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Argentina's Wineries Grapple with Economic Difficulties

A weaker currency and painful inflation is increasing production costs

Liz Thach
Posted: April 7, 2014

In recent months, the Argentina peso has fallen in value by 30 percent against the U.S. dollar. This change, coupled with dramatic inflation rates, is creating stress for the Argentina wine industry.

"We’ve experienced these cycles before," said Alejandro Gennari, an agriculture economist with the National University of Cuyo in Mendoza. "But if this doesn’t end soon, we could have a serious crisis."

As of 2013, Argentina was home to 894 wineries, with more than 300 of them exporting wine. Argentina is now the fifth-largest wine producer in the world, and wine holds an important role in the economy. More than half of its wine exports go to the United States. But the country has also been subject to several recessions and economic crises in recent decades.

Winery owners have seen the cost of basic winery supplies such as corks, bottles and yeast rise by more than 40 percent, which has put heavy pressure on profit margins. Some small wineries have been forced to sell their wine on the bulk market just to survive.

"We are trying not to raise prices, despite high inflation," said Osvaldo Domingo, owner of Domingo Molina in Cafayate. "We want to remain competitive, but the situation is difficult. All wineries are working so hard to increase quality and maintain their foreign markets."

Larger wineries, such as Trapiche, are trying to hold prices steady and increase export volume. Normally a weaker peso would mean Argentine wines would cost less for American consumers, which could help sales. But inflation is outstripping gains. Financial hedging has also become a critical competency as winery accounting offices juggle currency exchange rates with the peso, dollar and euro.

"We are hopeful the situation will change soon," said Gennari. "The Argentina wine industry has been growing at a healthy pace and exporting high quality wine at attractive prices. It would be a shame to see that change."

One bright spot is an increase in wine tourism due to the weaker peso. "Tourists can get excellent deals on wine and food," said Julia Zuccardi of Familia Zuccardi, located just outside of Mendoza. "We now receive more than 40,000 visitors a year, and we see many more from Brazil and the United States because of their favorable exchange rate."

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