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Made in Cuba: The challenge of conquering the market

cuba producciones exportarMinistry of Foreign Trade reports that a survey has been conducted in all provinces to identify potential exports, since every product or service placed on the world market, no matter the scale, provides needed hard currency

When we hear about a non-state economic actor venturing into import and/or export operations, almost automatically our mind associates such activity with agro-industrial products, equipment, accessories, raw materials….

But one of the positive elements of regulations published in August of 2020, which opened the doors to this type of foreign trade via specialized state companies, is that the option is not limited to self-employed workers or non-agricultural cooperatives, but is available to the entire non-state sector, and that services and goods as varied as the market itself that can be placed in the international arena.

This is well understood by self-employed worker, Bernardo Romero, founder of Ingenius Cuba, a micro-company offering computer and electronic solutions that has already signed three export contracts through state enterprises, two via Softel and one through Desoft.

“We do not export a product, but rather a service that could be defined as software development tailored to the client’s needs. Thus far, we have only signed small scale agreements, as we are just starting, but the goal is to continue growing and positioning ourselves in a foreign market that is competitive and demanding.”

Although Romero states that the experience of exporting has been positive and he is grateful for the specialized support provided by government agencies, he adds, “There are many elements that can be improved and could be changed in order to move forward with this policy, which can be of great benefit to non-state forms of management and to the country as a whole.”

Data recently provided by the Ministry of Foreign Trade and Investment (Mincex) indicate that through the first half of January 2021, 4,450 non-state forms of management had approached the specialized companies, while 2,081 have firm intentions to establish some type of operation.

Since the regulations were published five months ago, 863 contracts have been signed: 42 for exports and 821 to import. The negotiations have entailed transactions totaling 22 million dollars.

When analyzing the data, readers may wonder why the number of agreements signed for importing goods is higher than those related to exports.

According to Vivian Herrera Cid, Mincex general director of Foreign Trade, the entire Cuban economy as well as non-state economic actors tend to resort to imports to meet their needs, a tendency that must be reversed to the extent that national industry is able to meet the growing demand of all producers and service providers.

Along with the negotiations, she explained to Granma, a survey has been conducted in all provinces to identify potential exports, since every product or service that can be placed on the world market, even on a small scale, provides access to hard currency.

The dearth of these initiatives, she said, along with the technological obsolescence of Cuba’s industrial stock, management inertia and and excessive number of regulations, are among the causes that have led to the decline in exports. The country has now begun to remove obstacles and the results, sooner rather than later, should be positive, Herrera stated.

“Nonetheless, it must also be borne in mind that exporting is no simple matter. In addition to complying with a series of technical requirements and meeting international standards, negotiations are required to allow an exportable product can be placed in a market, where it will be competing with other recognized brands,” she added.

These are procedures that are often unknown or not fully mastered by non-state management, but which foreign trade companies can handle efficiently, since they have the experience to facilitate the processes and even make the operations less costly, since Cuba is a signatory of several trade agreements, which include benefits in tariff matters, she explained.

Although some have questioned why commercial import and/or export activity must be conducted through specialized state companies – currently there are 41 – reality has shown, in the words of Herrera, that “such facilitation is necessary, taking into account the dissimilar regulations in existence, as well as the importance of knowing the clients, their financial capacity.”

A similar opinion is shared by Orelvis Bormey, who describes as “satisfactory and essential” the advice provided by Cubaexport during the entire process, which allowed his peanut candies to make the long journey from Villa Clara to Italy.

“Initially, as part of testing the market, we exported 5,000 peanut nougats bars in a 75-gram format, including 2,000 fully ground and 3,000 ground with some nuts. Cubaexport had established working relations with the foreign entity and this provided a safe environment for commercial transactions,” he told Granma.

For Bormey, formally marketing his products for international consumption has been “an excellent experience that gives results, encourages and rewards work and dedication.”

In addition, he said, exports provide income in hard currency, which can boost the finances of the new forms of management and those of the country. “This income, in turn, allows us to make imports that will guarantee the incorporation of technology, which contributes to greater efficiency of processes and lowers production costs, which then define sales prices.”

Bernardo Romero, another self-employed worker, considers the advice of the intermediary companies valuable, since they are well organized and have access to the experience of lawyers and marketing specialists, but also believes that regulations governing the export process for small scale, rapid delivery services should be reviewed.

We are not talking about exporting containers of avocados, pineapples or charcoal, he said, but about services like software and IT solutions, which are obliged to go through an excessively long process, when foreign clients requesting this type of service are looking for operability, speed and efficiency.

This does not mean that intermediary companies are not necessary, he said, but rather that analysis is needed to determine what services can be managed in a different way, given their nature.

Experiences such as those of Orelvis and Bernardo show that it is possible, and feasible, for non-state forms of management to make inroads into foreign trade, and that the path is gradually being cleared of the initial uncertainties and fears, although there remains a long way to go and much room for improvement.

As the Mincex general director of Foreign Trade admits, the entry into effect of new regulations governing this activity has imposed a challenge these processes have customarily been conducted.

In the new scenario, state companies – which include meticulous planning of imports and/or exports in their daily routine – are facing a novel work dynamic, undertaking tasks that demand greater immediacy and are of a smaller scale, and this has not yet been fully achieved, she pointed out.

“For example, importers such as Tiendas Caribe, Cimex and Sasa are accustomed to purchasing large volumes of homogeneous products and then selling them on the market. They initially found the new dynamics strange, and this created ‘bottlenecks’ that slowed the procedures, in addition to other deficiencies such as lack of communication with non-state management and resistance to change.”

Regarding imports specifically, several customers have indicated their dissatisfaction with delays in the arrival of their orders.

“Although thus far I have received all the items with the agreed upon quality and price, it would be helpful if the specialized entities kept certain products in stock, which would allow us to buy them when needed and without delays,” stated Caridad María González Guerra, a self-employed food services provider, who has imported raw materials to make ice cream.

Many workers in the non-state sector do not have access to large amounts of hard currency to pay for significant purchases in advance and, on the other hand, the U.S. blockade and the epidemic have made importing more complicated, leading to delays in the delivery of orders of up to two or three months, she said.

According to Herrera, these delays occur when the goods are not available within the country on consignment and buyers must wait for their arrival from abroad. However, she clarified, more than 50% of contracted orders have been processed through the consignment or bonded warehouse modality, which allow goods to be delivered immediately.

Another concern raised by non-state management is related to the possibility that specialized companies could suggest types of markets or possible clients to the non-state sector, which would optimize operations, since they would involve known, reliable foreign entities with which, in many cases, commercial relations have been previously established.

We cannot forget that this type of foreign trade activity began only a few months ago, and non-state management as well as specialized companies are immersed in a continuous process of learning as they work. This is the time to perfect how they function, to together ensure that imports contribute to improving the quality of services, and that the Cuba trademark conquers the international market.

(Taken from Granma)

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