Government mandates new business rules for supermarkets; pay on time and buy from the little guy

Beginning this month, Ecuador’s supermarkets and other large retailers face new rules governing how they work with their supplies, even which suppliers they do business with.

The country’s Superintendency of Market Control (SCPM) has delivered a Manual of Good Practices to large retailers which sets deadlines for payments to vendors and mandates that they buy at least 15% of their goods from small businesses.

SCPM director, Marcelo Ortega, says that the guidelines are needed because of systematic abuse suffered by businesses who work with large retailers. “The large buyers of products should not dominate and dictate terms to smaller vendors,” he says. “Ultimately, it is the consumer who will benefit from these regulations,” he says.

In addition to new rules, the manual also provides models of “best business practices” that large retails are encouraged to follow.

The businesses affected by the new reules include supermarkets, such as the national chain Supermaxi, superstores such as Coral, department stores, large convenience stores associated with gas stations, distributors, manufacturers and importers.

The rules do not apply to neighborhood tiendas and small family operated businesses.

Among the new rules is the payment schedule to vendors. Ortega says the large stores must pay for purchases of up to $ 50,000 within 15 days; for purchases up to $ 250,000 within 30 days; and for purchases up to three million dollars within 45 days. He said that his office receives frequent complaints from suppliers that they must wait for months to be paid and are told by big retailers that they will never be paid if they demand more timely payment.

The new rules prohibit demands by retailers that suppliers deliver goods at low, or no, cost. “We will not allow big companies to strong-arm little companies,” Ortega says.