Argentina's famed vineyards buck backdrop of economic gloom

Buenos Aires

ARGENTINA'S wine industry is riding out the country's recession on a rise in tourism and exports stemming in part from a cheaper currency that put its world-class products at bargain prices.

The number of foreign tourists in Mendoza, Argentina's wine hub, jumped 58 per cent in February from a year ago, well ahead of the 19 per cent increase nationwide, government data published last week shows. Wine exports are up 8 per cent so far this year, contrasting with an overall decline in the country's exports during the same period.

Argentina is being slammed by a combination of surging inflation and its second recession in three years. Policy missteps last year undercut investor confidence, prompting the peso to lose half its value against the US dollar and forcing policymakers to seek billions from the International Monetary Fund. While the wine industry is by no means immune from the slowdown, there are signs that it is pulling through the adversity.

"Our restaurant is full every day," said Labid Ameri, president of Domaine Bousquet wines in Tupungato, a town in the province of Mendoza. "The peso devaluation has part to do with the increase in tourism." Mr Ameri's organic wine vineyard saw a 55 per cent boost in visitors from November to March, which is peak tourism season, compared to the same period a year prior. He said that sales rose by a similar amount, and visitor traffic is so brisk that he's building a hotel lodge on the vineyard that'll be done in August. He exports the majority of his bottles.

The February tourism boost in Mendoza follows similar increases in January and December. The number of Brazilians tourists nearly doubled in the fourth quarter last year, while Americans arrived in larger numbers and doubled their daily spending.

For Alejandro Vigil, who co-runs one of Argentina's most famed vineyards, Catena Zapata, business is booming. Visits to his vineyards are up 53 per cent so far this year while sales have increased 40 per cent. His "Gran Enemigo" wine costs about US$60-70 in the US but only 1,500 pesos (US$36, S$48) in Argentina.

To be sure, Argentina's woes still reverberate among wine makers. The country has the world's highest interest rate at 66 per cent, which hinders efforts to get loans and make a profit. Wine requires upfront investment in goods from tanks to harvesting equipment.

The peso's decline has made imported parts such as corks and cases costly, and there are signs of weakening consumption by cash-strapped Argentines. As a result, vineyards that focus on domestic sales are under pressure, according to Mr Ameri.

"I see a lot of wineries that are domestic dependent and are suffering," he said. "Nobody in the world can sustain a rate of 60 per cent." BLOOMBERG