Costa Rica’s State Monopolies Dominate in Industries Like Energy, Internet and Alcohol.

Costa Rica Tourists and locals alike generally do things the “Tico Way” when in the country. “Pura Vida” is a phrase overused by both, ‘taking things slow’ or accepting ‘tico time’ is accepted, or forced upon both, and Ticos and tourists tend to drink Imperial the national beer and Cacique the national liquor.

Guaro is what Costa Rica calls their house liquor and it’s similar to the aguardiente (”burning water”) that can be found in Columbia and other Latin American countries. Sold under the brand name Cacique, guaro is a 60-proof hard liquor that is grown locally in Costa Rica and derived from fresh sugar cane. Its flavor is surprisingly smooth and sweet and is a product of Costa Rica’s National Liquor Factory (Fanal). The home grown, state-run Costa Rican enterprise has been producing and bottling Cacique since 1853, however, the national liquor isn’t Fanal’s only claim to fame.

In a country so found of monopolies, it is no surprise that Fanal recently petitioned the government to maintain its right to be the sole refiner of alcoholic beverages in Costa Rica, or more specifically, to be the only company able to dilute imported alcohol and prepare alcoholic beverages in the country.

The Costa Rican Attorney General’s office approved Fanal’s petition to maintain its monopoly status, thus revoking an earlier decision that allowed private enterprises to import highly concentrated alcohol and dilute it since the alcohol was not considered safe for human consumption before dilution. This authorization opened up a great deal of business within the country taking away from Fanal’s large monopoly. Private firms would bring the imported products with high alcohol concentration to Costa Rica where they would then reduce the quantity and utilize the diluted agent to prepare similar beverages.

Fanal has been working closely with the National Council of Production (CNP) to petition its right to maintain the monopoly. Thanks to their efforts and the ruling of the Attorney General, all businesses that would like to import and dilute highly concentrated alcohols must first notify and request approval from Fanal and the CNP.

Despite the Attorney General’s ruling most of the private businessmen who diluted their own alcohol without permission in the past, will continue to import liquors and market them inside the country. However, these liquors will have to arrive pre-mixed and ready for distribution in order to avoid violating Fanal’s alcohol production monopoly.

The ruling seems to fall at a convenient time considering that Fanal’s sales have dropped significantly over the past few years. It was reported by CNP that in 1999 Fanal sold over one million 12-liter boxes of liquor. Their current yearly total has dropped to a measly 440,000 boxes. The monopoly has other projects in the work that they hope will reverse this statistic, including increased distribution, international exportation, new beverages and a new look for the old favorites. Luckily for Fanal any hopes of competitors to compete against the changing face of the 155-year-old monopoly have been snuffed out, but the question is: for how long?

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Filed under: Business on July 16th, 2008