What can Scotch whisky imports tells us about emerging economies?
A few days ago, The Economist published aninfo-graphic showing the countries that import the most Scotch whisky. France and the United States topped the list, with each country importing well over 100 million bottles, but the interesting information was the dramatic increase in imports from South America, Venezuela and Brazil in particular.
Venezuela’s Scotch imports jumped 77 percent and Brazil’s 56 percent in 2009, according to The Economist.
And this in a year that was characterized by recession, Venezuela’s economy was inflation-plagued and shrank by 2.9 percent in 2009, while Brazil’s growth flat-lined at 0.2 percent
So what’s going on? Is there a contradiction here? This is how The Economistexplained it:
In Brazil whisky is a status symbol for the growing middle class (in the north-east of the country it is often drunk with coconut water over ice). In Venezuela bottles of whisky may be serving as both a store of value and as a diversion in an economy in deep trouble.
So, for The Economist, this jump in Scotch consumption is a reflection of Brazil’s increasingly robust and more widespread prosperity, a result of a decade of economic stability. The 2009 recession, then, was just a ding for a well-oiled machine that continued attracting investment and creating wealth and hence middle class lifestyles.
I don’t know about whisky as a “diversion” from a troubled economy, but lets parse “troubled.” It is persuasive that as inflation ate away at Venezuelans’ pocketbooks they rushed to buy and stockpile their beloved Scotch before it became prohibitively expensive.
I buy that. As any Latin American with a memory of the 1980s knows, when inflation begins to creep up to a 30 percent annualized rate, as it has in Venezuela, consumers begin acting kooky and all manners of distortions may occur.
And Venezuelans do love their Scotch. The country imported about as much as Brazil in 2009 and has like one-ninth its population.
However, in The Economist’s comment string there was an alternative interpretation on offer, a reader arguing that President Hugo Chávez’s social policies were helping to create new coterie of Scotch guzzlers. The commenter’s handle, “soyrojarojita,” (i.e., “I am red”) made it clear she had a dog in this fight. She wrote:
Historically for forty years Venezuela has been the principal importer of whisky in South America. To drink whisky you have to buy it and how can you buy it if the economy is ailing. We have an economy that is better than most and the money is reaching more people because due to government pressure the private sector has dignified salaries, banks are giving credits, and some companies have been nacionalized (sic) permitting workers access to shares.
This comment raises an interesting question: did Venezuelans’ Scotch consumption rise because of redistributive economic policies or because of a hoarding impulse triggered by inflation? I think the latter but it would be interesting to hear other points of view.
The same question might be asked with regards to Brazil. Is it really evidence of a newly strong middle class, or is it a semi-panicked hedge brought on by importers worried about future Scotch costs vis-a-vis inflation and local currency value, since Brazil did shovel billions of stimulus dollars into its economy?
Incidentally, even though Brazil imported some 40 million bottles of Scotch in 2009, per-capita consumption is still at about an eighth of the levels in the United States, 4 servings per year in Brazil compared to 32 in the United States, according to a recent study by drinks company Diageo.