Origins of the Wine Industry

During the mid-1800s the majority of agricultural land was used for alfalfa. Ranchers fed this alfalfa to cattle from the provinces of Cordoba and Santa Fe as the cattle were herded to Chile. By the mid 1880s, however, Mendoza found itself in the midst of an economic transformation due to the arrival of the railroad, rising agricultural production, and a steady influx of European immigrants. Additionally, winemaking technology improved so that the same amount of acreage that produced 46 kg of wine in 1870 yielded 250 kg at the end of the 1880s. The acreage in vines also increased six fold between 1893 and 1913. By World War I, vine acreage exceeded that of Chile and California. The improvement in technology and increase in overall acreage met a surging demand for wine from the growing immigrant population in the pampas region.

Government intervention in the wine industry virtually began at the industry’s inception. As a general rule, agricultural-based sectors were heavily affected by the government’s liberal, export-oriented economy during the latter part of the nineteenth century. The wine industry in Mendoza and the sugar industry in Tucumán paralleled one another in their rapid growth at the end of the 19th century. Both industries involved heavy state intervention which led to multiple overproduction crises during the 20th century.

In Mendoza’s case, the national government built the Andes Railroad in 1885, connecting the provinces of San Luis, Mendoza and San Juan with Buenos Aires, coastal markets, and the northern part of the country. The government also expanded and maintained the already extensive canal network. In addition to infrastructure, provincial laws in 1889, 1895, and 1902 exempted all grape production from taxes for the first five years of production. The province exercised excellent judgement in understanding that the demand for wine would one day yield high tax gains. Indeed, in 1907 over 60% of provincial revenue originated in the wine sector.

In addition to favorable subsidies, the federal government offered generous protection to the wine sector by imposing high import tariffs. Transport via ship from Europe to Buenos Aires remained cheaper than railroad transport from Mendoza, so the young wine industry sought protection from the well established industries in Europe. By 1914, the wine tariff had reached 80%. The federal government erected other barriers to trade ensuring no foreign wine could enter Argentina. Specifically, no wine could be imported from countries in which sugar was added to grape juice to increase the alcoholic content of the wine, even if the particular wine shipped to Argentina didn’t utilize this technique. Since this method was used in at the least one instance in every wine producing country, foreign wine was effectively prohibited from entering the market.

After thirty years of remarkable growth, the national government created the Junta Reguladora de Viños (JRV, or Wine Regulating Committee) in 1935 which would later become the Instituto Nacional de Vitivinicultura (INV) in 1959. Acting under the auspices of the JRV, the state attempted 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. The state’s role in the wine industry in Mendoza would undergo dramatic changes in the 1980s in the midst of an oversupply crisis.