for other economic or social conditions, of similar
economies or conditions of extrapolation. Without a doubt, the IOM has its
limitations and restrictions, but its extensive use and the development of similar
studies make it possible to guarantee its versatility and assertiveness.
3.6 Contribution to the Ecuadorian Bioeconomy
Considering the criteria previously dened in Table 3.4, we now proceed to quantify
the contribution of the bioeconomy. We consider three aspects of interest that will
allow its comparison to other economic sectors, as well as with other realities or
societies. Such comparisons are relevant in the decision making, planning, and
denition of strategies to extend the participation of the bioeconomy, i.e., future
scenarios.
Labour and salary.
Production and consumption.
Growth and taxes.
Additionally, the contribution of the bioeconomy in these three aspects is
quantied in segments in order to evaluate the interaction of results according to
Table 3.4 Selection criteriaavailable models
Model Comparability Applicability External validity Scalability
IOM High Medium High High
GEM Medium Medium Medium High
SAM Low High Low Medium
50 D. Ortega-Pacheco et al.
classication in the traditional economy as: primary or secondary. It is important to
note that these segments are structured according to the methodology of means to
take advantage of the bioeconomy, proposed by the Inter-American Institute for
Cooperation on Agriculture (IICA by its Spanish acronym) (IICA 2019).
Hence, the bioagriculture segment is linked to traditional agricultural activities
that produce goods and services derived from the direct use and sustainable trans-
formation of biological resources. These are classied as primary economic
activities, which are highly employment-generating but less capital-intensive.
Within this segment, the main focus is on the use of resource biodiversity through
innovation and the development of domestic markets, as well as sustainable intensi-
cation through agricultural practices that raise production levels while maintaining
or improving environmental performance (Table 3.5).
With respect to the secondary economic sector or industrial sector, which are
highly demanding in terms of capital, a segmentation is proposed based on the origin
of the raw materials used in the industrial processes, which can be of plant or animal
origin. The aim is for these segments to develop biotechnological applications to
raise the level of technological development in traditional production processes.
Another path identied is the increase of efciency in the value chains, mainly in the
use of wastes and residues for the use or creation of by-products.
Additionally, considering the energy consumption forecasts in the transportation
sector, as well as the potential use of second-generation biofuels, a segment
designated as bioenergy is proposed; there is a high potential for the use of biomass
from the agricultural sector for energy generation. The production of bioreneries
would be a replacement alternative for fossil fuels, mainly for the production of
ethanol for passenger transport consumption.
In order to determine the contribution of the bioeconomy to the aspects of interest,
we propose specic quantiable indicators that are available in the system of
national accounts, as well as in the countrys IPM. Consequently, Table 3.6 presents
an estimation of the participation in each of the indicators under the concept of
bioeconomy. Within the methodological structure, each indicator is dened as a
variable to be calculated, according to an established nomenclature.
The methodology proposes to estimate how many jobs (Emp.) are related to the
bioeconomy in the Ecuadorian productive structure, as well as the corresponding
total wage bill. Along the same lines, it is of interest to determine how much of the
total production and current intermediate consumption is related to the bioeconomy
and, consequently, estimate how much the bioeconomy contributes to the generation
Table 3.5 Subsectors of the bioeconomy
Segment Economic sector Vector reference (k)
Bioagriculture Primary 1
Animal bioindustry Secondary 2
Crop bioindustriy Secondary 3
BioindustryManufacture Secondary 4
Bioenergy Secondary 5
3 Social and Economic Contribution of the Bioeconomic Sector in Ecuador: A... 51
of wealth (GVA) and taxes to the central government (Tax). Shortly, the aim is to
carry out a comprehensive analysis of the contribution of the bioeconomy in multiple
aspects so as to nourish the debate on this topic, and not only to focus its analysis on
a specic indicator.
The calculation for each indicator is determined by the double sum presented
below in Eq. (3.5a), which considers the ve segments of the bioeconomy
(Table 3.5), as well as the contribution factors from Table 3.1. Equations 3.5b and
3.5c are equivalent representations of Eq. 3.5a. The bioeconomic segments are
denoted by the ksubindex and the economic sectors by the ij subindexes. Therefore,
the ijk coordinates represent an economic sector within the segments of the
bioeconomy. This method quanties the contribution of the segments rst, in
order to quantify the contribution of the bioeconomy as a whole by means of a
general summation. For example, the generation of employment is calculated for the
bioagriculture, animal bioindustry, crop bioindustry, manufacturing bioindustry, and
bioenergy sectors, where the total sum would imply the generation of employment in
Ecuador related to the bioeconomy.
Indicator ¼X
5
k¼1X
n
i¼1j¼1
Variableijk Factorijk ð3:5aÞ
Indicator ¼
vij1
vnn1
0
B
@
1
C
A
TFij1
Fnn1
0
B
@
1
C
A
zfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}|fflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{
Bioagriculture
þ
vij2
vnn2
0
B
@
1
C
A
TFi2
Fn2
0
B
@
1
C
A
zfflfflfflfflfflfflfflfflfflfflfflfflfflffl}|fflfflfflfflfflfflfflfflfflfflfflfflfflffl{
Animal Bioindustry
þ
vij3
vnn3
0
B
@
1
C
A
TFij3
Fnn3
0
B
@
1
C
A
zfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}|fflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{
Crop Bioindustry
þ
vij4
vnn4
0
B
@
1
C
A
TFij4
Fnn4
0
B
@
1
C
A
zfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}|fflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{
Biomanufacture
þ
vij5
vnn5
0
B
@
1
C
A
TFij5
Fnn5
0
B
@
1
C
A
zfflfflfflfflfflfflfflfflfflfflfflfflfflfflffl}|fflfflfflfflfflfflfflfflfflfflfflfflfflfflffl{
Bioenergy
ð3:5bÞ
Indicator ¼V1F1þV2F2þV3F3þV4F4þV5F5ð3:5cÞ
Table 3.6 Variables used to estimate the contribution of the bioeconomy
Aspect Indicators Nomenclature
Labour and salary Jobs generated
Total wage bill
Emp.
Sal
Production and consumption Total production
Intermediate consumption
TP
IC
Growth and taxes Gross value added
Taxes on production
GVA
Tax
52 D. Ortega-Pacheco et al.
3.6.1 Labour and Salary
As mentioned earlier, the labour and salary aspects allow us to quantify how many
workers are related to the bioeconomic processes, as well as the remuneration
involved in this type of activities. Such an analysis allows researchers to assess the
quality of work and to propose possible alternatives for the improvement of these
activities. In 2017, according to statistics from the Central Bank of Ecuador, 7.5
million jobs were generated in the countrys productive sectors, of which 46%
corresponded to the services sector, as shown in Fig. 3.3a. This fact is not surprising
as the largest job-generating productive sector in the country. Meanwhile, the
bioeconomy contributed with 20% of the jobs generated in the same year, a value
equivalent to 1.53 million workers.
It should also be noted that the generation of jobs in the bioeconomy is higher
than the generation of jobs in the traditional manufacturing industry (5%), the
construction sector (8%), and energy generation and transport (8%); a situation
that unfolds in an economy with low levels of industrialization and high export of
primary products. It should be noted that the greatest concentration of jobs generated
by the bioeconomy would be in the bioagriculture segment (76%), while the other
segments in the bioeconomy (bioindustries, biomanufacture, and bioenergy) would
represent a 24% share. Thus, there is a high potential for employment generation in
the last two sectors.
Labour compensation allows us to evaluate the quality of employment. In this
regard, the services sector represents the main share in workersremuneration, as
displayed in Fig. 3.3b. In addition, note that the public sector, which generates only
Fig. 3.3 Contribution to employment generation (a) and labour compensation (b). Source: Central
Bank of Ecuador (BCE) (2017a,b)
3 Social and Economic Contribution of the Bioeconomic Sector in Ecuador: A... 53
5% of jobs, has a signicant share of workerstotal wage bill (22%). In fact, a public
sector worker would have an average monthly salary of US$1746 in 2017, approxi-
mately 4.6 times the monthly minimum wage in that year. The opposite situation
occurs with jobs related to the bioeconomy, which represent a share of only 10% of
the workersremuneration (Fig. 3.3b). On average, a worker in this sector receives
US$207 per month, which is less than the monthly minimum wage and less than the
minimum cost of living. This situation reects the existence of inadequate work
conditions and high labour informality in the sector, as it is mostly primary.
3.6.2 Production and Consumption
The consumption of intermediate products in 2017 reached a total of US$73,836
million, linked to a production of US$170,919 million, while the difference was
destined to nal consumption. Consequently, Fig. 3.4a shows that there is an almost
equal participation between the bioeconomy (23%), service sector (26%), and the
traditional manufacturing industry (19%) in the intermediate consumption of goods
and services, implying a signicant participation of the bioeconomy. More than 90%
of the intermediate consumption of the bioeconomy is linked to the secondary sector
(crop and animal-related bioindustry) and the rest to primary products
(bioagriculture). The higher added value of processed products compared to agricul-
tural products explains this situation.
Fig. 3.4 Contribution to intermediate consumption (values at consumer price) (a) and total
production (b) Source: Central Bank of Ecuador (BCE) (2017a,b)
54 D. Ortega-Pacheco et al.
Regarding total production, the services sector has contributed the most (US
$55,922 million) followed by the bioeconomy (US$30,452 million); the latter is
even larger than the manufacturing and construction sectors, as displayed in
Fig. 3.4b. Consequently, the bioeconomy has room for growth in the production
of goods and services. Once the labour and production aspects are exposed, we will
expand the contribution of the bioeconomy in the generation of gross added value in
society, i.e., the generation of wealth, as well as its contribution in taxes for the
Ecuadorian state.
3.6.3 Growth and Taxes
Conceptually, the added value is composed of the sum of capital and labour
remunerations. In 2017, the Ecuador generated US$97,082 million in gross added
value contributions, considering all sectors in the economy. As may be expected,
Fig. 3.5a shows that the services sector was the main contributor (38%), followed by
the bioeconomy (14%). Of the US$13.279 billion in added value linked to the
bioeconomy, it is worth noting that there is an equitable participation between the
primary (bioagriculture) and secondary sectors (mostly crop and animal-related
bioindustry and biomanufacture). Since there is low remuneration for the labour
factor in the primary sector of the bioeconomy, this large contribution to the gross
value added would be explained by a higher return to the capital factor in this same
sector.
Fig. 3.5 Contribution to gross added value (a) and taxes on production (b) Source: Central Bank of
Ecuador (BCE) (2017a,b)
3 Social and Economic Contribution of the Bioeconomic Sector in Ecuador: A... 55
Note in Fig. 3.5b that the services sector, the sector with highest production and
consumption levels, is consequently the sector that contributes to taxes the most.
Note also that, since 2013, the oil and mining sector signicantly increased their tax
generation, reaching a participation of 8% in 2017, compared to 1.4% in 2009.
The sectors related to the bioeconomy have maintained a rather stable participation
in the generation of taxes, with an average participation of 12.22%. In 2017, the
bioeconomy generated US$132 million in taxes, which is more than the contribution
of the industrial manufacturing sector but less than that of energy and transport.
Thus, there seem to be opportunities to increase the participation of bioenergy at the
expense of traditional energy sources that are mainly consumed in the transportation
sector.
3.7 Insights for Assessing the Contribution of the Bioeconomy
in Ecuador in a Future Scenario
To identify feasible possibilities of expansion of the bioeconomy, this section
presents settings in the Ecuadorian context that offer a large potential for its
development, considering it an opportunity for productive transition, given an
unfavorable oil production horizon and signicant fossil fuel energy
consumption (Espinoza et al. 2019; Verdezoto et al. 2019). These settings are an
estimation of the potential for improvement of agricultural and livestock activities in
terms of yield per area of arable land used; estimation of the potential for the use of
fertilizers, herbicides, and pesticides of biological origin; estimation of an industrial
and energy development based on biomass; an estimation of the economic potential
of the expansion of biological wastewater treatment; and conguration of the IOM to
evaluate the future contribution of the bioeconomy. The methodologies to be used
for each of the above items are described below.
3.7.1 Potential for the Improvement of Agricultural and Livestock
Activities in Terms of Yield per Area of Arable Land Used
This contribution is calculated by estimating production yields per hectare of the
main agricultural and livestock products. For this purpose, the environmental statis-
tics available on INECsVDatosplatform
2
could be used. The results would be
compared with yield data reported in countries of the region and other continents
with similar climatic and biodiversity conditions. The calculation strategy shall seek
not only to increase current crop and livestock production but also to improve land
use that reduces the expansion of the agricultural frontier and the consequent
degradation of native ecosystems.
2
Available at: https://www.ecuadorencifras.gob.ec/vdatos/
56 D. Ortega-Pacheco et al.
3.7.2 Potential for the Use of Organic Fertilizers, Herbicides,
and Pesticides
Until 2016, 9% of total fertilizers, herbicides, and pesticides used in Ecuador were of
organic origin. Taking this percentage as a basis, it is important to review the impact
of the expansion of the production of organic inputs for agriculture and the displace-
ment of products of chemical origin and fossil materials. The limitations of organic
products in terms of waste generation and product yields per hectare should be taken
into account.
3.7.3 Estimating Biomass-Based Manufacturing and Energy
Development
Considering that one of the main raw materials of the bioeconomy is biomass,
Fig. 3.6 shows the mass weight of the primary economic sectors in Ecuador. Most
of the data on the mass size of bioeconomic productive activities in Table 3.1 were
obtained from the INEC (2014) and from INEC environmental statistics.
The production of bananas, rice, corn grains, African palm, sugarcane, and wood
is the main primary productive activity that can become abundant sources of
biomass. Among the secondary economic activities, shrimp, coffee, cocoa, and
sugarcane processing are considered potential sources of biomass due to their
1000 10000 100000 1000000 10000000
Banana
Cocoa (dry grain)
Coffee (golden grain)
Rice (with rice husk)
Pea
Barley
Bean
Haba
Maize (corn)
Corn (grain)
Soya
Wheat
Roses (a)
Other flowers (b)
Potato
Cassava
Broccoli
Tomato
Fruits (c)
Oilseeds (African palm)
Sugar cane (fresh stem)
Wood
Annual production, ton/year
Fig. 3.6 Potential sources of biomass in Ecuador today. (a) It is assumed that the rose together with
the stem weighs 25 g. (b) The reported number of stems produced is assumed to be the same weight
as a rose stem. (c) Mango, passion fruit, orange, and tree tomato
3 Social and Economic Contribution of the Bioeconomic Sector in Ecuador: A... 57
production volumes and relative geographic concentration. Table 3.7 presents the
estimation of the amount of biomass available as waste.
The wastes considered as potential sources of biomass are 10% of all lignocellu-
losic material (plants, leaves, and roots) left after a harvest of transitional crops, i.e.,
cereals, tubers, and vegetables. Normally this material is left in the elds for soil
nutrition (Lal, 2009), so its use is proposed at 10% only. This percentage could vary
considering the possible expansion of the use of organic fertilizers whose contribu-
tion in trace minerals is signicant. The items determined by this calculation are
straw, stubble, and unspecied lignocellulosic wastes that bind all the other minor
products listed in Fig. 3.4. The economic potential of using these lignocellulosic
materials for the production of a range of products such as nutritional supplements,
edible fungi, chemicals, bres, biomaterials for construction and biomedical
applications, polyphenols, bioactive substances, energy production, among others,
will be studied (Cheali et al. 2015; IICA 2019; Lal 2009).
Table 3.7 Biomass available from waste in Ecuador
Available biomass Ton/a (/1000) Waste in kg/product in kg
Primary sector
Rice straw 210.0 1.45
1
Rice crust 289.7 0.07
1
Banana stalk 1032.1 0.13
2
Maize stubble 463.1 2.94
3
Unspecied lignocellulosic waste 3642.9 2.44
4
Secondary sector
Shrimp shells 222.6
a
0.44
5
Cane bagasse 3301.0 0.40
6
Coffee processing residues
Barks 0.2 0.12
b7
Pulp 0.6 0.29
b7
Silver skin 0.1 0.05
b7
Spent grain 1.0 0.54
b
Cocoa processing residues
Bark 11.5 0.07
8
Wasted grain 10.9 0.066
8
Mucilage 11.4 0.07
9
Noneconomic sector
Municipal waste
c
2607.1 0.717 (INEC)
a
Shrimp export volume was obtained from the National Chamber of Aquaculture of Ecuador (http://
www.cna-ecuador.com/estadisticas/)
b
Calculation made considering that fresh grain (INEC data) has 55% humidity (Blinováet al. 2017)
c
Cardboard, paper, organic waste, and wood were taken into account
1
Moraes et al. (2014);
2
Pazmiño-Hernandez et al. (2017);
3
Muñoz-Tlahuiz et al. (2013);
4
Rodrigues
Lima et al. (2005);
5
Khan et al. (2014);
6
Tyagi et al. (2019);
7
Blinováet al. (2017);
8
Akinnuli et al.
(2014);
9
Balladares et al. (2016)
58 D. Ortega-Pacheco et al.
The secondary production sector can provide biomass in the form of waste from
the processing of sugarcane, shrimp, coffee, and cocoa. Sugarcane bagasse has
received attention as a raw material in the production of ethanol and other high
value-added products such as xylitol, enzymes, organic acids, microbial protein,
hydrocarbons, and furfural, among others (Nisticò 2017; Restrepo-Serna et al.
2018). Since bagasse is currently used as fuel by Ecuadorian sugar mills, the use
of its ashes in the formulation of cements could also be considered due to its high
silica content.
Residues from shrimp processing are considered to be important sources of
calcium carbonate and chitin. Chitin is a long-chain sugar that can be used for the
production of pharmaceuticals derived from chitosan and glucosamine, valuable
monomers for the biopolymer industry (Oddoye et al. 2013). Coffee husks can be
used as a source of bioactive substances, in the production of biogas and
bioabsorbents for the removal of cyanide, heavy metals, dyes, lead, and uorine in
water treatment. Coffee pulp also has signicant amounts of tannins, polyphenols,
and caffeine. Silver skin is a potential source of antioxidants and can be used in
functional food formulations (Blinováet al. 2017). From the residues of cocoa
processing, mucilage is considered a raw material for the production of beverages,
pectin, and as a source of sugars for fermentation. The shell, on the other hand, can
be used for energy production and its ashes in the manufacture of soil fertilizers or
soaps because of their high potassium and potassium soda content (Balladares et al.
2016; Kaviedez Hernández and Loyola 2014).
The proposal to use these wastes is based on the relative geographical concentra-
tion and high volumes of processing, such that their large-scale industrialization will
not be limited by supply chain costs.
3.7.4 Estimation of the Economic Potential of Water Treatment
Expansion
Water pollution has major effects not only on public health but also on a range of
economic activities that depend on clean water. Public health is affected on two
fronts: by the direct consumption of contaminated water and by the consumption of
food products that were exposed to contaminated water during their production.
Economic activities that are limited by the existence of contaminated water sources
are tourism, commercial shing and aquatic animal farming, and recreational
businesses, among others. The fact that modern water treatment plants use biologi-
cally active sludge as a technological basis means that this sector can be explored as
part of the bioeconomy.
The assessment of the economic potential of the expansion of the wastewater
treatment sector will be based on the sum of potential reductions in the economic
impact on peoples health, the expansion of tourism and recreation businesses
related to water sources that are currently biologically contaminated, and the expan-
sion of the commercial shing industry using currently polluted freshwater sources.
3 Social and Economic Contribution of the Bioeconomic Sector in Ecuador: A... 59
This calculation should be based on the estimated ow of contaminated water
sources in Ecuador. For this purpose, it is proposed to use the ratio between the
monitoring points of the National Institute of Meteorology and Hydrology
(INAMHI, by its Spanish acronym) where the concentration of fecal coliforms
exceeds 1000 MPN/100 mL, and the total number of monitoring points. This limit
is one of the criteria for dening suitable water for crop irrigation according to the
Unied Text of Secondary Environmental Legislation (TULSMA, by its Spanish
acronym). According to the most recent data available (2013), in 231 of 503 stations
in total the concentration of fecal coliforms exceeded the limit, i.e., in 46% of the
points. To put this percentage into perspective, it can be considered that according to
Ecuadors National Water Secretariat (SENAGUA, by its Spanish acronym), 70% of
water sources below 2800 m (above sea level) have a considerable level of pollution.
3.7.5 Structure of the InputOutput Model to Assess the Future
Contribution of the Bioeconomy
For the structure of the alternative scenario, one in which the bioeconomy has a
greater participation in the social and productive structure, we propose the use of the
IOM with base year 2017. For this purpose, we rely on the criteria presented
previously. Two alternatives have been identied to address the objective.
The rst consists in varying the technological-productive parameters in the
primary and secondary sectors of the Ecuadorian economy, assuming that the
implementation of the bioeconomy will bring about structural changes in society
as depicted in Fig. 3.7a. It should be noted that this premise would imply signicant
investments by either the state or the private sector, in addition to the availability of
Fig. 3.7 Inputoutput model structure considering a shock in technology (a) and a shock in
consumption (b)
60 D. Ortega-Pacheco et al.
raw materials, infrastructure, and qualied professionals in the prioritized areas.
Undoubtedly, the above-mentioned aspects are difcult to access in the short term.
As a second alternative, variations in the nal consumption of goods and services
are proposed, focusing mainly on household consumption as shown in Fig. 3.7b.
This premise consists in consumers preferring goods and services based on the
bioeconomy, displacing the preferences for traditional goods of fossil origin or
more polluting technologies. Notice that variations in nal consumption do not
consider variations in exports, reecting the importance of oil exports, since the
economy is still very sensitive to variations in this sector. It bares mentioning that
variations of consumption would assume the existence of incentives to consumers,
which can be channeled through tax incentives to sectors based on the bioeconomy
or market regulation for traditional products, i.e., structured approaches in a public
policy aiming for the development of the bioeconomy in the country.
3.8 Conclusion
The international scientic community acknowledges Ecuadors biodiversity as a
competitive advantage whose potential is still not fully comprehended locally.
Despite the institutional and academic local interest in the bioeconomy as a means
for a transition of the productive matrix, the discussion is still lacking studies that
quantify the sector or its potential. We hope that the present work nourishes the topic
by assessing the current contribution of the bioeconomy sector to the Ecuadorian
GDP. We evaluate the available methodologies for this exercise considering ve
criteria. Based on a comparison of the models, the inputoutput matrix ranks best in
terms of comparability and external validity. The contribution of the bioeconomy
sector in Ecuador was then calculated in terms of employment, total wage bill,
consumption, production, gross added value, and taxes on production. In almost
all aspects, except for total wage bill and taxes on production, the contribution share
of the bioeconomy sector ranks second. The methodology proposed gives room for
the measurement of the impacts of bioeconomic measures in developing economies.
Acknowledgement This study was completed, thanks to the helpful feedback and funding of the
Inter-American Institute for Cooperation on Agriculture (IICA).
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... A "new" dimension of environmental strategies in this sense is the bioeconomy, defined as an industrial transition toward the sustainable use of biological resources in intermediate and final products for economic, environmental, social, and national security benefits. It can leverage economic growth in agricultural communities, in line with sustainable objectives (ORTEGA-PACHECO et al., 2018). However, as we are about to demonstrate in the Ecuadorian case, inadequate working conditions and high levels of informality can persist in sectors related to the bioeconomy. ...
... The situation reflects the existence of inadequate working conditions and high informality in the sector, especially in the primary sector (ORTEGA-PACHECO et al., 2021). Further, the definition of bioeconomy includes goods (bananas, coffee, cocoa, shrimp) whose production and/or extraction does not necessarily, if not rarely, correspond to structural change based on new green technologies or services that satisfy the BV. ...
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