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Huge potential

The potential of NAFTA with the EU is enormous, and it could particularly benefit the country's wine sector, opening up
Business and Enterprises
El potencial del TLC con la UE es enorme, y podría beneficiar especialmente al sector bodeguero del país
| 28 August, 2019 |

Mercosur concluded a historic strategic partnership agreement with the European Union and which lays the groundwork for finally moving forward with a Free Trade Agreement. Huge potential for Argentina.

The understanding reached by both blocs, after 20 years of negotiations, implies the integration of a market of 800 million inhabitants and with more than $100 billion of bilateral trade.

And, among the main sectors that voted in favour of the agreement is the winemaker. In a context in which domestic consumption has reached the lowest level recorded (below 20 liters per capita), companies in the sector see export growth as a way out of the current crisis.

In the days leading up to the closing of the negotiations, Bodegas de Argentina, an entity that brings together more than 250 companies, had already openly expressed their support for the Government, considering that the elimination of tariffs affecting the bilateral trade of wines “will boost exports”.

In dialogue with iProfesional, Francisco do Pico, Director of Institutional Relations of the Group Peñaflor — the company that leads sales to the world and is also the one that exports the most to the European market — considered that the conclusion of the negotiations “is extremely positive, because many of the barriers that today affect domestic companies and that put them at a disadvantage compared to wineries in other producing countries will be removed. such as Chile, South Africa, Australia or the United States“.

In this line, the manager considered that an FTA between Mercosur and the EU is “fundamental”. Since Argentina “is the least internationalized wine country worldwide. And the one that has had the worst performance since the boom of internationalization of wine began.”

On this point, he plotted that currently 20% of the total produced is exported while in Chile, for example, sales abroad are equivalent to 90% “.

How do tariffs affect domestic industry? According to Do Pico, currently an Argentine winery that intends to enter the European market must pay, per bottle, between 13 and 16 euro cents (FOB). However, this tariff then has a drag effect along the chain. This ends up making the final price of the domestic product much more expensive than those of other competing countries.

In addition, Do Pico considered that the margins managed by the wine industry in general are more “very fine”. So “any incentive that exists to export and that improves the competitiveness of the sector is very important”. Beyond that it considered that there are still other domestic variables that affect the business and that also require solution. Like the high cost of financing, volatility would change and logistics costs.

With regard to strategic markets with more growth potential for national wineries , once the tariffs, are the Netherlands,

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