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Wine crisis goes on...
Iurie Gotisan, April 11, 2006

Although the Russian Federation's actions regarding exportation of Moldova's wine production are delighted in the "sanitary-epidemic field", as many officials of Moscow claim, we consider that the definitive elimination of some alleged suspicions regarding respect for quality and technical standards by Moldovan producers and exporters will be possible only when Moldova will implement the internationally recognised standards. It is not enough to own some products recognised on market or to win medals at various international contests and exhibitions. For this purpose, Moldova shall implement a series of institutional and regulatory reforms in the area of certification of quality of wines. As a result, quality testing laboratories fitting European standards shall be working in Moldova. As for example, the European commodity quality and origin assurance ISO 9000 is applied on about 100 Moldovan products and not all wine producers that export their production to CIS hold this standard.

On the other hand, this situation has demonstrated one more time that a unilateral dependence on a sale market, on the Russian market in this case, may have dramatic consequences on exports in particular and on country's economy in general. Alcohol production worth about 300 million dollars is exported to the Russian market and some simple estimates show that losses of exporters amount to 20 million dollars a month. At the same time, it is clear that the political aspect prevails the economic side and the assertions that the decision of the Russian Sanitary Service Rospotrebnadzor to exclude the alcohol production made in the Republic of Moldova from trading does not affect the wines and cognacs imported from Transnistria is an eloquent explanation in this regard.

Given this situation, we think that wine producers suffer double losses because many of them have contracted credits for production activity from commercial banks in Moldova and they will have to reimburse them. We do not rule out the possibility that banks will also lose. They will have less liquidity available since notably big wine producers transact large amounts via banking system. The present state of things could lead to a overheating of the currency market - the leu could devalue versus main reference currencies since most of credits were contracted in foreign currency.

Although we do not know the value of loans that banks have released to producers, we consider that the impact will be negative on both sides. On the other hand, the bank theory names hardly reimbursable credits as non-performance credits and we think that banks calculate their risk margin after granting credits, anticipating potential risks of loans and system risks in general. Of course, it depends on the size of risks and the risks seem to be high enough in this case, being capable to challenge a serious crisis. This situation may have dramatic consequences on exports in particular and on economy in general. We shall admit that wine producers pay high taxes to the state budget and thus we do not rule out a reduction of budget incomes.

Thus, Chisinau will have first of all to negotiate with Moscow at least the introduction of wine production stationing at the Russian customs stations or sale of the production on the market, in order to relieve this situation. Indeed, the wine problem will be a goal of the April 12-14 visit of the Moldovan parliamentary delegation to Moscow. Thousands of decilitres of raw wine are delivered besides bottled wines to Russian wineries which have more than 200,000 workers. Many of these workers run the risk to be fired. As a result, Russian makers also suffer while some Russian experts say that the losses of Russian producers are estimated at about 20 million dollars a month.






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