Is Argentine bulk wine competing on the world stage again?
It is the question that everyone in the South American country asks.
Argentina struggled for many years to penetrate the shelves of Europe and the United States. At times, the quality of their wines and the strength of their brands set a precedent that got into the heads of consumers around the world, and that allowed the argentinian wineries to continue starring in the toasts of barbecues and roasts.
However, a difficult economic situation seriously affected Argentine bulk, which went from exporting 193 million liters in 2020 to 40 million in 2023 (January-November).
What were the causes?
The main reason was the retention of the exchange rate against the dollar, in a country with excessive inflation. This exchange distortion, the result of a government need to control the few dollars that the country had and on which they depend so much, caused the industry’s costs to be linked to the free dollar (between 50% and 150% higher than the official), while exporters would obtain collection of their exports at the price regulated by the state.
In other words, with an example gap of 100% between both dollars, an exporter had to export 2 dollars to receive 1.
On the other hand, a lean harvest that scared the market, although as the months went by, this shortage became relative since domestic consumption fell abruptly.
The numbers speak for themselves. Argentina lost market space in practically all countries, especially in the bulk wine segment.
What is the future scenario?
The scenario promises to change in the short term. After elections that kept the country alert for months, the winning party is the one that promises from the beginning the total elimination of regulations and the liberalization of the capital market.
If it happens, beyond the consequences for the domestic market, it could mean a rationalization of relative prices in the international market.
The logical thing: that an exporter exports 1 and receives 1.
If this is done, a window may open for wineries to compete again for the space given up.
The export sector and importers of the world have a scenario that will become clearer in a short time.
We hope it is favorable!
Lost Valley Argentina- Editorial * December 2023 ***