ECUADOR DIGESTHigh liquor taxes reduce imports, increase smuggling; Colombia to pay spraying damages; shrimp tariff dropped

Ecuador’s Spirits Importers Association reports that imports of alcholic beverages droped 41% from a year ago due high taxes and tarrifs. They also say that smuggling of foreign brands has skyrocked and government officials agree.

Taxes on alcoholic imports have been raised three times since 2009, including a new charge last year based on the percentage of alcohol in an imported bottle.

Felipe Cordovez, president of the Importers Association, said the consequence of the taxes is that retail prices are double and even triple the price charged in neighboring Peru and Colombia. “For Premium brands of imported whiskey, rum and gin, we have seen as much as an 80% reduction in imports as a result of these taxes.”

Cordovez said that a bottle of Johnny Walker Black Label whiskey that can be purchased for $37 in Peru, costs about $80 in Ecuadorian stores.

The government admits that there is a growing black market for foreign liquor brands, almost all of it coming over the borders with Peru and Colombia. According to Cordovez, much of it crosses the borders in gas trucks smuggling low-price LP gas out of the country. “They take gas out and bring liquor back. It’s a very profitable business,” he says.

The government admits it has a smuggling problem. Quito customs officer Luis Cortez says that as much as 60% of foreign liquor purchased in Ecuador is smuggled in. “We do not have the personnel to keep all of it out. We can control it in stores and bars but it is difficult with prívate sales.”

Juan Calderon a Quito liquor store owner said sales of imported liquor by more than 50% in his store from what it was three or four years ago. “Everyone knows where to get smuggled liquor, everyone has a friend in the business,” he said. “Why would they want to buy from me when they can get it for half-price from a friend? I don’t understand why the government hasn’t figured out that high taxes are counter productive. They should read the history of prohibition in the U.S. to see what happens.”

The national customs office reports that legal duty free liquor is coming into the country in record amounts, mostly due to high prices at home. Travelers are allowed to bring three liters into Ecuador from out of the country.

Importers say new taxes have also reduced shipments of European wines. Wines from Chile and Argentina, however, have not been affected due to trade agreements between those countries and Ecuador.

Colombia to pay $15 for spray damages

Colombia has agreed to pay $15 million to settle a lawsuit filed by Ecuador for human and economic damage caused by spraying an anti-coca herbicide that blew across the countries’ common border.

The settlement of the 2008 lawsuit brought by Ecuador before the International Court of Justice at The Hague was announced by both governments Friday. In a statement, Colombia’s Foreign Ministry said the “friendly agreement” included money to encourage economic development in Ecuador’s border zone.

“The peaceful solution demonstrates the excellent relations shared by the two countries, the fruit of continuous effort and … the 160 projects that feed the binational agenda,” said the Colombian statement.

The  agreement, however, is being criticized by some prominent Ecuadoreans.

National Assembly member Clever Jimenez, who sits on the congressional international relations commission, said $15 million is “insufficient” compensation for the health consequences suffered by hundreds of farmers in northern Ecuador who ingested airborne glyphosate, the active ingredient in Roundup weed killer.

Alberto Molina, a former Ecuadorean army officer now working as a security consultant in Quito, said the two governments should continue to assess the effect on his country of Colombia’s drug war and five decades of civil conflict, including the thousands of Colombian refugees now living in Ecuador.

The U.S. Environmental Protection Agency has issued warnings that long-term exposure to glyphosate could cause “kidney damage (and) reproductive effects.”

U.S. eliminates tariff on Ecuador shrimp

Nathalie Cely, Ecuador ambassador to the U.S., announced Friday that the International Trade Commission (ITC) has ordered the U.S. to eliminate its tariff on Ecuadorian shrimp, effective immediately.

The U.S. Department of Commerce added the tariff in early August, claiming that Ecuador’s shrimp producers were being subsidized the government, creating an unfair market advantage. Shrimp imports to the U.S. from China, India, Indonesia, Malaysia and Thailand were also charged the additional tariff.

The ITC said that they found no evidence that Ecuadorian shrimp producers received government assistance.

Photo caption: Liquor stores feel the pinch of high taxes and high rates of smuggling; Photo credit: El Comercio