Monthly Archives: January 2015

Mendoza Argentina Lawyers|Mendoza Real Estate Attorneys|Mendoza Real Estate Law Firm

Skilled Real Estate Lawyers in Mendoza Argentina

Argentina has thrived in the international wine market for fifteen years. While the country was able to become the fifth-largest global producer of wines and world’s tenth-largest exporter, inflation and high production costs, a weak peso and restricted access to credit are affecting the winemakers sustaining the industry. La Nacion’s December 31 article, “Wine: The Crisis Obligates Us to Revise the Numbers,” explores the transformation that the Argentine wine industry is facing in the midst of economic turbulence at home. The Argentine wine industry is controlled and consumed by a small number of actors. Argentine winemakers depend on just a handful of companies that import supplies like bottles, boxes and cork, and 80 percent of exports are delivered to just five countries: The United States, the United Kingdom, Canada, Brazil and the Netherlands. Argentine wineries have paid the price of so little competition between providers:  the high price of supplies means production is expensive, which gives the advantage to bigger wineries that can find ways to make a profit through economies of scale. Meanwhile, smaller wineries that can’t compete have been gradually bought up by bigger players.

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In the United States, wines in the ten-dollar range are the big sellers, says Susan Balbo, President of Wines of Argentina, the organization that represents and supports local wine exporters and promotes Argentine wine abroad. And only bigger wineries can manage to export these less expensive bottles profitably. The result of this phenomenon is that only a small group of wineries have come to dominate the wine export market. Argentina became a big player in the international wine market in the 90s, when hundreds of millions of dollars were invested in transforming the quality of Argentine wine, which had traditionally been mostly generic and low-quality, with a focus on promoting Malbec in foreign markets. When the 2001 economic crisis occurred in Argentina, the country became extremely cheap for foreigners, and international investors poured in. With three unique wine varieties, Malbec, Bonarda and Torrontés, the Argentine wine market was booming.

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But with the current state of affairs, the future of Argentine wine is changing. In 2013, profits from Argentine wine exports fell for the first time in a decade, and lately, countries like Chile, Australia, Italy and Spain have taken larger slices of market share that Malbec from Mendoza once enjoyed. Spain has high subsidies on wine exports to help winemakers make profits while charging low prices, and countries like Chile have free trade agreements with countries like the United States and China. These factors make it even more difficult for Argentine wine to compete internationally. It’s become expensive to produce that ten-dollar wine, as the cost of producing a box of wine often exceeds what can be made off of the bottles. Smaller wineries face two choices: A) convert themselves into large-scale productions focusing on lower-priced bottles or B) produce less, but charge more. It may be inevitable that the Argentine wine industry heads towards becoming a market dominated by a small group of big conglomerates in the next few years. This would not be a first, as in Chile, only four groups dominate wine production. Who will survive the transition, or the shape that smaller wineries will take, is yet to be determined. Kier Joffe has worked with international clients in Argentina for over 70 years, and our team members have become experts on the topic of buying and selling wineries in Mendoza, Argentina. Foreigners seeking advice or legal guidance on any matter related to Argentine wineries are encouraged to contact us for more information about our services.