Economic Impact of the MalbecResearch Paper

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[. . .] The country is not only the fifth largest producer of wines in the world but also consumes significant amount of its produce in local markets. Navarro Correas is another company that exported $7 million worth of wine from Argentine in 2009 (Latin Trade, 50).

Tourism development

Tourism is another sector that directly benefits from the growth of wine industry in Argentine. There are thousands of tourists from across the world that come and taste the different varieties of Argentines wine. These include Malbec, Pinot Gris, and Chardonnary. Argentine is one of the few countries in the world that has "wine tourism sector." There are significant amounts of foreign investments pledged in 2013 for setting up "upscale lodging and restaurant facilities" in Argentines wine producing provinces. The wineries will use these facilities as a means to attract tourists and arrange for their boarding, lodging, and tour across the wine producing plants. During the last one decade, hundreds of boutique hotels have got opened that offer wine tasting and trips to local wine trails. The usual combination that is offered by the tourist hotels is the malbec wine along with grass fed local beef and thousands of tourists from across the world, specifically from the U.S. And Europe come to Argentine for being entertained from red wines and grass fed beef.

URUGUAY

III- Wine Industry of Uruguay

Uruguay is the fourth most acclaimed country in the Central American region producing wines of superior quality. Its wine industry supports the country's fragile economy and is considered important in the economic development. Tannat is the most cherished variety of wine that Uruguay produces. Tannat is now recognized by its association with Uruguay and it is the variety that constitutes 40% of the total wine production of Uruguay. Montevideo is the leading region of vineyards of Uruguay. The wine exports of Uruguay are dispatched to Central American countries, Gulf countries, and the U.S. Tannat is highly regarded in these regions as the superior wine of Uruguay.

Economic role of wine industry

Uruguay also started restructuring its wine industry since 1990s. From then onwards, the wine industry has played an important role in the economic development of country. The country is significantly smaller than Argentina but the wine variety called Tannat is considered of more quality than the varieties offered by Brazil and Argentine. Currently, there are approximately 1800 wine producers in the country that contribute to the economic development by providing jobs and attracting tourists to the small country. Bouza is the leading brand of Uruguay that produces Tannats, Chardonnay, Albarino, and Merlot. There are extensive man-hours required for running the wineries. Such considerable has been the contribution of Uruguay's wine industry that it is considered as the powerhouse of South American wine. A striking difference in the wine industries of Uruguay and Argentine is that Uruguay's wines, specifically Tannat is best known for its quality and economical rates whereas wine industry of Argentine produces the wine varieties in bulk that may not be as high in quality as Uruguay but has more global footprint in supplying wines. Canelones is the area that produces 60% of wine produced in Uruguay (WorldWines Tours, worldwinetours.com). There are varieties of reasons that support the wine plantations in Uruguay; good availability of sunshine is one of the major reasons that Uruguay produces superior quality of wines.

Tourism industry and role of wineries

The role of wineries in promoting the tourism in Uruguay is also worth-mentioning. The Uruguayan wineries are present across the geographical boundaries and vast coast line of Uruguay. Fishing and swimming are the favorite pastimes of the tourists that visit the Uruguay wineries. Overnight accommodations also play an important role in developing the tourism industry in Uruguay. Since the county sixe is small, the travellers are interested in travelling most of the wineries and the quality produced wines testing. Tour operators arrange for the "wine tours" in Uruguay and help the tourist traverse wine fields as well as the production plants. Although, wine tourism in Uruguay is not as developed as in Argentine and Chile, there is growing awareness in the wine industry stakeholders as well as the tourism operators to help develop the tourism industry in the regions that are rich in wine production. Tannat blends of Uruguay's wine industry are famous and large numbers of tourists that visit Uruguay come here for tasting the wine.

Some of the major wineries of Uruguay are mentioned below.

Dante Irurtia

Toscanini

Stagnari

Bodegas Carrau

Ariano

Exports of wine

Uruguay, as Argentine, also earns significant amount of revenues from exporting wines to the Central American markets as well as the U.S., European countries, and Middle East.

In 2004, the Uruguay wine industry exported 1.2 million liters of wine with a combined value of $3.3 million. The most dominant share in these exports was that of Tannat wine. In 2008, the wine industry exported 13.4 million liters of wine that was estimated to be worth $10.6 million (Olivera). The exports of wine by Uruguay fell down in 2009 due to the global financial crisis of 2008. The country soon recovered from the slowdown of economy but could only export two million liters of wine. The ruby red Tannat is the most widely selling variety of wine of Uruguay. The per capita wine consumption in Uruguay has also helped the country to increase the revenues earned through wine production. U.K is also a country to which Uruguay significantly exports its wine varieties. The country has also increased its presence in the European markets through distribution and retail outlets by individual brands. Both tourism and job markets of Uruguay have benefited from the growth of wine industry. A typical winery is labor and capital intense, therefore the influx of capital and increased laborers in the wineries has helped individuals to earn money from the growth of this industry. The strong economic measures to attract investment in the country have also helped Uruguay to maintain the growth of wine industry. The majority of the producers in Uruguay are of Italian descent and this has provided for an effective linkage of export oriented firms to the European markets for selling Tannat. The bulk of wine being exported from Uruguay is produced by four main companies, namely Juanico, Pisano, Carrau and Castillo Viejo. These four firms constitute 95% of the exports that Uruguay accounts for the wines. There is a considerable issue of economy of scale that hinders many Uruguay wine producers to sell their produce in international markets. This can be eliminated by increasing the tax incentives and improving the capacity of producers.

IV- Improvement of economy through wine industry

Argentine

In context of Argentine, there are several steps that the government as well as the governing body of wine industry in Argentine can take to improve the economic prospects of the industry as well as the country. Since Argentine is an exports oriented country, the government needs to make changes in the legal framework that governs the rights of land ownership. Following are some of the specific steps that the government may take to improve the business conditions and investment climate in wine industry of Argentine.

Removal of restriction of ownership of land by foreigners:

The Argentine government had introduced the legislation that restricted the number of acres that foreign investors can own in Argentine for the development of wine yards. Only 1000 acres can be legally owned by foreigners that invest capital for wine production. This needs to be altered should the government intend to improve the capital inflows to the Argentine wine industry. This will help increase the confidence of foreign as well as the local investors that may be able to partner with the foreign firms.

Removal of trade barriers

The government should also try to remove the existing trade barriers and initiate dialogue on signing free trade agreements with the Central American countries for improving the trade of wine. Large number of investors from the U.S. may be willing to invest huge amounts of money in the wine industry as it still is under grown. This will allow the Argentine economy to expand through foreign direct investments and the resulting boost in labor market of Argentine. Since the wine production is labor intense, local labor market will grow due to an increased business activity in the wine industry.

Decreasing the production costs

The wineries should focus on reducing the production costs in Argentina. Currently, 40% of the production cost is that of grapes. Only premium brands were focused for selling by the exporters during the last one year. This was due to the increased prices of non-premium brands. To help increase the competitiveness of their brands, the Argentine producers of wine should try to decrease the production cost. Further, the government of Argentine (GOA) should continue the support programs that it has offered to small producers such as tax exemptions and equipment financing.

Uruguay

Uruguay has exceptional capacity of producing high quality… [END OF PREVIEW]

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