National Economic Policy and its Influence in Mendoza

The Fecovita cooperative marked the beginning of a state-led policy of allowing private actors to manage public-private organizations which are heavily financed by the state. The growth of such public-private programs came during a pro free-market regime in Buenos Aires. President Carlos Menem and Economic Minister Domingo Cavallo sought to end inflation by instituting the Convertibility Plan that pegged the peso to the dollar in 1991. Inflation was practically reduced to zero while Menem and Cavallo advanced their neoliberal policies that mirrored the Washington Consensus. One main feature of the Menem/Cavallo plan was the reduction of government intervention in the markets. These policies relegated the INV to the diminished role of monitoring the quality of wine without any say in the quantity or price of the grapes produced. However, the Convertibility Plan arguably had a much more profound impact on the industry than many of the other neoliberal policies.

By pegging the peso to the dollar the Convertibility Plan affected the wine industry in two key ways. First, the wine industry was able to import technology from abroad. With better machinery and more advanced technology, the industry upgraded itself to international standards. Moreover, previously prohibitively expensive human capital from abroad was attracted to Argentina. For example, winery Pascual Toso hired a Napa Valley consultant to visit its winery ten times per year. Even world renowned wine consultant Michel Rolland came to Mendoza to analyze several different wines. Under the weak peso, no winery was ever able to afford such an expense. This quality improvement opened the possibility of exporting Argentine wine to sophisticated wine markets like the United Kingdom, the United States and Japan. On the other hand, the peso to dollar ratio offered a steady economic climate for foreign investors. Unlike the late 1980s when hyperinflation created a chaotic investment environment, the Convertibility Plan attracted large amounts of foreign direct investment. With the new technology from abroad and foreign investment, the government worked to create strong linkages between interests within the industry.