Cooperativa Pisco Capel, Chile's largest producer of the national spirit pisco, is facing bankruptcy unless the government decides to intervene to save the company.

The company blames its plight on overproduction of pisco grapes and falling demand for the spirit. The previous board of directors also invested heavily in an olive-oil business that failed to deliver profits.

Pisco Capel's new director, Nelson Saavedra, believes the pisco industry is still commercially viable, but is calling on the Chilean government to use some of the duty it raises on pisco sales to provide a bridging loan to the owner-members.

The Chilean government has, however, responded coolly to the proposal. A government spokesperson said the authorities were not convinced that a further loan was in the best interests of the co-operative, which is already heavily in debt.