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Argentina Uncorks Exports

Wine exports are “growing like crazy.” But protectionism could stopper trade.

by Bill Armbruster, blog anchor

Argentina surged ahead of Chile to become the third largest source of US table wine imports during the first quarter, according to the National Association of Beverage Importers, trailing only Italy and Australia. Sales were up 33% over the same period last year, according to NABI.

“They’re growing like crazy,” Geoff Giovanetti, managing director of the Wine and Spirits Shippers Association, told me. “Argentina has an incredible capability to export wine.”

Wine is Argentina’s top containerized export to the US. The largest US importer is The Wine Group, based in Ripon, Calif. The company, whose brands include Franzia and Mogen David, is the third largest wine seller in the US, behind Constellation Brands and Gallo. Its imports totaled 7,927 metric tons as of June 15, according to Datamyne. Other leading importers include Prestige Wine Group, W.J. Deutsch and Sons, and Winebow.

A key reason for the growth in Argentine wine is the increasing popularity of the Malbec varietal, NABI president William Earle explained to me.

For the most part, Argentina hasn’t been a significant factor in US trade. It was the 29th largest export market and 50th largest import supplier for the US in 2010. So far this year (through June 15) it has ranked 35th as a source of US containerized imports, according to Datamyne statistics.

It is, however, a rapidly growing trade partner, particularly for US exporters, and one of a relatively few countries with which the US has a trade surplus. US exports to Argentina (led by refined oil, a mix of chemicals, and coin-operated games, Datamyne data shows) in the first five months of the year totaled $3.6 billion, up from $2.7 billion in the same period last year. That’s double the $1.8 billion in Argentine imports, which were up from $1.3 billion in the same period last year.

But there is significant Argentine export growth potential in another liquid cargo – oil. The Argentine oil company YPF announced in May that it had discovered 150 million recoverable tons of shale oil, but that could be just the start of something much bigger. Michael Lynch, president of Strategic Energy and Economic Research, told me that YPF, the nation’s leading oil producer, had explored only 100 square miles out of 5,000 square miles in the oil field where it was discovered.

Lynch said Argentina has the potential to become as significant Mexico, which was the world’s 7th largest producer in 2009, according to the U.S. Energy Information Administration. Argentina ranked 26th.

Crude oil is Argentina’s largest export to the US, with sales of $387 million in the first five months of the year, accounting for more than 20% of its exports to the US, helping make the country Argentina’s fourth largest trade partner.

Another huge potential market for Argentina’s oil is China, which is cultivating nations around the world as it seeks to increase its sources of raw materials and minerals. “Argentina will become more attractive given China’s desperate need for dependable oil supplies,” said Riordan Roett, a Latin America specialist at the Johns Hopkins School of Advanced International Studies, in our recent exchange of emails.

The two countries have had an off-and-on relationship, he said, with soybeans the heart of the problem. Argentina’s exports to China plunged nearly $1 billion in the first five months of this year to $2.7 billion, almost entirely because of a huge drop in soybean shipments. Notwithstanding the dispute, Argentina’s imports from China were up 50% over 2010, totaling $3.3 billion.

Argentina has also been at odds recently with neighboring Brazil, its largest trade partner. Both countries have raised barriers to each other’s imports, and bilateral talks apparently have yielded little progress. Motor vehicles and parts account for the vast majority of both countries’ exports to each other.

Argentina’s tax and regulatory policies have hampered its exports and the development of its natural resources and are partly to blame for its low standing in the global economy. It ranked 115th in the World Bank’s Doing Business 2011 report, out of 183 economies surveyed for overall ease of doing business.

So, while its wine claims new global market share, it may be premature to uncork a bottle in celebration. Just last month, Argentina was reported (by the Financial Times) to be expanding its “1:1 trade policy” requiring importers to match the value of any goods they bring into the country with exports – a protectionist move that could back-fire, critics charge.

Bill Armbruster, the anchor for the Datamyne Blog has covered shipping and trade for 30 years as a reporter and editor with The Journal of Commerce and Shipping Digest. “I’ll be blogging on headline news and current issues in oceangoing commerce, trying to shed some light on the backstories and, wherever I can, supply some sound advice for shippers.” Write Bill care of [email protected].

Date posted: August 3, 2011

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