President's whisky tax threatens £74m trade

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President's whisky tax threatens £74m trade and launches demands for an EU investigation
HUGO Chavez, the left-wing Venezuelan president, has sparked anger by threatening to impose a 15 per cent luxury goods tax on Scotch whisky.

The industry is also being hit by punitive foreign currency restrictions put in place by the Chavista government that have seen the price of imports of the spirit to Venezuela grow by up to 50 per cent.

Concerns are growing in Westminster that the measures break world trade laws.

The cost of whisky has soared since the Chavez government stopped allowing importers to use the official exchange rate to exchange bolivares in June, forcing them to buy euros at a much less favourable rate.

The market is worth £74 million to Scotland and Venezuela is the biggest consumer of whisky in Latin America and the seventh-biggest buyer in the world.

According to the Scotch Whisky Association, exports to Venezuela could double this year as the world's fifth-largest oil exporter benefits from an economic bonanza thanks to high oil prices.

Now the organisation has asked the European Commission to investigate.

Traditionally the drink of the oligarchs, whisky has become the latest target in Mr Chavez's "Bolivarian revolution".

During a reception held in honour of foreign VIPs including Angus MacNeil, the SNP MP, who was visiting Venezuela to observe Sunday's presidential elections, elegantly dressed waiters poured glasses of whisky, stunned when anyone requested a different drink. However, the flow of spirit is under threat since Mr Chavez unveiled his plans for a 15 per cent tax that would be applied to whisky imports.

Jose Luis Betancourt, president of the Venezuelan Chamber of Commerce, told The Scotsman this measure will almost certainly be implemented, although it is unclear whether it will be in the form of a luxury tax or another type of taxation.

In 2005, an EU-Venezuela agreement allowed access to foreign exchange for imports of EU spirits and wines at the official rate, provided they had a particular certificate. The authorities have recently limited these certificates, in terms of both quantity and time. The Scotch Whisky Association and other European spirits manufacturers believe this is a violation of both WTO and IMF rules.

A spokesman for the Scotch Whisky Association said: "The discriminatory foreign exchange control system is restricting market access contrary to WTO rules, denying consumer choice and unfairly preventing Scotch whisky sales reaching their full potential in Venezuela."

Mark Pritchard, vice-chairman of the all-party Venezuela group and a Tory MP, had expressed concerns to visiting MPs from the country about the looming tax. "This is a serious issue for the Scottish whisky industry which employs 41,000 in Scotland. The new tariffs must not be part of Chavez's crusade on capitalism."

John McFall, the Labour chairman of the all-party whisky group, said the measure was "punitive". "The Venezuelan government is going against all the multilateral agreements." he said.

TRADE WAR IS A RUM DO
VENEZUELANS drink whisky in golf clubs and slums alike, despite the country producing excellent cheaper rum.

Whisky has become a sign of distinction, equivalent to owning a car or a TV set, with a good bottle costing 100,000 Bolivares ( £24) - or around a quarter of the local monthly minimum salary.

The effects of the trade measures could be limited thanks to Venezuela's boom - the economy grew by almost 10 percent last year - which would allow increasing prices without reducing demand. Venezuelans' habits could also help.

"Whisky is part of our lives. We'll complain but I'll still drink it, maybe slightly less than now," said local businessman Jose Marquez. Nearby, Luis Altamirano, a bartender working in an American-style restaurant located in an upmarket area of Caracas, said: "I don't care if prices increase, I'll drink whisky anyway."

Source: The Scotsman Newspaper Online