Spanish colonial authorities used to fill their coffers with cash they made selling liquor, tobacco and gunpowder.
After Central America gained its independence from the Spanish crown, the government of Costa Rica issued a slew of decrees in the 1830s so that the state could keep filling its pockets with liquor sales.
However, liquor continued to be sold widely on the black market, which is why Costa Rica even dedicated a police body – the resguardos – to pursue illegal liquor makers. In 1848, the government declared that only one liquor factory was permitted per province.
It wasn’t until President Juan Rafael Mora (1849-1859) ordered all liquor to be manufactured in one factory in the nation’s capital in 1850 that the state began really cashing in on booze. The National Liquor Factory (FANAL) was opened in 1856, and distillers were contracted to produce liquor.
Distillers who didn’t comply would have their distilleries seized and brought to the national factory. The institution’s profits were used to help pay for cash-strapped Costa Rica’s war against invading mercenary filibusters from the United States led by Tennessee-born William Walker. Mora also made the argument that the factory would rein in Costa Rica’s black market on liquor, which was highly unregulated and resulted in deaths from consumption of crude alcohol.
After a sugarcane shortage in the 1890s, in which Costa Rica had to import much of its alcohol from Cuba, liquor sales began to take off. In the 1920s, FANAL’s profits became the state’s single biggest source of income, according to a factory brochure.
The state used its liquor-generated riches to invest heavily in the factory, which produces wines and liquors as well as alcohol for domestic and industrial uses, vinegar, and distilled water.
Profits from the state-owned liquor factory were also used to fund improvements to San José parks, among other public works.
Though a dip in sugarcane production during Costa Rica’s Civil War meant slowed growth for FANAL, the state continued to make major investments in FANAL during the 1940s and 50s.
In 1949, the new government of José “Pepe” Figueres ordered FANAL to be managed by a new government agency, the National Production Council (CNP).
The council uses FANAL’s profits to finance small farmers, operate a wholesale food market for public institutions and invest in agricultural industry research.
In 1950, FANAL began building its new plant in Grecia, a coffee-producing region northwest of San José. The plant wasn’t completed until 1996 because of complications with construction and investment.
Attempts since the first administration of President Oscar Arias (1986-1990) to privatize FANAL have crippled planning and investment in the factory, in part because of a lack of certainty about the institution’s future, according to a FANAL statement.
It was in 1988, under Arias’ first administration, that big changes were first proposed to the National Liquor Factory.
In 1989, his administration proposed having the Agroindustrial Sugarcane League (LAICA) administrate FANAL instead of the National Production Council (CNP), which would have put the state-run factory into the hands of a private organization.
Opposition legislator Joaquín Salazar, from the Citizen Action Party (PAC) claims FANAL’s weakening has benefited President Arias and his brother, Presidency Minister Rodrigo Arias, who both have small shares in Taboga, the country’s biggest sugarcane mill.
Taboga was one of several companies granted concessions to distill alcohol, a business that has become more lucrative after FANAL was stripped of its right to distill alcohol in 1998, after the Public Health Ministry found the factory’s wastewater treatment plant wasn’t up to standards.
FANAL now spends about $2 million a year buying alcohol from distillers like Taboga, according to Salazar.
In 1999, a new law jacked up taxes on liquor and other alcohol. CNP president Francisco Oreamuno claims the law favored the Cervecería de Costa Rica, which produces the nation’s beer, by applying lower taxes to beer than to liquor. The next year, FANAL’s sales began to drop. Since then, the Cervecería has become the largest beverage company in Costa Rica, representing more than a third of the industry’s worth (TT, April 20).
The Tico Times’ repeated calls to the Cervecería for comment weren’t returned in recent weeks. To cut its losses, FANAL has started contracting out its distribution capabilities to other companies, including the Cervecería.
The sugarcane-based liquor Cacique, meaning “chief,” is FANAL’s best-selling product, accounting for up to 80% of the factory’s sales, according to FANAL manager Carlos Villalobos. And at ¢3,000 ($6) a liter, or a ¢1,000 ($2) for a media, or 365 ml., the clear sugarcane liquor is one of the cheapest buys on the market.
FANAL produces an array of liquors beyond its star product Cacique. It also produces rum, liqueurs and a brandy and vodka brand. It also processes alcohol for medicines, perfumes and domestic uses.