U.S. Importers and Greek Suppliers Stymied by Cash Controls

http://www.nytimes.com/2015/07/30/business/smallbusiness/greek-crisis-pinches-importers-in-us.html

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Ted Diamantis, an importer of Greek wines who is based in Chicago, has been helping his suppliers stock up on bottles, labels and printing ink. The barrels, though, have him worried.

In two or three weeks, some of Greece’s winemaking regions will begin their annual grape harvest. The wineries Mr. Diamantis buys from age their wine in barrels from Italy and France, but Greece’s capital controls make it difficult for them to send money out of the country to pay for the barrels they need for this season. No barrels means no wine for Mr. Diamantis.

“Without the ability to access your capital, you can’t buy anything,” said Mr. Diamantis, who is in Greece meeting with his business partners. “The marketplace is frozen.”

American companies that import Greek products have been battling uncertainty for the last month. Export shipments are still leaving the country, but Greece’s debt crisis is disrupting its supply chain in both significant and subtle ways, threatening the livelihoods of Greek merchants and their distant trading partners.

“The domestic market in Greece has dried up,” said Jim Tsiboukis, who imports Greek wine and foods to his warehouse in San Jose, Calif. “My suppliers count on exports, but they can’t get the materials they need to pack their products. This is going to slow the economy there down to nothing.”

Mr. Tsiboukis estimated that he has three months of inventory stockpiled, but every day that Greece’s capital controls — stringent restrictions on international money transfers — remain in place eats into his safety margin. The olive oil producer he buys from has not been able to import the bottles it needs for its oil, and his winemakers are scrambling for supplies like yeast, bottles and equipment.

The United States imported $1 billion in Greek goods last year, many of them flowing through small, family-run businesses like Mr. Tsiboukis’s. Greek products make up about 10 percent of his company’s $24 million in annual sales.

Some businesses have to juggle their finances and payments to work around Greece’s restrictions. The moment Greece’s banking system seized up, Mr. Tsiboukis’s suppliers asked him to stop sending money into the country. Those with accounts in other countries — Cyprus is a popular choice — redirected the payments for their invoices.

Jeremy Johnson’s vendors made the same choice. His family’s importing business, Encore Foods in Hingham, Mass., is delaying payments for several suppliers that are setting up accounts outside the country.

“They have more faith in us right now to hold on to their money than they do in their own banking system,” he said.

Greece’s economic crisis is the most extreme problem Encore Foods has run into, but the import industry is always facing challenges, Mr. Johnson said. Supply shortages, dock strikes, customs delays and shipping problems are common, especially in Europe. Encore hasn’t yet experienced delays in any shipments from Greece, but Mr. Johnson is increasing his order volume to build a buffer in his inventory.

Concerns about Greece are beginning to ripple out to his customers. One of his buyers, an e-commerce business that sells global goods, recently canceled a planned 2016 promotion featuring Greek products.

“They said, ‘You know what, I’m going to focus on a different country,’ ” Mr. Johnson said. “They didn’t want to set it all up and then suddenly find they couldn’t get any products from Greece.”

Many American importers who have personal ties to Greece say that watching the crisis ravage the local merchants they work with is one of the most painful costs.

Monica Dreger, whose mother and husband are Greek, is the creative director of CultureBaby, a children’s boutique of international products. Domestic sales have collapsed for the jewelry and home decoration designers she works with; few Greeks can afford such luxury goods. A shoemaker she buys from is struggling with increased competition from discounters trying to capture a piece of the export market with rock-bottom prices, and the materials the designer needs for her handmade sandals are in short supply.

“For me, it’s not a problem, because she’ll find new materials and make some changes to the sandals to work with what she has,” Ms. Dreger said. “But on her end, she’s having to do double work, and she’s making less money.”

Greece’s economy is heavily dependent on imports, and the current crisis has exposed just how many parts of its supply chain no longer exist domestically. Mr. Diamantis, who spends about four months a year in Greece, started his wine business in 1992, nine years before Greece adopted the euro. That move reshaped Greece’s industrial landscape.

“All the industries that supplied this small market, but supplied it efficiently — they disappeared,” he said. “Once we became part of a greater economy, the small suppliers couldn’t compete on a global scale.”

The wineries he works with rely on Italian glass and German machinery. Greece no longer makes the paper they need for wine labels or the ink to print them.

Efstathios Martinis, the owner of Kalamata Food Purveyors, an import business in Hayward, Calif., is on the verge of sending a wire payment to Italy to buy the bottles his Greek supplier needs to package its olive oil. Doing business in Greece is becoming more expensive, he said, as new taxes pile up and imported supplies become costlier.

Greece’s turbulence has settled a bit since mid-July, when the European Union approved a bridge loan that allowed Greece to make two crucial debt payments, but its economic outlook remains bleak. The prospect lingers of Greece exiting the eurozone, a move the country’s government secretly prepared for as a contingency plan.

Switching to a new drachma would be “a whole different ballgame,” Mr. Martinis said. The cost of Greek goods would rapidly plunge, but producing and shipping them out of an economically isolated country would be a logistical nightmare.

Even if Greece’s situation stabilizes, the damage has been immense.

“When I talk to our partners, there’s a sadness in their voice about what’s happening to their beloved country,” Mr. Johnson said.

Greek importers have spent years building up the country’s image overseas, and Americans have fallen in love with products like Greek yogurt, Mr. Diamantis said. He’s worried all that progress will be undone by a perception of the Greek people as deadbeat debtors.

“We need to protect the brand of Greece and get the right message out,” he said. “This crisis that’s occurring, it’s not a crisis of bad culture. It’s bad governance. It’s like a drug dealer and a drug addict. Who is to blame? Europe has been so eager to lend money and sell to Greece. Now, all of a sudden, in the last year or two, you see people looking around and going, ‘We have nothing left.’”