HomeEconomyJuan Arias: “It is not just generating foreign currency; but to invigorate the productive chains”

Juan Arias: “It is not just generating foreign currency; but to invigorate the productive chains”

The Vice Minister for the Development of Special Economic Zones (ZEE), Juan Arias, in an interview with Últimas Noticias, explained that “the fundamental objective of these is to strengthen the national productive apparatus… to strengthen and expand it”, and that “it is not only to generate foreign exchange; but to invigorate the productive chains”.

“The inspiration, without a doubt, was the resounding success of the Chinese SEZs,” he said, and recalled how “Commander Hugo Chávez put his national picket on it… he did not want a copy of any model, the thing had to be his own; he always hammered that.”

He said that the original project "was languishing" until, in 2018, President Nicolás Maduro proposed the SEZ deputy ministry to boost those that already existed in the country, in this regard he specified that there are six civilians and two military.

“The military ones were created last year and the civil ones are: two in Lara, one in Palavecino and another in Iribarren; one in Cojedes, one in San Carlos-Tinaquillo; one in San Antonio-Ureña, in Táchira, border; another in Paraguaná (Falcón) and the sixth in the Guarenas-Guatire axis of the state of Miranda”.

He also recalled that the first Plan de la Patria contemplated three zones, that of Falcón and that of Táchira, in addition to one that has not yet been decreed in the Morón Puerto Cabello axis, in the state of Carabobo, and in the case of those three were planned: “the Ministry of Planning had them on the radar and included them in the Development plan”.

He pointed out that the SEZs "have been a State policy for a long time", included in the Plan de la Patria of 2012 and delimited how "President Hugo Chávez already spoke of Economic Zones of Endogenous Development" in 2001, the year in which he created the Ministry of State for the Coordination and Control of Special Sustainable Zones and appointed José Francisco Natera Martínez as the head of that portfolio "who came directly from Fedecamaras".

"And after the coup d'état (in 2002) that cooled down, but the national and international business sector was sought," he said while specifying that these zones are not conceived "for the State to invest, but for them to invest the private ones” for the development of the Venezuelan economy, for which “we cannot be saying that this (the ZEE) is an invention to overcome the situation”.

Already in action. In his opinion, one of the current SEZs that works best is one of the Larenses, that of Palavecino "because they built a train branch... that is now more than three years old and in the first two it was just an embankment where there was nothing and wisely they decreed a dry port there (baptized Jacinto Lara)”. The official explained that the railway section contributed to transportation and, therefore, had a positive impact on the development of the area, especially in the face of the difficulties faced by the country in supplying spare parts and supplies for trucks and, more recently, fuel.

"The train is much more efficient and safe and there are already signs of success... in one year some 300 containers were exported, that is to say, almost one container per day... and the most important are fundamentally agricultural products."

He explained that one of the most successful products is the so-called Chinese bean, which is produced mainly for export to “Vietnam, India and another country in Asia. We are exporting coffee and items other than oil”, he said.

He said that "standing meat" has been exported, which at first generated discomfort "as a result of rumors that pointed to that export as a vehicle for price increases and shortages, instead of foreign currency income to the country and development of the agricultural apparatus and national livestock.

He pointed out that the SEZs already in operation contribute to a large extent to the “important awakening of Venezuela; we are still in a delicate situation, we need to increase resources; especially in oil, but we had (with the reactivation through the SEZs) an important jump”, he limited.

Function. He said that the deputy ministry "which was created in June 2018" seeks to strengthen the legal framework of the ZEE, and hence its relevance in the development of the Organic Law on Special Economic Zones (Lozee) that will soon enter the second discussion phase. in the National Assembly and that the first work of his office was a diagnosis of reality, to then consult with sectors involved in the issue.

Among the sectors consulted, the workers stand out, through the Universidad Bolivariana de los Trabajadores Jesús Rivero; the business chambers: especially the regional ones; “And very especially with the Communal Power”, with his ministry.

He recalled that the SEZs are governed today by the Comprehensive Regionalization Law for the Socio-productive Development of the Homeland, decreed in Extraordinary Gazette No. 6.151, dated November 18, 2014, in which the Motor Districts are presented and that the SEZs “ they are a chapter of the whole compendium”.

Detractors. Since the Lozee was announced, its detractors assure that the ZEE will violate the Organic Law of Labor, Workers and Workers (Lottt) and that tax revenue will be lost because it opens the door to maquilas and a fiscal sacrifice in favor of businessmen.

In this regard, Arias warned how “the same is said of the Environmental Law… there are even those who say something so reckless, such as that even national sovereignty is violated. That because they are special economic zones; with special regulations, conditions are created for secession... and that is only to make people afraid”.

He regretted that notable people whom he respects and admires make such an unfounded assessment, because "there is not a single article in the law that says that the labor regulations will be contradictory to the Lottt, nor is there any proposal to disapply the country's environmental law."

“When it comes to special measures being adopted, these measures allow expanding benefits to workers and the environment… for example, the State can decide that, in those SEZs, those who recycle or incorporate a certain percentage of recycled raw material will have certain exemptions. in taxes," he said, and that these would be the "regulations different from those that exist in the rest of the territory" to which the instrument refers.

He pointed out that the Law provides, after consultation with at least 300 members of the Universidad Bolivariana de los Trabajadores Jesús Rivero, that a percentage (which would be around 12 points) of the net profits of the companies installed in the ZEE be transferred annually to the employees.

The deputy minister explained that the bet is that the tax exemptions, among other advantageous conditions that they offer, promote more and better jobs, but beyond that effect, the companies that settle will have obligations that, without diminishing the economic attractiveness, would mean a impulse to improve the socioeconomic and labor situation in the country.

He referred to how in other countries the SEZs import everything, including the workers, "there are factories that import the raw material, unload it, make the product and reassemble it on a ship for export, and not even the workers are from there … and the question is what is the impact that something like this would bring to the economy?” he said.

"We ask that the raw material that is processed be mostly national, from the same area, hopefully... and that the workforce be Venezuelan... The SEZs must generate a consolidation and expansion of the productive apparatus," he said.

He regretted the few contributions from the university academic field. “We have toured the country discussing the Law and we have visited universities; we have met with the university community and there has been very little initiative among academics to make proposals”, she emphasized.

He assured that "this Law is a great opportunity to promote the development of the country", and it should become "a super law" because through it it would be possible to "really encourage companies to promote technological development, promote constant training workers" through tax and tariff incentives, rewarding training, inventiveness and scientific and technological research.

Arias explained that a proposal that arose from consultations is the "article that incorporates the benefit to companies of social, communal property or of the Communal Economic System." and I point out how, on many occasions, sectarianism prevails in the decision not to buy what communal enterprises produce, regardless of its quality, but, in addition, how private companies allow themselves margins of negotiation that state or communally owned companies It would be an act of corruption.

He placed as a hypothetical example a price increase in a transaction between individuals that later, in the seller's accounting, is reflected truculently as a commission and benefits the buyer.

“A public or communal company gets the Law for the Safeguarding of Public Assets, but not a private company,” he said. And to combat these situations, he explained that transactions with the Communal Power within the ZEE can be exempted from taxes, "reward with exemption, up to 100% if you buy from the Popular Power," he summarized.

Clear rules. Arias joined President Nicolás Maduro's claim for the disincorporation by the Legislator of articles that arose from the intervention of specialists in areas linked to the development of SEZs.

He recalled that the second discussion of the Lozee “is when we go article by article” and hopes that “those who were in the original project that we had prepared experts from Seniat (National Integrated Service of Customs and Tax Administration) be reinstated; of Boliports (Bolivariana de Puertos SA); the National Customs Protection Guard, the Anti-Drug Office, the Resquimc (Single National Registry of Operators of Controlled Chemical Substances), the Oncdoft (National Office against Organized Crime and the Financing of Terrorism); and from the Ministries of Finance, Industry and Planning; who are the parents of the child”.

He explained that "they removed a title that had to do with sanctions... looking for a law that is short and precise, but I believe that things should have the corresponding size," he said.

He referred to the importance of legal security beyond the enactment of laws, but "that things work well and efficiently... because legal security is not only having laws but knowing that those laws are going to be applied and if they are not applied there will be sanctions" , he added, referring directly to "old-fashioned" vices that hinder the development capacity of the national productive apparatus.

The intention is that they effectively apply the regulations and the Lozee offers concrete instruments to punish those who violate the productive chain, and that businessmen face forceful sanctions if they violate rights or dodge duties.

He indicated that he is aiming for a true one-stop shop that will simplify the procedures, automated and with the use of new technologies, "and put order so that the processes are agile, efficient and transparent."

He explained that “customs is essential” to attract investors “with electronic, reliable, fast and secure processes; not discretionary: 'let's see if the official arrives', but automated processes”, he pointed out.

He lamented how Venezuela occupies the last seats of the World Bank's During Business ranking (Index of ease of doing business), and he opined that, unlike other lists that can be manipulated for political purposes to damage the reputation of a country, the During Business reflects the reality of the slowness and discretionality of procedures in the country.

He added that the Lozee, to solve the anachronism, would regulate and require the use of information technology to guarantee periods that companies can compute and incorporate into their processes and thus reduce the margins of inefficiency and corruption.

He pointed to the National Electoral Council, recognized throughout the world, as an example of the implementation of a coherent automated system.

scenarios. Arias outlined possible application contexts for SEZs. He said that the classic scenario is "a territorial space without development or very precarious development, but with potential" and asked how much is the State collecting there if there is nothing?

He explained that “investors are offered to develop that area, that they will not be taxed for five or ten years, provided they meet the conditions, for example, of having local workers, using raw materials from the area and methods that do not harm the environment”, this is how the space is developed and there is no tax sacrifice.

“That becomes a dynamo that also generates indirect employment; for example, in the bakery that now sells a thousand loaves instead of ten; or the rubber industry, or the food stalls”, he explained and that although the companies by agreement of the ZEE do not pay taxes, “there is no sacrifice because they did not exist before”, but those that were will have new billing, that is, more collection , and natural persons through the Value Added Tax (VAT) and other forms of tribute "by way of consumption" increase the treasury.

He also raised the scenario of a depressed area, such as in industrialized spaces where factories and companies closed, but there is infrastructure "in decline", and the collection is little and will be less to the extent that unemployment increases. Then a SEZ can be created there and exonerate existing businessmen and attract others to stop the fall. "It is also a victory, even if it implies a fiscal sacrifice," he said.

betting on cryptocurrencies

Juan Arias explained that one of the mechanisms that will be used to attract investment will be crypto assets. “We are promoting the digital economy in general; digitize a number of things that will be fundamental in the Special Economic Zones.

He called the news that China, potentially interested in promoting and participating in SEZs, prohibits the use of cryptocurrencies as disinformation.

"There are some incorrect interpretations of decisions," he said while referring to the abuse of language gaps to create confusion and decrease interest with false or misinterpreted news.

“What the Chinese government said is that the use of cryptocurrencies that are not regulated is prohibited… and reiterated that the digital economy is “the economy of the new era, the economy of the future, the coexistence of currencies”, this especially for the Venezuelan case because "as a consequence of the blockade we (the Venezuelan State) have to protect investors," and he referred that the Law of Special Economic Zones "is the daughter" of the Anti-Blockade Constitutional Law for National Development.