Mendoza in Argentina is a wine region with barrels of potential
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On the world stage, Argentina is perhaps best known for three things, all beginning with the letter âMâ: Lionel Messi, the worldâs best footballer; mismanagement â Argentina is unique in its radical reversal from the advanced economic development it apparently achieved in the early 20th century; and Malbec, the Bordeaux grape that is celebrated as Argentinaâs most distinctive wine varietal.
This report â the first in a series on Latin Americaâs regions â is about a fourth âMâ: the region of Mendoza. Abutting the Andes, this desert state is a microcosm of Argentinaâs potential, although in this case âpotentialâ is an overused word: Mendoza has already realised much of its promise.
There is its wine, of course, because Mendoza forms the centre of Argentinaâs centuries-long wine tradition that has been upgraded with Zen-like attention to oenological detail to earn its vineyards, such as Bodega Catena Zapata and Mendel Wines, a global profile. No self-respecting Argentine â or for that matter European or Californian â millionaire with more than a passing interest in wine does not also want to own at least a few hectares in the wine lands of the Uco valley.
But it is not only wine and its largest exporting companies, such as PeÃ±aflor, the eighth largest wine company in the world, that gives Mendoza a certain cosmopolitan air.
There is Impsa, a turbine manufacturer that has the technology to take on global competitors. With deep roots in the state, the family-owned company, now in its fourth generation, has annual sales of more than $1bn and is a genuine âmultilatinaâ â a Latin American company with a presence across the region.
There is also Roberto ZaldÃvar, one of the worldâs leading ophthalmologists, who practises out of his Mendocino clinic; Grupo Uno, Argentinaâs second biggest media company; and large mineral and energy deposits, from uranium, potash and copper, to gas and oil.
âMendoza produces a fifth of Argentinaâs oil,â says Miguel Galuccio, chief executive of YPF, the national oil company.
With the development of the vast Vaca Muerta shale gas formation set to push ahead over the next few years, it will soon account for even more.
Most distinctive of all, however, is the stateâs work ethic â which Charles Darwin missed when he visited and wrote that âthe happy doom of the Mendocinos is to eat, sleep and be idleâ. But Darwin visited almost 180 years ago, and in the summer, when temperatures can top 40 degrees and a siesta is almost obligatory.
Mendozaâs celebrated work ethic derives partly from its proximity to Chile â Santiago, the capital, is only 360km away, while Buenos Aires is 1,200km distant. But most of it comes from the areaâs desert roots â Mendozaâs original name, cuyo, means âsandy landâ.
The areaâs first known inhabitants, the Huarpes, cultivated corn, beans, squash and quinoa using a system of irrigation that carefully rationed run-off from Andean snow melt. This system was built on and expanded by the Incas, and then by the Spanish conquistadores.
Although the irrigation system, which remains today, allowed farmers to cultivate more land than they otherwise could, its most important and lasting contribution is cultural.
To function, it requires a degree of co-operation, responsibility and adherence to rules that Mendocinos boast are less present elsewhere in the country.
It is no accident that Mendoza is the only Argentine state never to default on its debt, or that local politics â a model of convivencia â lacks the malice and vitriol of Buenos Aires.
âArgentina is about bonanza, Chile is about effort. And Mendoza? It is about the desert,â says JosÃ© Octavio BordÃ³n, a former Mendoza governor.
He adds: âEverything grown or produced in Mendoza is solely because of the effort of man. You canât just throw seeds on to the soil and expect them to grow. Here, you must work.â
This attitude can be seen in Francisco PÃ©rez, the ex state governor, a member of the ex President Cristina FernÃ¡ndezâs ruling Victory Front party and a man with the energetic air of a workaholic executive.
âLook at this,â Mr PÃ©rez says jumping out of his office chair. He strides past photographs of Evita PerÃ³n into a back room and flicks a switch; a detailed analysis of state finances, hospital beds and schools soon lights up a giant plasma screen.
âAll this is in real time,â he adds. âNo other state has comparable systems. It helps me formulate better public policy.â
Foreign companies that have set up here have noticed Mendozaâs business-friendly attitude and attractive macroeconomic conditions. Its annual economic output is $16bn, it has low unemployment, a shrinking budget deficit and less dependence on national revenues to fund state expenses than many peers.
Incomers include Danone, the French food and drink group, to bottle spring water; Saint-Gobain to make glass; Knauf, the German building company, to quarry stone and gypsum; and Globe Speciality Metals of the US, which makes speciality wire.
Companies are also drawn to the stateâs eight universities and its strategic location, next to the switchback Cristo Redentor road, the busiest mountain pass between Argentina and Chile. There is also the prospect of a 120km train tunnel being built to link the two countries.
If that project gets built, rail-borne Chilean trade to the Atlantic, and Brazilian and Argentine cargo to the Pacific, would soar and make Mendoza a hub for the wider region.
âMendoza is going to be one of the geopolitical centres of the world,â enthuses Mr PÃ©rez â which might seem unlikely until you visit the area, hear the accents of visiting Brazilian and Chilean tourists, and imagine the nearby world streaming through.
Sofia Pescarmona, a member of Impsaâs founding family and a manager of the turbine maker, echoes those concerns. She says that Impsa is proud of its Mendoza roots but they come at a cost â especially when allied with the near-pariah status that Argentina, as a sovereign state, suffers in international markets.
Standing by a huge precision-engineered propeller that will soon be mounted on a wind turbine in Asia, she says: âFinancing is one of the main things that makes us less competitive that our peers … Staying in Mendoza is, for us, as much an emotional decision as a rational one.â
Wine exporters, similarly, bemoan the loss of competitiveness that has come from the countryâs high inflation. But such disadvantages could disappear quickly, as Argentina starts to move into recovery with a more progress business friendly government.
The prospect of that change is already piquing greater international business interest. âIâve had more enquiries in the past few months than I have had in years,â says a regional consultant and financier. âPeople are seeking to get in now, or at least thinking about it.â
Watching the sun set behind the snow-capped Andes with a glass of wine in hand, there are certainly worse ways to wait and contemplate more prosperous times that may not be so far away with the Macri government now in charge.
Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Chile, Paraguay, Peru and Uruguay, providing expert advice on property acquisition and investment tours.
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