Why become an “artisan” in Ecuador? If you get the official classification from the Artisans’ Guild, a lengthy and onerous process, your business is exempt from charging sales tax and you only have to file sales tax receipts twice a year instead of monthly. These at least are the primary reasons why we decided to pursue “artisan” classification.
To get artisan classification, there seem to be two competing organizations that bestow the title. We went with the one with the easiest requirements. This included an inspection of our workshop and answering a number of questions. Supposedly Maria (the owner of the business, officially) will have to attend some classes as well in order to keep the classification and have it renewed on an annual basis.
When Maria first went to apply for the classification, they asked her how much money she had invested (supposedly the threshold for artisans is a maximum $85,000), how many employees she had, and how many years she had been doing “artisan” work. She answered each of these questions, and to each of her answers they told her at the office she had to answer something different to the inspector, otherwise we wouldn’t be able to get the classification. Does something sound funny hear? Maybe they are more interested in just collecting the fees than actually making sure you meet the requirements. I don’t know.
She had to pick up the inspector the next morning, in line with a number of other businesses waiting to become “artisans.” She was number 2, after following the inspector to a hair salon. The inspector came for no more than 2 or 3 minutes, glanced around, asked how many employees she had (two-me and our other employee Leonor), how much money we had invested-$3,000 or so, and how many years she had been working with chocolate (8 was the minimum acceptable answers). The inspector also asked a number of questions about our expenses and revenues, trying to figure out if we were not making very much money; if it was apparent that we might be doing really well, I think they may have invented something on the spot to “disqualify” us. Artisans are supposed to be lower income, at least. here. You know, the whole struggling artist thing…
We are now waiting approximately 8 business days, after which we will be issued the “artisan card” which makes us officially “artisans”.
I just returned from the World Cocoa Foundation Partnership Meeting that took place last Wednesday and Thursday at the Hotel Oro Verde in Guayaquil. The link at the head of this post will take you to a recent article on the conference. The WCF is made up of large cocoa commodity trading firms, chocolate and confectionery manufacturers, cocoa producers, and exporters. Over 300 attendees participated in the conference.
It was a great opportunity to hear about the cocoa trade in neighboring countries such as Peru and Colombia, and the problems with Ecuadorian cocoa, namely the mixing of the CCN-51 variety with fine cocoa variety, which has hurt the quality and reputation of Ecuadorian cocoa on world cocoa markets. I had no idea this was such a controversy, the big problem being that CCN-51, while being a high yielding variety of cocoa, does not have the flavor and aroma characteristics of “Nacional” or Arriba cocoa as its known in Ecuador. Rather, it imparts a lot of astringency to the final product, denigrating the flavor profile of nacional cocoa. Since many growers often mix the two (in part because CCN-51 has much higher yields than nacional), it’s no longer a sure thing that you are buying pure nacional cocoa, even though it may be labeled as such. And thus far in Ecuador, there are no controls or means of ensuring that cocoa labeled nacional is purely nacional cocoa. Another large part of the problem is that much of the cocoa produced in Ecuador is gathered by small landholders who may have no more than 5 or 10 hectares. Many of these small farmers lack the know-how and knowledge to distinguish between different varieties, don’t know much about fermentation and drying, and lack knowledge of standards in order to get the best price for their cocoa.
I was the only actual producer of artisan chocolates at the conference. The rest were either cocoa growers, or in farther removed positions like commodity buyers, management level people in chocolate manufacturing companies, or people in charge of cocoa purchasing at companies like ADM. So it was an interesting mix of growers, corporate, and industry people. But I was surprised at the lack of high-end chocolatiers who are a large part of the “end-user” market for fine chocolate, and who should be making their voice heard when it comes to issues of quality, sustainability, and fair trade.
The day after the conference we made a visit to one of the biggest producers of actual chocolate and cocoa products in Ecuador. Most of their production line is Carle & Montanari, a high quality Italian maker to this day of chocolate production equipment. Most of it looks like it’s at least 50 or more years old, which makes no difference in the quality of their product. We hope to eventually work with them on a product.
Just about 14 years ago I worked here as a development business bureaucrat. At that time, I gathered some ideas about Ecuadorians, their idiosyncracies, the reasons behind the lack of the country’s “development.” The pace of things moves slowly here, there’s not lot of dynamic professionalism or interest in finding out how to do things better, faster, more efficiently. It’s hard to get people in the local bureaucracies (municipalities, ministries, etc.) or private workplace to move ahead on much of anything unless the boss or “patron” orders something done.
Most people I worked (and work with now) wait for things to happen, to be ordered to make things happen, rather than taking initiative to do things; it seems they are this way for fear that they might do something wrong, be rebuked by a superior, lose face. Saving face and avoiding any type of conflict, no matter how low level, seems to me to be quite typical here. To give an example, if you tell someone to sweep half a room, that’s exactly what they’ll do. If the other half is becoming increasingly dirty, but they’re not told to sweep it, it will remain unswept, forever.
Now that I’ve been attempting to do business here for almost a year, it’s become apparent that public bureaucracy, absurd laws, and business as usual has the country tied in knots and makes forward progress nearly impossible. You’ve probably figured that out already if you’ve read the blog. But here are some specific examples.
The “registro sanitario” or sanitary registry
If you’re in the food business, this is a real nightmare. Though the more I have learned about, the more it seems that you can really get away without ever getting it, even for exporting. Though everyone seems to have a different answer on this topic, I do know several companies that do export without it.
While there are some drawbacks to the free trade agreements the US seeks, like the complex agricultural subsidies in the US that allow our agricultural products to compete unfairly with those of smaller countries, protectionist trade policies nonetheless seem utterly stupid to me, because they directly affect the ability to produce at the lowest cost. And they thus limit consumer choice and the availability of goods at the lowest cost. Add to this protectionist schemes like the “sanitary registry” discussed above and frequently in other parts of my blog, and it adds up to a drown-yourself-in-quicksand scheme.
Because of high tariffs, Ecuador is limiting the availability of many goods and services by pricing them entirely out of the marketplace, or making certain goods and services affordable only to very wealthy sectors of the population-and often this small market is not large enough to justify the cost of bringing in a product or service. Ecuador’s high tariffs reduces the ability of local businesses to provide affordable goods and services that may not only be convenient, desirable, increase efficiency in other sectors of the economy, and have a multiplier effect on the economy, but more importantly, make money for locals, offer business opportunities, and create employment.
In my specific case, the food industry, it’s next to impossible to introduce a new product for mass consumption without paying a number of exorbitantly high costs. While such a structure is great for those who can afford to pay those costs, it severely limits that ability of new entrants into the market. With all the costs involved to launch a new food product, it’s like launching a new drug in the US…the sanitary registry, the health permit, etc.
The country’s import policy is still based on the imnport substitution theory, that by protecting local industry from competitve imports through high tarifss, local industry will somehow prosper. But the reality is that local industry simply continues to produce mediocre to shoddy products as there is no competition or incentive for improvement. And there are very few small producers of specialty items because the local market alone is not big enough to support such producers even if they existed. Few specialty items are imported either because of high duties, making scarcity of many items an everyday occurrence.
The tax system here is based on the US tax system, or at least they tried to base it on the US system. Big mistake. Not even Maria, who’s native language is Spanish and has spent years dealing with bureaucratese, can understand even the simplest tax form. No two people will give you the same interpretation of the same question about tax issues-just like nearly everything in the country.
And I don’t understand the logic behind some of the penalties. If you fail to give a receipt, the Tax Service will shut you down for a few days. I can understand a fine, but shutting you down? Perhaps no one thought that this means reduced sales, and thus reduced revenue, for the tax service. Most laws seem to be written with an aim towards punishing wrongdoing, rather than encouraging good business practices and compliance with the law. That is, there are no incentives for good performance, just penalties for non-compliance.
Ok, I know you´ve all been waiting for this…I announced a few posts back that I would find out who this gentleman is, whose names graces one of the most useless, bureaucratic institutions in the beautiful country of Ecuador. Drumroll please…
Wikipedia doesn´t have it. Google doesn´t bring up anything. Only the Institute itself offers up this brief biography:
|Review of Dr. Leopoldo Izquieta Perez|
|Birth: Guayaquil, November 15, 1879
Death: Guayaquil, April 5, 1948
Primary and secondary studies, conducted in his hometown and Medicine, Faculty of Medical Sciences at the University of Guayaquil, where he earned a doctorate degree in Medicine and Surgery, December 8, 1908.
He would probably be ashamed that his illustrious name is now associated with bureaucracy…and that’s putting it mildly.
From almost anywhere in Quito, the Pichincha volcano looms, reminding you that despite all the concrete, the earth is near. The volcano first slopes up gently, but then climbs quickly, forming a small peak that is often dusted with snow if you’re up early to see it before the clouds creep over . On the slopes north and south of the peak, you can see patches in varying shades of green, a reminder this is still an agricultural nation. Just across the ridge where the Swiss-built cable car line climbs the mountain, a jumble of antennas stand on another ridge, providing radio, tv, cellular, and internet service-if you’re lucky enough to have a line of site to the antenna but unfortunate enough to be somewhere they haven’t yet put in cable.
Cheap lunch shops offering sandwiches, chicken soup, pork chops, and other popular local staples abound in the streets. These are not restaurants, but simple places offering basic home cooking for Quito’s masses, who can’t afford more than $1 or $2 for a meal out. The same goes for “tiendas”, little shops selling bread, crackers, sodas, cigarettes, and other basic needs. Many wealthier Quiteños wouldn´t deign to visit these shops, but my cousin recently announced he goes all the time to one right next door to his house; the store is nestled between a candle factory and the lobby to a working class apartment building. The owner of this shop used to be a baker for the Ecuadorian Army, and makes first class bread.
On street corners everywhere, women dressed in bright reds, yellows, pinks and blues wearing bowler hats, part of the typical indigenous dress, display avocados, apricots, strawberries, tangerines, and other fruit brought in from the nearby countryside. Hauling baskets lined with plastic or newspaper, sellers also hawk “chochos con tostado”, a favorite street food consisting of lupini beans and toasted corn kernels, of a variety only found here in Ecuador. It’s served in little plastic bags with a tiny plastic pick, with spicy “aji” or chile sauce on top. You’ll find “fritada” or fried pork, served the same way, often with hominy and potatoes or tostado too. I recently spotted a man with a heard of goats, offering fresh goat milk straight from the udder, on the street corner. He was roaming right at the intersection where a middle class supermarket meets the popular open market, just the spot for his target market. Nonetheless, people offering “Porta, Movistar, Alegro” are replacing the snack food sellers that once populated the streets at traffic lights. These are the three main cellular carriers, and you can buy minutes just about anywhere traffic slows.
You can get your watch battery changed by a guy with a temporary lean-to built against someone’s wall or fence on the street corner, or your watch strap too. And he’ll probably be on his cellphone chatting it up with a friend somewhere.
Bookstores are few and far between. There are lots of offerings for textbooks, school notebooks, and paper supply, but few stock more than some basic titles and bestsellers. I recently visited one of the best known bookstores in Quito, located in the touristy Mariscal district, to get some books for my kids. Only a few shelves of children’s books were available, and none were of the simplified sort of non-fiction that is starting to interest my son. Lots of intellectual tomes in Spanish, good photography, design, and architecture books, but still of a limited selection. This bookstore has a wide selection of topics, but only a limited number of books in each selection, characterized mostly by the heavyweights of the topic. Grocery stores offer a limited number of publications and books, but are good for picking up the latest bestseller or society gossip rag printed on shiny paper with lots of photos, of which Latins seem to be so fond. HOLA, COSAS, VANIDADES.
Two main avenues run from North to South through a large swath of Quito. The city is a narrow strip no more than three miles east to west at any one part, but easily over twenty miles long, with about 1.5 million people. On Avenida 10 de Agosto, hundreds of stores, both small and large, sell every kind of auto part, ball bearing, industrial machinery, hardware, air conditioning equipment, and vehicle. Many of the shops have been around for decades and it shows; the exterior walls are often dirty, the display cases old, the glass scratched, the chrome worn. But they have stood the test of time and will probably continue to be there for many years to come.
Recently, I bought an Ecuadorian made high-powered gas stove at “Metalica Hermanos Lozada” on this very street. The shop is no more than a room full of kitchen stoves, blenders, and deep fryers. No marketing or advertising-it’s often easier to locate what you’re looking for by just driving around and seeing what’s available, rather than looking in the phonebook. Like most of the stores on this street, it has a large entrance, its only door a rolling steel shutter about 15 feet wide by 10 feet high. A sullen man who looked deeply bored gave me a quote the first time I came by. He turned friendly when I actually stopped in with cash in hand, and carried the stove a hundred yards down the street for me to the car.
At Quito’s north end it’s all industrial; textile factories, car assembly plants, moving and import/export companies, chemical factories, and motels-that is, of the Latin type. Motels are big business in Latin America, basically rendezvous spots where you can rent a room by the hour. You drive in through one entrance and pull into a small garage space, where a curtain is lowered to make your license plates less conspicuous. From there, you exit your car and enter a room, usually equipped with a dumb waiter for beverage and snack service. You make your exit through another entrance just down the block.
My wife and I, with the kids in back, were in just this area last week looking for a product for our chocolate business at one of the chemical companies in the area. The secretary had given us directions “just across from the Blue Seagull Motel.” We were lost until we asked a security guard its location. “Claro que sí,¨ he said in an enthusiastic, drawn out grin, as if he knew just what we were up to. I guess he didn´t notice the kids in the car. They didn´t have what we needed at the chemical factory, but we at least had a good laugh.