Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Wednesday, October 18, 2006

Cachaca! And Free Trade. And Intellectual "Property"

It sounds like moonshine rum--ferment for 24 hours and then boil to 80 proof. Drunk at Cafe de la Paz in Berkeley:

Cachaca: TED Case Study #721 - Brian Morgan: Unknown to many outside Brazil, the cultural significance of cachaça, a distilled liquor, ranks among soccer, carnival, and samba. Although non-Brazilian’s compare cachaça to rum, their only similarity is that they both originate from sugarcane. Cachaça first gained popularity among slaves and peasants during Brazil’s colonial period but the spirit has recently become a favorite domestically and internationally regardless of the drinker’s class. Also, Brazilian cachaça exports to Europe and the United States have been aided by the trendy drink caipirinha. The cocktail’s global success has inspired other Caribbean and South American states to produce their own cachaça-like alcohols. Consequently, the Brazilian government has initiated protectionist measures at home and abroad to preserve cachaça’s foreign markets. These developments bring together cachaça’s trade, cultural, and environmental aspects.

No one knows for sure who began cachaça production.... [S]ugarcane had been introduced to Brazil as a cash crop by their colonial motherland Portugal. Slaves... were given leftover cane juice... let it ferment... plantation owners often promised slaves this fermented cane juice once they had completed their work. Eventually, someone realized that by boiling the fermented juice a more potent libation was produced, marking the birth of cachaça. At this point, wealthy Brazilians regarded cachaça as a poor man’s drink and thus preferred European alternatives. However, this did not stop cachaça from becoming an integral part of Brazilian culture. It is estimated Brazilians consume close to 350 million gallons of cachaça per year – about two gallons per person.

There are roughly 30,000 small producers.... Because the distillation process is relatively easy... because sugarcane is so abundant in Brazil, the business can be is open to anyone. Sugarcane is... milled... fermented for about 24 hours... boiled... 80-proof.... Regardless of the variety, cachaça should not be confused with rum, which is distilled from the molasses left over after sugar refinement....

Cachaça’s export capability was uncertain until the caipirinha became a bestseller in bars across Europe, United States, and Japan. The cocktail combines crushed limes, sugar, ice, and cachaça to produce a sweet and zesty flavor packed with alcoholic intensity.... Germany has become the largest consumer of cachaça outside Latin America, constituting about one forth of the foreign market.... The Brazilian government has also helped promote cachaça by providing caipirinhas at social functions.... Ambitious export programs aim to increase cachaça exports to 40 million liters per annum by end of this decade. In addition, Brazilians hope that cachaça and caipirinha will become what tequila and margaritas have become for Mexico: an internationally recognized image associated with the Brazilian lifestyle....

However, since sugarcane is such a homogenous good and since the distillation process does not impose geographic limitations outside the wood used to age cachaça, imitation cachaças have been increasingly manufactured... the imposters could crowd them out of foreign markets... the quality or unique taste of a cachaça is barely noticeable once it is mixed into a sugar-rich caipirinha.

To protect its cachaça industry... President Luis Inacio Lula da Silva... sent the issue to the World Trade Organization in hopes that cachaça will gain protection under the Trade Related Aspects of Intellectual Property Rights agreement (TRIPS). Moreover, Brazil is currently involved in bilateral negotiations with the European Union to ensure that the cachaça name will be used only with Brazilian products within member states.... Under the TRIPS agreement of the WTO, cachaça could potentially gain protection as provided by Article 22 and 23. According to Article 22, “geographical indications are, for the purposes of this Agreement, indications which identify a good as originating in the territory of a Member, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin.” In the case of cachaça, Brazil is arguing that the drink is unique to its territory because of the liquor’s history, origin, and its ties to Brazilian culture. If cachaça qualifies for geographic indication, it would also receive the higher level of protection granted by Article 23, which states that signatories of the TRIPS agreement would need to prevent the use of the name cachaça, “even where the true origin of the goods is indicated or the geographical indication is used in translation or accompanied by expressions such as “kind”, “type”, “style”, “imitation” or the like.”...

If cachaça attains protection for geographic indication in both of these negotiations, it would create two additional avenues for dispute settlement. First, Brazil would be able to file complaints through the WTO, which would allow the country to target Caribbean and Central American nations, such as Colombia and Martinique, that illegally produce cachaça. And Second, Brazil could resolve conflicts directly with the EU regarding cachaça....

Brazil has not yet officially disputed any instances where other countries have tried to sell their drinks as cachaça...


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