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Argentina abolishes wine tax to boost flagging demand
Impact International / June 1, 1996

By Larry Luxner

BUENOS AIRES -- Argentine wine producers, plagued by an overvalued peso and stagnant local demand for their products, got a pleasant surprise in late April when Argentine President Carlos Menem eliminated the 2.5% excise duty on fine wines.

The move, which caught liquor executives off guard, was intended "to lower the fiscal burden and give a boost to the development of Argentina's wine industry," Menem told reporters. The sudden move annoyed the Economy Ministry, since it had not been informed of the decision previously, and since the government had not received any demands from the Buenos Aires-based Argentine Wine Association to eliminate the tax.

Nevertheless, Argentina's wineries certainly need all the help they can get.

With annual per-capita consumption under 40 liters (compared to over 90 liters in years past), Argentine wineries are finding themselves more and more the target of mergers and acquisitions. In the last 12 months alone, according to La Nación, Etchart was bought by the Cusenier group, Balbi was acquired by Allied Domecq, Crillon by Seagram's, Norton by the Swarosky family, Escorihuela by the Catena group which also took over La Rural, Toso by Llorente Hermanos and Navarro Correas by Cinba.

Chilean groups also got into the act, with Santa Carolina buying 60% of Santa Ana, Jugos Lourdes acquiring Rozzi y Vaschetti and best-selling Concha y Toro grabbing Premier. In 1993, Argentina exported 105,000 cases of wine to the U.S. market -- still a drop in the wine vat compared to the 695,000 cases shipped by Concha y Toro. Argentina's main obstacles to exporting more wine are an overvalued peso -- which makes the country's products more expensive on the world market -- and a tradition of bureaucratic regulation of the wine industry that stifles growth.

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