Bloomberg
Venezuelan President Hugo Chavez, who declared an economic war against bourgeois comforts, is winning one for the socialists in his battle against the nation’s most popular spirit: Scotch whisky.
Chavez’s shutdown of the unregulated currency market is reducing shipments and sales of whisky and pushing up prices by almost 50 percent as companies including Diageo Plc and Pernod- Ricard SA struggle to obtain dollars for imports.
“We’ve only been receiving 5 percent of the whisky that we requested in the last month and a half,” said Fernando Soto, president of retailer Licores Mundiales. “The distributors are restricting supply to avoid a more difficult situation; they’re buying time to resolve the currency issue.”
By taking control of the foreign exchange market, Chavez is limiting a Venezuelan favorite. Venezuela is the largest market for Scotch whisky in Latin America and the sixth-biggest global importer by value, according to the Scotch Whisky Association in Edinburgh. The nation, with a population of 28 million, brought in more of the liquor last year than all of Brazil, with 205 million residents.
Venezuela imported 116 million pounds ($184.3 million) of Scotch last year, according to the Scotch whisky trade group.
Liquor distributors, bars and restaurants are receiving fewer shipments and are paying in cash for deliveries after spirits companies cut off credit amid a liquidity crunch caused by the shutdown of the currency market, where they turned to buy dollars, Soto said.
Stretching Inventory
At Licores Mundiales, Scotch whisky is usually the top seller. Thanks to Chavez, total retail sales fell 50 percent in June, he said.
“We’re stretching our inventories,” Soto said in a telephone interview. “This situation is sustainable for another few months.”
Isabelle Thomas, a Diageo spokeswoman in London, and Florence Taron, a Pernod-Ricard spokeswoman in Paris, didn’t respond to e-mails seeking comment. Diageo and Pernod-Ricard officials in Caracas declined to comment for this story and asked not to be named in accordance with company policies.
The shortages mark a victory for Chavez, 56, who blames capitalism for the nation’s ills and has nationalized companies in the oil, food, cement and metals industries.
Shipments Decline
Chavez, a former paratrooper who was jailed for a failed coup attempt in 1992, is no fan of whisky. He often assails the opposition and businessmen for drinking expensive Scotch at country clubs, playing golf and traveling to Miami -- and says they’re trying to be more like Americans.
“Rich people are lazy and almost all of them spend every day drinking whisky,” Chavez said on May 15.
Whisky shipments began falling after Chavez tightened currency controls in May by closing the unregulated market run by brokerages which he accused of fueling capital flight, setting artificial exchange rates and laundering money. Chavez acted after monthly consumer prices rose 5.2 percent in April, the most in seven years.
Chavez, who devalued the bolivar in January by as much as 50 percent, established a multitier exchange system where importers pay 2.6 bolivars per dollar for essential goods and a rate of 4.3 for nonessentials.
To obtain official rates for imports, companies must receive government approval from the Foreign Exchange Board, known as Cadivi. The organization allowed $7.6 million for alcoholic beverage imports in the first half of the year, compared with $2 billion for food, according to figures on its website.
Unregulated Currency
Diageo, the maker of Johnnie Walker whisky, and Pernod- Ricard of Paris turned to the unregulated market to buy dollars at more than double the official exchange rate.
Whisky importers used that market to import about $20 million a month after Cadivi stopped approving dollars in 2008, according to estimates from Caracas-based consulting and research firm Ecoanalitica.
That option is no longer available. The central bank now controls the trading of dollar-denominated securities and sells currency at about 5.3 bolivars per dollar. The unregulated market was trading bolivars at 8.2 per dollar before being closed.
The central bank limits purchases to $50,000 a day and $350,000 a month. Those sums are insufficient for large corporations, said Asdrubal Oliveros, a director at Ecoanalitica.
Liquor Rationing
Merlin Gessen, manager of the Le Gourmet restaurant in the five-star Intercontinental Tamanaco hotel in the Las Mercedes district of Caracas, where an executive suite costs $389 a night, said the new rules have led to lower liquor sales.
Gessen said distributors are rationing whisky because they anticipate shortages getting worse, pushing prices higher.
“When people know there are shortages of a product they buy as much as they can, exacerbating the problem,” said Gessen. “Venezuelans are like that.”
For now, Venezuelans are paying more for a drink that’s a centerpiece of leisure time. Venezuelans consume bottles of 12- year and 18 year-old Scotch blends at weddings, bars and restaurants as a sign of class, shunning some of the world’s best premium rums produced in the South American country.
“How many people waste money on whisky, parties and traveling?” Chavez said in a speech in May 2007. “Venezuela is one of the countries that most consumes whisky per capita. That shames me. It is part of the capitalist curse that is consumerism.”
Price Increases
Alcoholic beverage prices have risen 48 percent in the last year, the most among the 12 categories measured in the central bank’s benchmark Caracas price index released yesterday.
Prices for Buchanan’s 12, a blend of Scotch whiskies that dates to 1884, at a Prolicor store in Caracas jumped 33 percent to 325 bolivars ($75.67 at the official rate) in the last two months as customers rushed to buy whisky, Carolina Linares, the manager, said. A similar bottle in Duty Free stores abroad sells for $30.
The store is receiving just a few bottles of whisky per brand, instead of several cases each, she said. The store has enough inventory to last through the end of this month, Linares said.
‘Common Drink’
“Whisky consumption is wide spread because during Venezuela’s history it became a common drink through imports that came along with the oil bonanza,” said Luis Vicente Leon, a director of Datanalisis market research and polling firm. “Whiskey is also a sign of status.”
While Chavez still views the drink as a vice, his government appears ready to help tipplers. Central bank President Nelson Merentes said on July 28 that he has met with business leaders to discuss import needs and that the bank may make changes to the currency market to raise purchase quotas.
“I don’t have any doubts that the scarcity of the spirit will create a black market,” Oliveros from Ecoanalitica said in a telephone interview. “But I don’t think the Venezuelan, with their selective taste for the drink, will quickly substitute a 12-year scotch for a local liquor.”
Chavez’s shutdown of the unregulated currency market is reducing shipments and sales of whisky and pushing up prices by almost 50 percent as companies including Diageo Plc and Pernod- Ricard SA struggle to obtain dollars for imports.
“We’ve only been receiving 5 percent of the whisky that we requested in the last month and a half,” said Fernando Soto, president of retailer Licores Mundiales. “The distributors are restricting supply to avoid a more difficult situation; they’re buying time to resolve the currency issue.”
By taking control of the foreign exchange market, Chavez is limiting a Venezuelan favorite. Venezuela is the largest market for Scotch whisky in Latin America and the sixth-biggest global importer by value, according to the Scotch Whisky Association in Edinburgh. The nation, with a population of 28 million, brought in more of the liquor last year than all of Brazil, with 205 million residents.
Venezuela imported 116 million pounds ($184.3 million) of Scotch last year, according to the Scotch whisky trade group.
Liquor distributors, bars and restaurants are receiving fewer shipments and are paying in cash for deliveries after spirits companies cut off credit amid a liquidity crunch caused by the shutdown of the currency market, where they turned to buy dollars, Soto said.
Stretching Inventory
At Licores Mundiales, Scotch whisky is usually the top seller. Thanks to Chavez, total retail sales fell 50 percent in June, he said.
“We’re stretching our inventories,” Soto said in a telephone interview. “This situation is sustainable for another few months.”
Isabelle Thomas, a Diageo spokeswoman in London, and Florence Taron, a Pernod-Ricard spokeswoman in Paris, didn’t respond to e-mails seeking comment. Diageo and Pernod-Ricard officials in Caracas declined to comment for this story and asked not to be named in accordance with company policies.
The shortages mark a victory for Chavez, 56, who blames capitalism for the nation’s ills and has nationalized companies in the oil, food, cement and metals industries.
Shipments Decline
Chavez, a former paratrooper who was jailed for a failed coup attempt in 1992, is no fan of whisky. He often assails the opposition and businessmen for drinking expensive Scotch at country clubs, playing golf and traveling to Miami -- and says they’re trying to be more like Americans.
“Rich people are lazy and almost all of them spend every day drinking whisky,” Chavez said on May 15.
Whisky shipments began falling after Chavez tightened currency controls in May by closing the unregulated market run by brokerages which he accused of fueling capital flight, setting artificial exchange rates and laundering money. Chavez acted after monthly consumer prices rose 5.2 percent in April, the most in seven years.
Chavez, who devalued the bolivar in January by as much as 50 percent, established a multitier exchange system where importers pay 2.6 bolivars per dollar for essential goods and a rate of 4.3 for nonessentials.
To obtain official rates for imports, companies must receive government approval from the Foreign Exchange Board, known as Cadivi. The organization allowed $7.6 million for alcoholic beverage imports in the first half of the year, compared with $2 billion for food, according to figures on its website.
Unregulated Currency
Diageo, the maker of Johnnie Walker whisky, and Pernod- Ricard of Paris turned to the unregulated market to buy dollars at more than double the official exchange rate.
Whisky importers used that market to import about $20 million a month after Cadivi stopped approving dollars in 2008, according to estimates from Caracas-based consulting and research firm Ecoanalitica.
That option is no longer available. The central bank now controls the trading of dollar-denominated securities and sells currency at about 5.3 bolivars per dollar. The unregulated market was trading bolivars at 8.2 per dollar before being closed.
The central bank limits purchases to $50,000 a day and $350,000 a month. Those sums are insufficient for large corporations, said Asdrubal Oliveros, a director at Ecoanalitica.
Liquor Rationing
Merlin Gessen, manager of the Le Gourmet restaurant in the five-star Intercontinental Tamanaco hotel in the Las Mercedes district of Caracas, where an executive suite costs $389 a night, said the new rules have led to lower liquor sales.
Gessen said distributors are rationing whisky because they anticipate shortages getting worse, pushing prices higher.
“When people know there are shortages of a product they buy as much as they can, exacerbating the problem,” said Gessen. “Venezuelans are like that.”
For now, Venezuelans are paying more for a drink that’s a centerpiece of leisure time. Venezuelans consume bottles of 12- year and 18 year-old Scotch blends at weddings, bars and restaurants as a sign of class, shunning some of the world’s best premium rums produced in the South American country.
“How many people waste money on whisky, parties and traveling?” Chavez said in a speech in May 2007. “Venezuela is one of the countries that most consumes whisky per capita. That shames me. It is part of the capitalist curse that is consumerism.”
Price Increases
Alcoholic beverage prices have risen 48 percent in the last year, the most among the 12 categories measured in the central bank’s benchmark Caracas price index released yesterday.
Prices for Buchanan’s 12, a blend of Scotch whiskies that dates to 1884, at a Prolicor store in Caracas jumped 33 percent to 325 bolivars ($75.67 at the official rate) in the last two months as customers rushed to buy whisky, Carolina Linares, the manager, said. A similar bottle in Duty Free stores abroad sells for $30.
The store is receiving just a few bottles of whisky per brand, instead of several cases each, she said. The store has enough inventory to last through the end of this month, Linares said.
‘Common Drink’
“Whisky consumption is wide spread because during Venezuela’s history it became a common drink through imports that came along with the oil bonanza,” said Luis Vicente Leon, a director of Datanalisis market research and polling firm. “Whiskey is also a sign of status.”
While Chavez still views the drink as a vice, his government appears ready to help tipplers. Central bank President Nelson Merentes said on July 28 that he has met with business leaders to discuss import needs and that the bank may make changes to the currency market to raise purchase quotas.
“I don’t have any doubts that the scarcity of the spirit will create a black market,” Oliveros from Ecoanalitica said in a telephone interview. “But I don’t think the Venezuelan, with their selective taste for the drink, will quickly substitute a 12-year scotch for a local liquor.”
