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Colombia Aguardiente Producers Back New Government Plan
Impact International / April 1, 2001

By Larry Luxner

BOGOTÁ -- Colombian legislators are now debating a bill that would preserve the government's traditional monopoly over liquor production, while further opening the market to distribution across Colombia, as well as throughout the other four countries of the Andean Community: Bolivia, Ecuador, Peru and Venezuela.

Otherwise, production of aguardiente-- Colombia's anis-like national drink distilled from sugar cane -- could suffer. This would particularly affect liquor factories near the Ecuadoran border, where aguardiente costs considerably less to produce.

The bill, known officially as the Ley de Regimen Propio de Monopolios, is supported by Eduardo Mollo Contreras, executive director of the Colombian Liquor Industry Association. The organization, known by its Spanish acronym ACIL, currently represents six state-owned liquor factories -- down from 14 in 1996, since economic difficulties in Colombia have forced eight of them into bankruptcy in the last five years.

"We're working with the Federación de Departamentos, a national organization that represents Colombia's 33 departments or states," said Contreras, interviewed at his office in northern Bogotá. "They're also interested in the proposal because it would discourage clandestine producers from selling contraband liquor."

Of the 33 departments, nine have their own liquor factories, producing mainly aguardiente, an unaged spirit distilled from sugar-cane molasses and popular among lower- and middle-income Colombians. A 750-ml bottle of aguardiente currently costs 8,500 pesos (around $3.70), and a bottle of rum 10,000 pesos ($4.50). Some 55% of this consists of value-added and consumer taxes that go directly to the various regional governments.

In 1999, said Contreras, national sales of aguardiente and rum came to 120 million bottles, down from 133 million bottles in 1995. About 82% of the total comes from the Colombia's four biggest distilleries: Fábrica de Licores de Antioquia (FLA); Empresas de Licores de Cundinimarca (ELC); Industria Licorera de Caldas (ILC) and Industria de Licores del Valle (ILV).

The largest by far is FLA, whose plant in Medellín produced 48 million bottles of Aguardiente Antioqueño, Ron Medellín and other spirits -- about 36% of the 1999 total. Of this production, 70% of it for consumers in the department of Antioquia, and the remaining 30% for customers in other departments and in Peru, the United States and the Netherlands Antilles.

Francisco Piedrahita Echeverri, executive president of the Medellín Chamber of Commerce, says Colombian law permits the importation but not the production of hard spirits. Originally viewed as a way to generate revenue for the departments and protect public health by guaranteeing production standards, traditional state ownership of liquor factories is strongly supported by departmental governments, many of which fear a sudden loss of pesos if the distilleries are privatized.

"The liquor industry has always been a state monopoly. It's a source of revenue," says Piedrahita. "To produce aguardiente costs very little, and they have a very high profit margin. What they make pays the salaries of teachers in Medellín and other cities."

In second place is ILC, which in 1999 produced 29 million bottles of Aguardiente Cristal and Ron Viejo de Caldas, followed by ELC, which distills and bottles Nectar aguardiente for Bogotá and other cities in the department of Cundinimarca. The company, founded in 1905, has 350 employees. In 1999, the company produced 21 million bottles of Aguardiente Nectar.

Cali's ILV, which ranked fourth, produced 13.2 million bottles of rum and Aguardiente Blanco in 2000, with production expected to rise slightly to 14.2 million bottles in 2001.

Guillermo Eduardo Ulloa, managing director of ILV, says the aguardiente and rum industry is worth around $250 million a year. In the department of Valle del Cauca, ILV sells $40 million a year, and generates another $40 million in taxes for the local government.

About half of ILV's revenues come from finished liquor products, and the other half from the sale of molasses -- the main ingredient in rum and aguardiente -- to other Colombian liquor producers, It also produces aguardiente on contract for Meta, Nariño and a few other departments whose state liquor companies have gone bankrupt.

One reason smaller companies are suffering is declining consumption of their chief product: aguardiente. This is partly due to the increasing local presence of global conglomerates and increasing consumption of beer and imported liquor brands.

"The last four years have seen a contraction of the liquor market by 30%," said Ulloa, "though in the last half of 2000, sales rose by 6%. The drop in construction has hurt us, because that generates income for the lower classes, which are our main consumers."

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