Argentina: Why Malbec doesn’t Flood the US

Rob McMillan, EVP and Founder of Silicon Valley Bank’s Wine Division, wrote a column on Wine Industry Insight on why Malbec doesn’t manage to flood wine shops, supermarkets and restaurants in the US. He wrote this article after a visit to Argentina in which he was invited to participate as a speaker in the 8th edition of Foro Internacional Vitivinícola (International Wine Forum) carried out in Mendoza.  It was there where he discovered and came to understand Argentina’s virtues and difficulties when facing the national and international context.

A few months ago I was given the opportunity to speak at the VIII Foro Internacional Vitivinícola in Mendoza Argentina.

Environment

One of the things that I never sorted out in my mind regarding Mendoza was the environmental aspects. The region is a desert. As it turns out, the indigenous peoples there channeled snow melt into ditches centuries ago and to this day most of the irrigation is done with those same systems the old fashioned way, by flooding the fields. So water is not a problem, unless there is rain and then there isn’t good runoff. Flooding is a problem.

Our Mendoza cousins deal with is hail which is a little different from most regions. Pretty much every year they deal with heavy hail that can easily damage cars and ruin the harvest in large or narrow swaths. The counter-measures in the expensive vineyards is to place black netting over the trellising. That netting slopes off between the rows so hail is directed between the vines. You can see the netting in place on the vineyard picture above, and notice both the Andes and the sub-Andes in the background of the picture.

Of course finding the right micro climates are critical just like everywhere, and the Argentinians have gradually evolved to believe the cooler varietals like chardonnay should be planted in higher climates, and the Bordeaux varietals planted in the lower zones. The region that seems to have come of great import lately is the Uco Valley to the  side of the map on the left. The soils are alluvial in nature, there is a source of water, and the cold air that I talk about above flows down the mountains and out the cut in the range from the river, adding an additional source of evening cooling and moderating temperatures. I have to say, there wasn’t a single malbec I tried from the Uco Valley that I didn’t absolutely love. And …… the price for most of those kinds of wines were a third to a fifth what I would expect to pay for such a wine.

Argentina’s Future

Why should the US worry about Argentina? Because as I discovered first hand, the wines made there can be as good as the wines made anywhere in the world and those wines are a third or more cheaper than those made in the US.

Why shouldn’t we worry? Because the country has a dysfunctional government.

At one point, the country pegged their currency against the US Dollar. They carried one US$ in the Central Bank for every Peso in circulation. That worked until the crash in 2001. Since then, the currency has floated again with the Central Bank carrying an official exchange rate, but a higher exchange rate does exist in other gray markets.

Argentina makes wines that should roll over the US in comparable price points for wine quality. They are making great strides in their exports but their government itself shoots their businesses.

Malbec doesn’t flood the US simply because their Government is making it hard to do international business.

Source: http://www.wineindustryinsight.com/ex_nf.php?url=http://svbwine.blogspot.com/2012/10/argentina-why-melbec-doesnt-flood-us.html

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Tags: Rob McMillan