Wine: winemakers close 2022 with lower foreign sales and profits

Business owners complain of rising costs, export taxes, fiscal pressure and exchange restrictions. They admit they’re investing less.

In 2022, Argentine wines gained international recognition for their high quality once again. Wineries launched new products and the process of boosting regional producers was accelerated with new establishments apart from the classic Cuyo winemaking provinces, in non-traditional parts of the country such as Buenos Aires province.

But this glamorous side of the industry only reflects part of the reality the sector is facing. The other side indicates that we are at the end of one of the worst years of the decade for the sector.

This diagnosis is based not only on the opinions of its protagonists, but also on hard data from official statistics.

According to the most recent report by the National Institute of Viticulture (INV), between January and November of this year Argentine wineries exported 247.8 million liters (65.4 million gallons) of wine, which represents a 20.1% drop compared to the same period in 2021. That was 62.5 million liters less than last year.

Of total exports in the first eleven months of 2022, 184.3 million (74.4%) were of bottled wines (those with the highest added value), which registered a 9.2% year-on-year drop. This translated into a 6.2% decline in annual turnover. For bulk wines, the situation was worse: 63.4 million liters (25.6% of the total) were exported with a decrease of 40.9% in volume and 20.6% in dollars, compared with the same span of 2021.

Domestic sales, affected by inflation, are no better either, as they reflect a strong trend over the last decade. According to a study by the Argentine Wine Observatory, just over 1.005 billion liters were shipped for domestic consumption in 2012, and in 2021 that number dropped to 834 million liters, which represented a 17% drop. The best year of the decade was 2015, with shipments that exceeded 1.026 billion liters. And the estimate is that in 2022 this will end up stalled.

“This year was marked by scarcity, loss of competitiveness, labor tensions and climatic adversities that, after 30 years, returned throughout the country,” summarized Milton Kuret, executive director of Bodegas de Argentina (Argentine Winemakers), the chamber that gathers more than 250 wineries from all over the country. “The increase in costs, export taxes and fiscal pressure, together with price restrictions and outdated exchange rates, are the perfect combination for a drop in profitability and its corresponding impact on fewer investments,” he added.

This context, which also affects other local industries, has put the sector in a critical situation: “The competitiveness of our companies is compromised, and therefore, so are our sales in different markets. In these matters we have, and still are, actively petitioning the authorities for the necessary relief measures,” Kuret remarked.

The winemakers’ latest efforts are related to the demand for the elimination of export taxes and the application of a “malbec dollar” exchange rate, with similar advantages to those the national government granted to farmers through the “soy dollar”.

They have also recently added demands for fiscal relief measures for areas affected by late frosts, which hit extensive areas of vineyards. But the promised answers are still delayed, according to the companies.

“In our countless trips to Buenos Aires, we have raised our concerns about the impact of government regulations and practices. In particular, we focus on those that undermine our competitiveness, causing us to lose markets, and those that hinder our ability to make payments abroad and import inputs that allow us to produce and grow,” explained Patricia Ortiz, president of Bodegas de Argentina and owner of the Mendoza winery Tapiz.

Today, the entire sector’s concern is focused on stopping currency exchange restrictions –which hinder payments for export management services abroad– from causing Argentine wines to lose markets. “A market you lose does not come back”, is the slogan of wineries that compete internationally with large producers such as Spain, France, Italy, and the Chilean neighbors.

Author: Jorge Velázquez / Orginally published in Ambito.com / Translated by Agustin Mango

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