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Announcement of new measures for Foreign Trade and internal wholesale and retail trade

medidas-economicas-2022-cuba-portada-Betsy Díaz Velázquez, Minister of Domestic Trade, and Ana Teresita González Fraga, First Deputy Minister of Foreign Trade, appeared this Monday at the Round Table to report on new economic measures that are part of those announced by Deputy Prime Minister Alejandro Gil in the recent session of the National Assembly of People’s Power.

First Vice Minister of Foreign Trade: Why take these measures?

At the beginning of the television space, the First Deputy Minister of Foreign Trade, Ana Teresita González Fraga, stressed that the announced measures should not be viewed independently or in isolation, but rather are decisions that will lead Cuba to recover from the complex economic situation it is facing. the country and progress progressively.

González Fraga referred to the foreign exchange restrictions in which state entities with commercial activities operate, which has caused a shortage in the internal market of goods highly demanded by the population and by non-state actors. It has also caused the development of spontaneous and informal forms in the supply chains, which influence the increase in prices.

“The country has been adopting a group of measures to deal with this situation, such as, for example, increasing the use of consignments and, to a lesser extent, the sale of goods under the customs warehouse regime, since they are ways to have goods in the country”, he stressed.

The deputy minister pointed out that state companies have also been created to provide foreign trade services, under the legislation issued in relation to MSMEs, which have “more flexible provisions in their operation than the rest of the state companies that today do foreign trade.

These state MSMEs – she explained – have specialized to offer foreign trade services to non-state management forms. The establishment of foreign investment modalities in wholesale trade has also been promoted. Two have already been constituted and there are others in negotiations.

“The actions have been insufficient to stop the complex economic situation that the country has today. The situation of shortages in the domestic market continues and the expected impact on the development of wholesale trade has not been achieved”, she acknowledged.

González Fraga asserted that they have not taken advantage of the benefits that the participation of foreign investment could bring today in the development of trade, such as, for example, in terms of access to supply markets, in attracting financing, equipment, methods of administration, or the use of innovative techniques for logistics management.

“The exchange scheme should contribute to some extent to the development of wholesale and retail trade,” she said.

In detail, the new provisions

Based on these evaluations, he specified, several measures have been adopted that will be reported below.

Firstly, it has been decided to promote the development of businesses throughout the country in order to promote wholesale trade through foreign investment.

“It is important to know that foreign investment, until today, we have basically used to produce goods and services, and today we are proposing that foreign investment entities be created to market in the wholesale market.”

Another approved measure is to selectively promote the creation of joint ventures under the foreign investment law to carry out retail trade activities, which will allow greater efficiency in this area of ​​commerce.

It was also approved to promote that these foreign investment businesses be used, fundamentally, for the sale of raw materials, supplies, equipment and other goods that can contribute to promoting the development of national production.

In addition, to the supply of finished goods such as food products, cleaning and economic line and installation of electricity generation systems with renewable energy sources.

“We want these measures to have an immediate impact on shortage problems and help improve offers in stores in MLC and in national currency,” said the First Deputy Minister of Foreign Trade.

Another of the approved measures is to encourage these entities to pre-finance national producers who have the conditions to become suppliers. “We are talking about the fact that today we have installed capacities in the country that, due to lack of financing, cannot produce goods.

“What is sought is to pre-finance these national producers so that, in time, they deliver the finished goods to the foreign investment modalities, and these, in turn, market them in the national market to contribute to a greater supply in the national market,” he explained.

The foreign investment modalities themselves – specified the deputy minister – can also sell and wholesale these products.

Another of the measures is to apply to these entities a differentiated financial scheme that allows guaranteeing the stability of the supply chain.

“This scheme must include the authorization to make sales in MLC,” he said, adding that the liquidity that the country obtains from taxes and other income associated with these businesses, will be used to stimulate national production, support imports of economic line products and market them to the population in Cuban pesos.

González Fraga reported that the other approved measure is to facilitate foreign investment modalities established in the country for the provision of goods and services to sell in the wholesale trade segment, including non-state management forms, NGOs, embassies, representations companies and branches in Cuba.

“These are decisions that substantially modify the role that has been given to foreign investment in internal trade, and that will be accompanied by adequate control and monitoring mechanisms to guarantee that these measures are effective.”

The Vice Minister of Foreign Trade pointed out that the approval of these businesses will be carried out by the competent authority, for which it must be ensured that they are in correspondence with the objectives for which they were approved.

Díaz Velázquez: The commerce sector also needs foreign investment
Betsy Díaz Velázquez, Minister of Internal Trade, pointed out that, since the design of the economic strategy, trade has been at the center of it, focused on measures that allow resolving the complex situation in supply and taking into account the difficult context international, the logistics crisis and the effects generated by the economic blockade against Cuba.

“Trade has not really been a prioritized sector in the field of foreign investment, because the main projects have been aimed at the production of goods and services,” she said.

However, she specified, every year a policy that was born with limitations has been updated, but has been enriched and in which we have been finding other opportunities.

“Foreign investment does not escape the strategy of the trade sector, including the attraction of capital and the capture of new technologies, as well as the incorporation of management and marketing methods.

“We could consider that we know what the Cuban market demands and this is not exactly the case, because we see that today we have diverse cultures, so we also have to acquire marketing studies from foreign investment that allow us, once we have access to goods and services, bringing what is really attractive to the Cuban population,” he explained.

The trade sector also needs foreign investment, she stressed, Díaz Velázquez, and considered that based on the decisions adopted, it is an opportunity that carries a very high responsibility so that it has the immediate result that the population expects.

“That is to say, that the effect of the measure, which has to start with sales in MLC, has an effect in increasing the offers in CUP and, with it, counteracting the excessive increase in prices and stabilizing the offer, which is one of the greatest difficulties that we present today”, he pointed out.

The minister gave the example of the Gran Comercial company, which was granted the import and export facility in December 2021.

“It is a company that recently has this faculty. We have been incorporating tasks with the dynamics and commitment to show that it is possible to do wholesale trade in Cuba. It has incorporated the consignment, today with a contract for hairdressing and beauty products, but there are other ongoing contracts related to supplies and household items, hardware items and other office supplies.”

Regarding this last line, she said that although this company previously had the purchasing concentration for the Cuban business system and has experience in that sector, now it ventures into modalities that it did not work before.

Today it has more than 900 contracts with non-state forms, both self-employed workers and non-agricultural cooperatives, MSMEs and others. It was one of the companies that was incorporated into those that could import non-state forms of management.

“The result of these operations in MLC has not stopped being sold in Cuban pesos, so it is an example that the result of this measure can be achieved,” Díaz Velázquez stressed.

The minister referred to another established company, Logística Hotelera del Caribe, which provides services mainly to the tourism sector, “but today we are evaluating whether it can participate in the full scope of the measures we are proposing.”

Retail trade may be carried out through joint ventures
What are the opportunities we have today in the Cuban market to do wholesale and retail trade with foreign investment? In this regard, the minister mentioned some data:

The country has a network of more than 27,000 warehouses throughout the economy, 1,905 of them in the commerce sector, and of these, 478 refrigerators, which allow the supply chain to be completed without breaking the cold chain.

There is a network of retail units – which excludes warehouses, program stores and the chain store network – that exceeds 2,000 units.
“This is an infrastructure that is currently underutilized and deteriorated by shortages, where, although alternatives such as installment sales, retail houses and others have been incorporated, there is still a usable space to incorporate these decisions adopted,” she explained.

The minister commented that there has always been an aspiration for other actors to participate in wholesale trade.

“Today the non-state forms, the mipymes, are doing wholesale trade. A group of them have recently been approved that today show us the different ways of doing things, with a flexible, small structure, so we consider that we are at the right time for the decisions adopted”.

What policy did the commerce sector have? On this point, Díaz Velázquez pointed out that it was aimed at developing wholesale trade and, exceptionally, retail trade with foreign investment, with the aim of attracting financial resources, advanced management methods, technologies and marketing techniques.

In this context, where do the decisions adopted go? The minister explained that they are aimed at:

Eliminate the exceptional nature of the participation of foreign investment in retail trade. Today is not exceptional, but it is not completely open either. “A state market has to prevail and today we defend social programs that we serve, so it will not be an open retail business, but neither will it be restrictive as it was established up to now.”
In wholesale trade, the fundamental modalities that had been applied to date, of the three provided for in the Foreign Investment Law, were joint ventures and international economic association contracts, with a common fund or by service.

“Today we are saying that we can also evaluate whether there is a participation of totally foreign capital companies in wholesale trade. Of course, with the criterion that it be a company that contributes to the objectives that we have set for ourselves.

“We are defending that this wholesale trade is a supplier of raw materials, equipment, inputs, technology to incorporate renewable energies; that is, a provider that promotes and stimulates the non-state and state sectors. We are talking about a wholesale market that allows us to have raw materials in the country and, of course, a productive development in less time than we have today due to the limitations and the international logistics crisis”.

Therefore -he said-, “all the businesses that we design, evaluate, which will not only be in our trade sector, but also in everyone who does wholesale and retail trade, will have as a premise that we have to promote national production and achieve the true productive chains, which can start from pre-financing or from certain inputs that are guaranteed to all economic actors in the country, and that end in an offer of goods and services to the population”.

In summary, he added, “wholesale trade can be accessed with foreign investment in the form of joint ventures and in international economic association contracts, both with common funds and for the provision of services.

“We will also evaluate (as long as the objectives of the proposal are in correspondence with the objectives that we have set ourselves) companies with totally foreign capital. This had not been seen that way, because it was a restrictive policy.”

Regarding the impact on the retail trade, he pointed out that this would be the main source, “because if there is a source of fundamental raw materials, we can develop a retail trade with foreign investment, a participation that allows us to have that income and taxes that would be the source to finance the country’s imports, which are significant and which we cannot give up.”

Today -continued the Minister of Internal Trade-, “there is no way to substitute, for example, the wheat that is imported, we will always have to import it, but we have to finance national productions such as rice, beans and other products, to stop rely somewhat on imports in the food sector and other industries such as construction materials.

“That we really have the necessary chain, that it be a chain that generates the supply of goods to be national products or imported products with the results of these modalities.”

Díaz Velázquez specified that work is already being done on the business models sought, both wholesale and retail.

“We will not be closed, but evaluating, but we must have lines, principles, because there is an objective: immediately put on the market an offer of goods and services that reverses the complex situation that the country has.

“There are designs made, we are concluding them and all the entities and organizations that currently carry out wholesale and retail trade in the country will participate with us, it is not limited to the commerce sector.”

She added that as part of this process, Cuban parties that can participate will be selected, and specified that there is information on this subject on the institutional website of the Mincin.

Currently, “work is being done on the evaluation of all the joint ventures that currently exist in the country, all the joint ventures that may have scope in wholesale trade.

“We have a look at all the provinces of the country and the objective is also to get mipymes to do wholesale trade in the center and east of the country. There may be a mixed company that is not necessarily in the West, with the capacity to do wholesale trade and that is incorporated into these measures, ”she pointed out.

“We are going to prioritize and offer these business proposals to companies that have remained in the country,” she said.

“In these difficult times, there are companies that have been in Cuba for many years, that have accompanied us, that have understood the situation that the country is going through, that today have representations or branches and that will be the first that we would be able to listen to. and advance entrepreneurially so that businesses can be established”.

He stressed that both the Mincex and the Mincin have a high responsibility in the state control of what is believed. “The objective that is proposed in this business has to be met,” he stressed.

He reiterated that the purpose is “to achieve stable supplies in the country, to have an offer of goods and services of essential products such as food, cleaning, household items, clothing, footwear, but all of this, when you look at a business, will have due follow-up, because it also has to have the result we expect, which is to be able to sell CUPs to the population.

He added that a survey of the entire trade network is being carried out, of the establishments that can be incorporated into the measure and reiterated that it will not be limited to domestic trade, but will be extended to all entities that carry out wholesale and retail trade.

“We confirm that this is not an isolated measure, it is part of a set of measures adopted and announced in the National Assembly by the Minister of Economy. It is a measure with constitutional backing, attached to the laws, which seeks results that are reversed in the short term to the benefit of the supply of goods and services to the population in Cuban pesos”, he concluded.

Later, the Minister of Internal Trade clarified that in the field of wholesale trade there could be three forms of investment: international economic associations, companies with 100% foreign capital and joint ventures. In the case of retail, it will be exclusively for joint ventures.

“The flexibility is that it was restricted and that today it is open for mixed companies. We are going to prioritize a group of countries and partners that have been with us all along. It’s going to be a trade that’s not restrictive, but it’s not open. What has been completely opened up is in wholesale trade”.

She indicated that joint ventures and international economic association contracts will continue to be prioritized. Totally foreign capital companies will be evaluated “when their objectives respond to the principles and what is being sought”.

Certain non-state economic actors will carry out foreign trade directly
Ana Teresita González Fraga, first deputy minister of Foreign Trade, said that today there are those who try to show the state monopoly on foreign trade as a centralizing whim and numerous criticisms are poured on this opinion on this issue.

She pointed out that it should be assumed that the state monopoly of foreign trade includes state control over foreign trade activity and the execution, by state entities, of export and import operations.

“We have not renounced and will not renounce the monopoly of foreign trade. This is a very important element to take into account,” she stated.

“In the operation, it must be said that for many years private entities have been involved that have been authorized to do so, such as the different modalities of foreign investment.

“Since July 2020, with the measures taken after the approval of the economic and social strategy, it was approved that a group of state-owned companies carry out foreign trade in non-state management forms. The question is to use forms that allow the country to be protected from the risks that the measures associated with this issue entail.”

In this regard, she recalled that Army General Raúl Castro Ruz, in the central report of the Party Congress, made reference to this issue and quoted the words of the leader of the Revolution:

“Others, hoping to blow up the socialist principle of the state monopoly over foreign trade, have been demanding that private commercial importation be authorized in the spirit of establishing a non-state system of domestic trade. These are questions that cannot lead to confusion and much less to naivety on the part of the leadership cadres and Party militants. There are limits that we cannot exceed, because the consequences would be irreversible and would lead to strategic errors and the very destruction of socialism and, therefore, of national sovereignty and independence.”

The deputy minister affirmed that it is very opportune to remember it, and added that in the analysis carried out, the criterion has been considered that the measures adopted must stimulate exports of goods and services and eliminate all the obstacles and obstacles that limit or prevent them.

“As for imports, the objective would be for these to be financed from new flows received from exports or for other concepts, so that they do not exert additional pressure on the country’s demand for foreign currency, and that, in addition, in the medium term they can really contribute to increasing national production and reducing imports, another of the proposed objectives”.

She ratified that the state monopoly of foreign trade will continue to be exercised by the Cuban State, which will establish the regulations and control of trade.

“It will continue to be the Cuban State that regulates and controls foreign trade.

On the other hand, the decision has been made to strengthen the state company that carries out foreign trade, increasing the efficiency of operations for non-state forms of management”, she stressed.

She pointed out that this is a measure that has been implemented for some time and there is progress. It was born with 23 state companies that carried out foreign trade and today there are more than 60.

Until last week, he reported, 14,362 foreign trade contracts had been signed, 252 of them for exports, for an amount of 21.4 million dollars, and 13,981 for imports, for a value of more than 240 million dollars.

“In other words, it is a measure that has had an effect, and we are going to continue strengthening the state company and providing a more efficient service.

“Likewise, we are going to continue promoting the creation of state MSMEs for the development of import and export activities for the sale of wholesale products, not only in Havana, it is sought that it be extended to the other provinces of the country, starting through the center and the east.

As an important measure, she considered that certain non-state economic actors will be authorized to directly carry out foreign trade activities under the control of Mincex.

He emphasized that to export and import you have to have technical knowledge. “This is not just any activity, it is necessary to know about certification, product quality, commercial law when signing contracts, insurance, reinsurance, of the actors involved in foreign trade operations.

“Unfortunately, there is a tendency to simplify what foreign trade operations are and it is believed that everyone is trained or has the possibilities to import and export.”

He specified that this power (directly carry out foreign trade activity under the control of the Mincex) will be granted to certain non-state actors based on the following criteria:

-The power to export will be granted to entities that produce goods and services with export possibilities in which direct sales abroad can facilitate them.

“We are evaluating starting with entities that export IT services,” he said.

-Import power will be granted in those cases in which carrying out this activity directly allows the conclusion of advantageous contracts that contribute to obtaining goods and services in the national economy with better conditions in terms of prices and others.

“That is to say, entities that manage to market their products and services at better prices to the Cuban population will be given the power to import.

“It must be said that imports are going to be restricted to inputs, raw materials, equipment and other products necessary to fulfill their fundamental economic activity, the corporate purpose for which they were created.

“This will be done as established for state companies. There is no distinction between non-state and state companies. That is, through a nomenclature authorized by Mincex.

“We are going to evaluate the corporate purpose of the entity and, on that basis, the established nomenclature will be granted.”

-The other approved measure is to ensure that the economic actors involved in these activities have their own differentiated and executable flows for import and export, so that they do not exert additional pressure on the country’s demand for foreign currency.

The first deputy minister of Foreign Trade highlighted that a working group has been created, led by the Mincex, which is evaluating all forms of non-state management that export services in order, in September, to present for approval the first entities that would be granted the power to execute foreign trade directly.

She acknowledged that they are complex issues and assured that the Mincex is in the greatest disposition to clarify doubts, support and help through its website and its profiles on social networks.

“This Tuesday we will publish a group of questions and answers on our website and on the Cubadebate website that offer more details on the implementation of these measures,” she advanced.

“We are open to answer any questions or concerns at the Mincex headquarters, in our profiles or at the single window for foreign investment,” she added.

“We are in a complex scenario, which forces us to make risky decisions, which we must accompany with control measures so that the expected results are not deviated.

“These decisions do not by themselves solve the problems we face today, all of us involved in these decisions and in these approved measures have to work hard, and we have the obligation to attract good partners, act quickly and have the personnel prepared to exercise this task.

“To the extent that we advance in the implementation of these measures, we will be in a position to continue informing our population about them,” she concluded.

(Cubadebate Editorial Team)

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