Bodegas de Argentina has asked the government to suspend withholding taxes on bottled wine

While the new Minister of Economy, Silvina Batakis, outlines the course of a lame economy and the history of the government is economic growth, the export numbers of 2022 do not accompany the official statements.

Wineries of Argentina (BdA)the business chamber, which brings together most of the country’s wineries, has asked the national executive to suspend withholding taxes (4.5% export duty rate on bottled wine) in order to maintain sales.

In the first half of the year, the volume of bottled wine exported decreased by 6%, compared to the same period in 2021, according to the National Institute of Viticulture (INV).

These exports reached 100.9 million liters. Meanwhile in 2021 there were 107.1 million liters. This translates into a total of $ 387.1 million exported in 2022, compared to $ 391.4 million in 2021.

“We come from a long period of constant exchange rate lagging and, due to several factors, we have cost inflation that far exceeds local inflation. So far only the bottles have risen by more than 60% this. year and grapes by more than 80% from last year, “he said Patrizia OrtizPresident of BdA, according to the daily Mendoza The Andes.

From BdA they pointed out that the sales numbers contrast strongly with the export capacity shown in recent years. Exports of bottled wine grew by 9.3% in 2021, 5.3% in 2020 and 1.37% in 2019. Beyond the variations, exports of fractionated wine have failed to consistently surpass 200-220 million liters per year from 2010 and 800 million dollars per year in value.

Argentina is the fifth largest wine producer in the world and is among the ten world exporters. The industry said the retentions for such a particular product as wine were counterproductive, because “it is an agrarian-based drink with a lot of added value and gondola brand”.

“It is a very price sensitive product for both importing customers and global consumers, so charging it with export duties is very risky,” they estimated.

A challenging context

For its part, Francisco da Pico, vice president of BdA, added that the local macroeconomic context “has changed compared to 2018”, when wine exports were again taxed with withholdings. Added to this is a challenging global environment, with logistics costs tripling and markets having less traction due to various factors.

“When the exchange rate starts to fall far below cost inflation, export margins shrink dramatically. We can’t pass on price inflation overseas,” he said.

And he added: “They just stop buying from us if we are out of pricing compared to suppliers in other countries.” “Here we are talking about dropping a customer for a lot less than a dollar,” she concluded.

The Director of Foreign Trade of BdA, I will Ramir Barrioshe considered it important to remember that Argentine wine pays tariffs to enter various markets around the world, “tariffs that add to withholding taxes and cost our industry more than 40 million dollars a year,” he assured.

The average tariff for Argentine wine, he explained, is 5% when considering central markets such as the United States, Canada, United Kingdom, Mexico, the European Union and China, among others.

“The net account of withholding, export refunds and entry fees gives us a negative account,” he said.

Barriers to imports

As explained by the wine company, to all these problems is added the negative effect of the difficulties in accessing dollars for importing supplies and paying for services abroad.

“In parallel, measures are being announced in Brazil to lower the tariff on non-local wines by 20%, which adds competitiveness to European wines. The current scenario is very unfavorable for our exports,” said Barrios.

BdA said that the temporary suspension of export rights “frees the wineries’ resources to reinvest in the business and thus support demand abroad in extremely complex times”.

Finally, the entrepreneurial body proposes to “make the measures for accessing the single free trade market (MULC) more flexible in order to fulfill the commitments with foreign customers and suppliers”.

DB