September 1st 2020.
Att.: Miller Howards.
PRESENT.
Dear Miller:
This morning I received an extensive report from my tax and legal advisors, about the joint
partnership we wish to do.
There are several matters in question, that I would like to explain to you in detail, waiting
for your wise answers, which allow us, to analyze the various legal, commercial, fiscal and
administrative alternatives.
Definitely, I need more information, to be able to contribute to being a useful element in
this alliance.
1.- Background of the previous operations carried out with Angélica.
I can understand that you had a close friendship and that her death was very regrettable.
Also, I understand that you want to keep some discretion.
However, I need to have a copy of the background documents of the previous operations,
given the importance that the product is Brazilian; and it will be exported to the United
Kingdom, as a product of Mexican origin.
I need you, to confirm me, if you were aware that the product had a Brazilian origin.
There is a very big difference, in being introduced to Dr. Morgan, as a Mexican farmer,
who supplies a Mexican product, than to introduce oneself, as a Mexican farmer, who
pretends to sell a Brazilian seed, as a Mexican one. And to take the risk that eventually, if
it comes to light; either through a document, a claim, a return, etc. what the truth is
about, and not to expect, any dangerous consequence. We can make this operation a oneshot deal, or a permanent relationship.
2.- Mexican tax law has undergone legal changes, and it is very careful to audit any
international operation of products of agricultural origin, to avoid money laundering.
Given that at this time, I do not have a legal entity registered to carry out this operation, I
must do it this time, as a person, not a Ltd entity.
This involves several issues:
i. The income tax is 35%, as a person, instead of 30% on a legal Ltd. entity.
My legal advisors suggest me, that the taxes of the total amount of the purchase and
sale operation between Genoclone and myself, must be paid in Mexico. Then the
probability of any immediate concern of the Mexican government, is reduced, due
that the operation begins and ends in Mexico. This is established by the MOU, and
probably, you already had a previous history of the advantage of this being done.
ii. The EBITDA registered by the operation, is well above my current income; therefore,
there is a very high probability that the Tax Department, figure out immediately, that I am
carrying out a special operation.
iii. We must have the legal registration of the contract between you and I, Genoclone and
I, and the provider LB Fazendas and I, as well as all the contractual element that supports
the operation according to current Mexican regulations
iv. It could be the case, that if everything is not perfectly transparent, the Government
may ask LB Fazendas and Genoclone if the operation is regular. Through an audit of
international stature
v. For that reason, even if the two operations are not binding to each other, the origin of
the seed cannot be lied to.
vi. The degree of vulnerability of exporting a seed from Mexico, being of Brazilian origin, is
very high and risky, commercially and legally.
vii. You and I are starting to realize, the high risk of withdrawing money from a Brazilian
bank. It takes more than a month; and if; in a near future, Genoclone requests a claim or
refund, it will become a major problem to return the money; without being able to justify
the delay.
I need to know if there is a clause to cancel the three-year contract with Genoclone
without a penalty.
viii. It is obvious that we need to develop a Mexican supplier, or you need to hire a person
in Brazil.
ix. Miller, my track record in business is clean. And on the other hand, you just got
promoted. Surely, you also are concerned of your reputation.
x. My advisers place a lot of emphasis on me, measuring in a balance, the cost / benefit.
xi. Not to take risks that are not previously calculated.
xii. The time has come, when I kindly request, to provide me all the information that I
need to know:
a. What is the procedure to receive the samples in Mexico?
b. What documentation should I receive from LB Fazendas?
c. What documents should I present to the person / company that receives both
the samples and the order?
d. Is there a quality certificate for the product that LB Fazendas delivers?
e. I cannot understand that there is no technical specification of the product. If I
am the farmer and I have to deliver a product of this value, what do I use to supply
an organic, fresh and in good condition seed?
f. If the product is rejected, what does Genoclone rely on, to determine that they
have the right to refuse such product?
g. Are there export and import duties? I understand that I do not export, and I
suppose that LB Fazendas imports into the country; but I need to know, as a
reference, just in case a follow-up, to be consistent with the answers.
xiii. A crucial piece of information is to know, what would happen if Genoclone,
discovers that the seed is of Brazilian origin?
xiv. I understand that Genoclone was looking for another supplier of seeds. How do
we start the search for a supplier in Mexico? Have you contacted some previously?
I can have contacts within the Secretary of Agriculture.
xv. What other important and transcendental information should I know, given
that ignorance does not exempt me, from responsibility as well as you?
As you can read, probably you have many answers to my questions due you
previous expertise, but we can´t underestimate the external consultancy, in order
to reinforce the perfect strategy.
Creativity has no limits. Having inner peace is priceless.
I don't want to buy hell, disguised as heaven.
I'm sure you don't either.
I am looking forward for your comments, thanking grateful with your attentions.
Atte.:
Arturo Rizo.