The Wall Street Journal / September 20, 1996
By Larry Luxner
SANTIAGO, Chile -- Don Melchor, the 19th-century founder of Viña Concha y Toro S.A., grew sick and tired of employees stealing from his private wine cellar. Installing iron bars didn't seem to help, so one day he christened the cellar Casillero del Diablo, Spanish for "dwelling-place of the devil." That, according to legend, scared off his superstitious workers for good.
Today, Concha y Toro is Chile's leading wine producer, Don Melchor is the company's most prestigious label -- and the country's wineries thriving as favorable climate, low labor costs and a stable economy help boost the presence of Chilean varietals on U.S. supermarket shelves. In fact, Concha y Toro recently overtook Brazil's Marcus James as the No. 3 bottled-wine exporter to the United States, with sales of $11.3 million -- over 28% of Chile's total U.S. wine sales.
"The wine industry is booming, both in terms of quantity and quality," says Ernesto Müller, marketing director for Errazuriz Estates, which produces Errazuriz and Caliterra wines in the fertile Maipo Valley area, just outside Santiago. "Consumption of premium wines is increasing in almost every major export market."
After stagnating for decades, exports of Chilean wine have skyrocketed -- from $8 million in 1982 to $180 million last year. According to the Chilean Wine Exporters and Bottlers Association, 40% of the country's wine production is exported, of which 40% goes to the thirsty European market, 37% to the United States and Canada, and the remaining 23% to Asia and Latin America.
While Chilean wine has certainly enjoyed a rapid rise to glory, it's not the only success story. Two other non-traditional exports -- fresh fruit and salmon -- have helped put Chile on the world gastronomic map.
In the 1995-96 season, according to the Chilean Exporters Association, a record 174.3 million boxes of produce -- ranging from cherries and table grapes to raspberries and kiwifruit -- were shipped from Chilean firms, generating $1.3 billion in revenues. That's up 14.6% over the previous season. The United States and Canada were the biggest markets for Chilean produce (63 million boxes), followed by Western Europe (60.9 million boxes) and Latin America (33.6 million).
Rodrigo Duran, marketing manager at David del Curto S.A. -- Chile's second-largest fruit exporter -- says that while exports to the United States are flat, Latin and Asian markets are growing by 20% annually.
The produce industry got a big boost earlier this year when United Trading Co. S.A., Chile's fifth-largest fruit exporter, announced it would acquire Del Monte Fresh Produce Co. for $534 million. Officially, Del Monte's parent firm, Grupo Empresarial Agricola Mexicano S.A., is selling Del Monte and its Global Reefer Carriers Ltd. shipping business to UTC's parent company, IAT Group Inc., in a deal that brings together Del Monte, with its pineapples, bananas and lemons, and UTC's grapes, plums and kiwifruit.
In the picturesque lake district of extreme southern Chile, tasty exports of another kind -- seafood -- are flourishing. Fishermen last year shipped northward more than 90,000 metric tons of fresh and frozen salmon worth $456 million -- a 30% increase by volume and a 23% jump by value over the year before.
Rodrigo Infante, general manager of the Salmon Producers Association in Santiago, which represents 85% of Chilean salmon exports, says Chile's biggest market for salmon is Japan, followed by the United States and Europe. Infante predicts Chile will very soon surpass Norway as the world's largest salmon exporter. "Our costs of production has dropped significantly in the past three years," he said, "because of improvements in feed technologies and better methods of raising and handling fish."
Yet Chile's phenomenal export success in all three areas -- fruit, wine and salmon -- is causing problems with the United States just as it seeks to gain entry into the North American Free Trade Agreement. Salmon producers from Maine are threatening to file an anti-dumping petition against Chile with the U.S. Commerce Department's International Trade Commission.
"They're saying that we send fish into the U.S. market below our production costs, which is not true," insisted Infante, who says this isn't the first time rumblings of an anti-dumping petition have been heard from Washington. "We feel this time the threat is more real, although nothing's been filed yet. For three years, we've done a generic campaign to increase salmon consumption in the United States, together with Canada, Washington state, Norway and Scotland. We feel that instead of trying to constrain the market, we should develop demand."
Adds lawmaker Jaime Estevez, president of Chile's Chamber of Deputies: "Instead of producing kilos, we're now producing tons. But we haven't done any dumping. The U.S. has put up barriers because they don't want competition.
In Sacramento, California wine-growers -- threatened by Chile's export success -- argue that any free-trade agreement which includes Chile but lacks protection for U.S. growers would cause a "crisis" because of the added competition from South America.
"There isn't going to be one additional drop of American wine sold in Chile as a result of the free trade agreement," says Bob Kalik, president of the Washington-based American Vintners Association, whose organization represents 450 wineries in 38 states, or close to 50% by volume of all wine produced in the United States.
Perhaps the most bitter issue separating the two countries, however, stems from the alleged 1989 discovery of cyanide in two Chilean table grapes arriving in Philadelphia. The Food and Drug Administration immediately embargoed all Chilean grapes for several months, costing the counry an estimated $330 million in lost exports. Gabriel Guerra-Mondragon, the U.S. ambassador in Santiago, recently told growers that Chile won't receive financial compensation from Washington, leading one official, Ricardo Ariztia of Fedefruta, to call the ambassador's offer of technical and marketing assistance a "blow to the honor, dignity and principles of those of us" subjected to the FDA blunder.
"The U.S. government should pay, because it was proven that those grapes weren't poisoned in Chile," says Cristián Smith Achondo, foreign trade manager at the Chilean Exporters Association. Adds Duran: "For the United States, it's small potatoes, but for Chile it's an important issue. Many growers and exporters were hurt, and we don't want to go through the same thing in the future."