Government Intervention

After thirty years of remarkable growth, the national government created the Junta Reguladora de Viños (Wine Regulating Committee) which would later become the Instituto Nacional de Vitivinicultura (INV) in 1959. These national bodies sought to deal with overproduction, especially during the Great Depression when wine consumption fell dramatically. The INV regulated when and how much the growers could plant, when the harvest was to occur and how much the grapes would sell for. On the production side, INV monitored quality and encouraged diversification. All this would change after the crisis of overproduction of the 1980s and the liberal economic policies instituted by President Carlos Menem and Economic Minister Domingo Cavallo.

Several factors contributed to the crisis that the wine industry faced in the 1980s. The most important issue was the dramatic fall in domestic consumption of table wine. Table wine is usually defined by any wine that falls below the $3 peso barrier (about one US dollar). Oftentimes this wine comes in a cardboard box but it can also be packaged in a bottle. Traditionally, Argentines mix this bargain priced wine with carbonated water to dilute its taste. Additionally, table wines use grapes from growers that use much less sophisticated technology in growing the grapes. Conversely, higher quality wines use grapes that are grown using irrigation systems that deliver water directly to the vine. Table wine is grown by small producers who usually have under 5 hectares of cultivated land and don’t use the same advanced techniques.

These low-quality wines suffered gravely when beer and soda sales rose in the 1980s. In 1968, Argentines drank on average 86 liters a year, while in 1986 that number had dropped to 60 liters per year. As a result, grape production in Mendoza fell by 60 percent between 1976 and 1993. This crisis generated by a drop in domestic demand signaled a necessity to look outside of Argentina for new markets. But capital controls imposed by the state and poor wine quality limited any efforts to sell a considerable amount of wine abroad as their counterparts on the other side of the Andes were doing with success.

Sources:
Sawers, Larry. The Other Argentina. Boulder: Westview Press, 1996.
Rodolfo Richard-Jorba, “Modelos vitivinicolas en Mendoza”. In Historia Economica & Historia de Empresas III. (2000)
Gobierno de Mendoza, 1992.