Financial Times publica el día 13 de noviembre un larguísimo reporte sobre Mendoza y las oportunidades de negocios.

1. FT SPECIAL REPORT
Latin America’s Regions
Doing Business in Mendoza
Wednesday November 13 2013
www.ft.com/reports | @ftreports
A region with barrels of potential
The resource-rich
Argentine province has
a bright future, writes
John Paul Rathbone
Tourists taste
the good life
Skiing, climbing
and polo are all on
offer before dinner
O
n the world stage, Argentina is perhaps best known
for three things, all beginning with the letter “M”:
Lionel Messi, the world’s
best footballer; mismanagement –
Argentina is unique in its radical
reversal from the advanced economic
development it apparently achieved in
the early 20th century; and Malbec,
the Bordeaux grape that is celebrated
as Argentina’s most distinctive wine
varietal.
This report – the first in a series on
Latin America’s regions – is about a
fourth “M”: the region of Mendoza.
Abutting the Andes, this desert state
is a microcosm of Argentina’s potential, although in this case “potential”
is an overused word: Mendoza has
already realised much of its promise.
There is its wine, of course, because
Mendoza forms the centre of Argentina’s centuries-long wine tradition
that has been upgraded with Zen-like
attention to oenological detail to earn
its vineyards, such as Bodega Catena
Zapata and Mendel Wines, a global
profile. No self-respecting Argentine –
or for that matter European or Californian – millionaire with more than a
passing interest in wine does not also
want to own at least a few hectares in
the wine lands of the Uco valley.
But it is not only wine and its largest exporting companies, such as
Peñaflor, the eighth largest wine company in the world, that gives Mendoza
a certain cosmopolitan air.
Page 2
Plan for tunnel
through Andes
Ambitious rail
project could
transform region
Page 3
Oil chief seeks
shale funding
Miguel Galuccio is
working to attract
new investors
There is Impsa, a turbine manufacturer that has the technology to take
on global competitors. With deep
roots in the state, the family-owned
company, now in its fourth generation, has annual sales of more than
$1bn and is a genuine “multilatina” –
a Latin American company with a
presence across the region.
There is also Roberto Zaldívar, one
of the world’s leading ophthalmologists, who practises out of his Mendocino clinic; Grupo Uno, Argentina’s
second biggest media company; and
large mineral and energy deposits,
from uranium, potash and copper, to
gas and oil.
“Mendoza produces a fifth of Argentina’s oil,” says Miguel Galuccio, chief
executive of YPF, the national oil
company.
With the development of the vast
Vaca Muerta shale gas formation set
to push ahead over the next few
years, it will soon account for even
more.
Sun-kissed state that has clasped
the joys of winemaking to its heart
Expert view
JANCIS ROBINSON
I have been to most of the
world’s wine regions but
I have never been to a
place where wine is so
deeply embedded as in
Mendoza.
Bordeaux and Porto run
it close, but both have
other important
commercial activities.
The neat grid of treelined streets of Mendoza’s
capital, also called
Mendoza, seems designed
to spirit you as quickly as
possible to one of the
numerous vineyards
outside the city.
Walk through the
brilliant white 19th-century
Spanish colonial façade of
the Park Hyatt, Mendoza’s
most prominent hotel,
overlooking Plaza
Independencia, and you are
assailed by invitations to
sample a glass of wine in
a bar, join a tour of the
vineyards or buy a bottle
or two.
There is something about
the quality of light –
a brilliance typically
filtered by the leaves
overhead – that echoes
what the local producers
believe defines their wines.
At 750m elevation, the
city of Mendoza is already
relatively high. But it is
the altitude of the
vineyards and the quality
of the ultraviolet light
there that gives
distinction to them and
their produce.
Mendoza is on roughly
the same latitude as Tunis,
which is normally too
close to the equator for
good quality wine
production, but altitude
Inside »
counterbalances this.
Mendoza’s vineyards
used to be concentrated on
the fertile plains around
the city, making vast
quantities of slightly rustic
reds and pinks and some
decidedly heavy, often
oxidised, white wines.
Rainfall here is low –
barely eight inches, or
200mm, a year – but the
melted snows of the Andes
have (so far) provided
supplies of irrigation water
– sufficient to plump up
the grapes nicely.
So high were yields
traditionally – often several
hundred hectolitres per
hectare, when the usual
limit for France’s better
wines is about 50 hl/ha –
that Argentina was at one
time the fourth most
important wine producer in
the world.
Americans have planted
the vine so enthusiastically
that the US has overtaken
Argentina in terms of total
volume produced, helped
by the fact that Argentina,
not much of a wine
exporter in the 1980s, had
a national vine pull
scheme.
But, in the past 25 years
or so, the Argentine wine
industry has woken up,
become much less insular,
and started to export in
great quantity.
The crucial ingredient
in the mix was a redrafting
of the Mendoza wine map.
Since the late 1980s,
vineyards have been
planted at much higher
altitudes, where cooler
nights slow the ripening
process and prolong the
growing season, meaning
that the resultant grapes
have time to build up
subtlety as well as sugar
while retaining refreshing
acidity.
The belief is that the
clarity of light here plays a
part in building up the
phenolics so important to
fine red wines.
Many of the best new
vineyards have been
planted in the Uco valley
at altitudes of up to
1,700m. In Europe, 500m is
regarded as the maximum
altitude at which grapes
can be persuaded to ripen.
Tupungato and Tunuyán
are the most important
The resultant
grapes have
time to build up
subtlety as
well as sugar
departments for fine wine
production in the Uco
valley, with La Consulta
district cool enough to
have encouraged growers
to plant white wine grapes
as well as the finicky
Pinot Noir that ripens
so early it needs a
particularly cool climate.
But Malbec is by far the
dominant grape variety of
Mendoza province. Indeed,
Mendoza Malbec has
played by far the biggest
part in Argentina’s
successful transformation
into a successful wine
exporter.
It produces rich,
powerful wines,
typically packaged in
overweight bottles
that satisfy
marketeers if not
ecologists, and
conform to what has
been the stereotype of
a successful red wine.
Mendoza Malbec
was such a hit in
the US market
that producers in
Cahors in
southwest
France, home
of the grape
variety, started
calling their
grape Malbec
instead of
using their
traditional
names Cot and
Auxerrois.
But the
winds of
change have
recently been
blowing
through the
vineyards of
Mendoza, with
many producers
deliberately
making finer,
more scented
reds from their
signature grape
variety by,
among other
things, picking
grapes earlier and reducing
the number of new oak
barrels.
There has been no
shortage of outside
investment in Mendoza
wine.
Prominent incomers
include Michel Rolland, the
world’s most famous
consultant winemaker who
owns the Clos de los Siete
winery; Diane and Hervé
Joyaux Fabre of Fabre
Montmayou; California’s
Cuvaison; Cava giant
Codorniu; and José-Manuel
Ortega, a Spanish former
banker whose wife also
runs one of many exciting
restaurants in the wine
country outside the city of
Mendoza.
Argentina, with its waves
of immigration from
France, Spain, Italy and
Germany, has long
benefited from its
particularly diverse range
of cultural influences and
all of these are reflected
in the increasingly
wide variety of wines
coming out of Mendoza.
Rather unexpectedly,
Mendoza turns out to
be the source of some
particularly fine,
distinctive
Chardonnay, a grape
that seems to thrive in
the relatively long
hours of Mendoza
sunshine.
Torrontés, the
Argentine
speciality white
grape, also
thrives there, as
does Pinot Gris
and even
Friulano, as
well as, from
the highest
vineyards,
Sauvignon
Blanc.
Mendoza is no
longer a onegrape wonder,
even if hail
remains the
bane of every
vine grower’s
spring and
summer.
Light fantastic:
Mendoza’s wines
echo the unique
characteristics of
the region
All in good time: wine casks ageing
at Mendoza’s Bodega Catena Zapata
Most distinctive of all, however, is
the state’s work ethic – which Charles
Darwin missed when he visited and
wrote that “the happy doom of the
Mendocinos is to eat, sleep and be
idle”. But Darwin visited almost 180
years ago, and in the summer, when
temperatures can top 40 degrees and a
siesta is almost obligatory.
Mendoza’s celebrated work ethic
derives partly from its proximity to
Chile – Santiago, the capital, is only
Continued on Page 3
Page 5
Former banker
indulges taste
for liquid assets
O. Fournier owner
has no regrets
Page 6

2. FINANCIAL TIMES WEDNESDAY NOVEMBER 13 2013
★
2
Doing Business in Mendoza
Mining potential not yet realised Tumbling prices leave
potash mine in limbo
Minerals A law
meant to protect
farmers is blocking
development, says
Benedict Mander
Development
The loss of a big investor has
put a potentially valuable
export industry in doubt,
writes John Paul Rathbone
T
he vast mineral wealth deep
underneath
the
Andean
chain has attracted outside
attention ever since the days
of the Spanish empire.
Yet, unlike in neighbouring countries, most of Argentina’s rich mineral
resources have remained largely
undeveloped. This is in marked contrast with the flourishing mining
industry across the border in Chile,
which shares the same geology.
Nowhere has Argentina’s mineral
potential been more neglected than
Mendoza, whose prospects as a mining centre hit a serious obstacle when
a provincial law, enacted in 2007,
attempted to put a brake on projects
that locals feared would threaten the
scarce water supplies of their arid
province.
Many say that Mendoza went too
far. Concerns for the agricultural
industry, which is irrigated with
water whose source high in the Andes
is where most mining projects are
located, resulted in a ban on the use
of chemicals such as cyanide, mercury
and sulphuric acid. This made many
mining projects unviable.
“What’s the most effective way of
curing a headache? The guillotine,”
says Raúl Rodríguez, a lawyer acting
for a number of mining companies
seeking concessions in the region.
“Mendoza has applied the guillotine to
its problems. It’s a solution, yes, but
not a very intelligent one.”
Despite the huge potential – local
experts value Mendoza’s mineral
deposits at about $350bn – big mining
projects are on hold while how best to
control the industry is debated.
“There is neither political nor social
consensus. We can’t advance without
consensus,” says Francisco Pérez, governor of Mendoza. “There’s a lot of
hypocrisy,” he adds, pointing out that
some farmers lend their support to
anti-mining groups while at the same
time taking little care of the region’s
scarce water resources themselves.
Indeed, only 4 per cent of Mendoza
province is cultivated, yet agriculture
Chemical ban: a project on the scale of the El Teniente copper mine in neighbouring Chile would be impossible in Mendoza
uses 96 per cent of its fresh water
supplies while accounting for just 8
per cent of its gross domestic product,
says Mario Chabert, president of Mendoza’s mining chamber.
By contrast, in the mining-friendly
province of San Juan to the north,
where Canada’s Barrick Gold has
operations, mining uses 1 per cent of
its water but accounts for 77 per cent
of exports, he says.
According to Mr Chabert, mining
would not necessarily compete with
agriculture for water, as the bulk of
Mendoza’s
prospective
mining
projects are in the south, where there
is no agriculture.
Moreover, he argues that mining
and agriculture have coexisted comfortably in Chile for years, citing the
example of the Cachapoal valley,
which has a flourishing wine industry
irrigated with water that comes from
the same sources as the water used at
El Teniente, the biggest underground
copper mine in the world located in
the mountains above.
Local environmentalists recognise
the importance of mining. The main
problem is that they doubt that
institutions in Mendoza are capable of
controlling and monitoring powerful
multinational mining corporations
effectively.
Eduardo Sosa, president of Oikos
Red Ambiental, a group that monitors
and promotes environmental issues
in Mendoza, says there is a “dangerous proximity” between mining
companies and the cash-starved
regional government, whose interests
are not always aligned with local
communities.
‘There is neither political
nor social consensus.
We can’t advance
without consensus’
Although Mendoza’s mining law
“can certainly be improved on and
adapted to the needs of the mining
sector”, Mr Sosa believes it is essential for there to be “trust, transparency and effective public participation” in mining projects.
“Almost all the problems with mining projects are related to poor environmental impact studies or poor
communication with local communi-
ties,” Mr Sosa says. “That is the seed
of all conflict.”
Until the people of Mendoza decide
on the answer, companies such as
U308 Corp, a Canadian uranium
miner, will be obliged to stay away
from the province. U308 owns a concession in Mendoza that it was forced
to abandon after the introduction of
the 2007 law.
Hugo Bastías, vice-president at U308
Corp, points out that, although Argentina imports about 250 tonnes of uranium a year, there is enough uranium
in Mendoza alone to satisfy national
demand for the next 100 years.
Mr Chabert says it is “criminal” not
to
develop
Mendoza’s
mineral
resources, the bulk of which are
copper. He says that, within five
years, simply by activating seven
mines that have already been developed, mining could generate annual
export revenues of $1.2bn, in addition
to Mendoza’s current export revenues
of $1.7bn
“Everyone asks the government of
Mendoza for money, and their answer
is always that we don’t have the
resources. Well, we do: they are in the
mountains, and they belong to everyone,” he says.
It was a sign of how bad things had
become. In May, Luiz Inácio Lula da
Silva, Brazil’s charismatic former
president who is famed for his negotiation skills, travelled to Argentina to
discuss the future of a $6bn investment that Vale, the partly stateowned Brazilian mining group, had
planned in Mendoza.
Vale had suspended the Rio Colorado potash project two months
before, citing Argentine exchange controls and rampant inflation that made
the project commercially unviable,
and had almost doubled its costs to
$11bn.
So when Mr Lula da Silva was pictured in a traditional Andean poncho,
discussing the project with Francisco
Pérez, Mendoza’s governor, Vale’s private investors feared he may reverse
his position and broke into a sweat.
“We were trying to make the venture viable and he seemed open to the
idea,” Mr Pérez said of the meeting.
The Rio Colorado venture was set to
be one of the biggest capital investments in Argentina, turning Brazil’s
neighbour into a top supplier of potash – the potassium compound that
Brazilian farms need for fertiliser.
However, after spending $2.5bn completing more than 40 per cent of the
project, which includes a port terminal and 790km of railway, Vale suspended operations in March.
For Argentina, it was a tremendous
blow. As well as employing 6,000
workers, the venture would have provided a significant amount of exportable potash, which would have helped
protect Argentina’s trade surplus. Production was set to start in 2014 at an
estimated 4.3m tonnes of potassium a
year – all of it destined for Brazil.
“The rule of law is a two-way track
when it comes to investment. The
state has to do its part, but so do the
companies,” fumed Julio de Vido,
Argentine planning minister, after
Vale announced it was suspending
development. “If there is a failure to
fulfil the terms, as there is flagrantly
in this case . . . it violates the concession the province awarded to Vale.”
But under the concession’s terms,
the Brazilian group had to pay a
small fee every year and make a minimum capital investment within the
first five years, all of which it did.
“Vale over-complied,” says Raúl
Rodríguez, a mining specialist at Barraza, Rodriguez, Diaz & Gregorio, a
Mendoza law firm. “With the annual
fee paid, the concession is fixed and
safe.”
Vale then put the project up for
sale in April after agreeing to pay an
extra two and a half months in wages
to laid-off workers. The Brazilian
group is now contemplating other
potash projects elsewhere amid big
changes in the market.
An end to output restrictions this
summer by Uralkali, a Russian producer, and Belaruskali, its Belarus
state-owned partner, has led potash
prices to tumble.
This has made acquisitions or
expanded production at existing sites
more economic for Vale than expensive foreign greenfield projects, such
as Rio Colorado.
Vale is now contemplating
projects elsewhere amid
big changes in the market
None of this has made Mr Pérez’s
job easier, as he has scrambled to find
new partners for the site that
Techint, the Italo-Argentine conglomerate, is currently caretaking for
Vale.
“We are in various conversations,”
says Mr Pérez, who has met potential
Chinese, Indian, Russian and Qatari
investors. “The new idea is to scale
back the original project, but I am
just a facilitator.”
Although the odds on such a deal
appear to be long, all is not bleak.
Forecasts say that, by 2020, Brazilian
consumption of potash will have risen
to 13m tonnes annually, from 8m
tonnes now. So a potentially huge
market remains.
However, that rising demand is not
going to be met from Argentina for
now – or at least not until a fresh
investor comes along that is willing
to buy out the project from Vale.
Meanwhile, Rio Colorado is for sale
and Argentina is a few billion dollars
and 6,000 jobs poorer than it might
otherwise have been.
Fact file
Population
(2010)
1.74m
Cristo Redentor pass
GDP growth
2012
Mendoza
(valued in 1993 pesos)
Tupungato
Santiago
Uco valley
Tunuyán
2.2%
La Paz
Rio Tunuyán
CHILE
Inflation rate
10.5%
Estimated value
of Mendoza’s
mineral deposits
San
Rafael
General Alvear
$350bn
Number of visitors
to Mendoza (2012)
MENDOZA
2.7m
Main grapegrowing areas
Share of Argentina’s
total wine output
(2012)
ARGENTINA
Buenos
Aires
69%
ARGENTINA
ATLANTIC
OCEAN
Santiago
Highest altitude
at which
grapes are grown
1,700m
Sources: Argentinian government, Mendoza provincial government, Great Wine Capitals, Mendozaeventos.com
Contributors
John Paul Rathbone
Latin America editor
Jancis Robinson
Financial Times columnist
and author, with Hugh
Johnson, of The World
Atlas of Wine, 7th Edition
(Mitchell Beazley, 2013)
Benedict Mander
Argentina correspondent
»
Ian Mount
Author of The Vineyard at
the End of the World:
Maverick Winemakers and
the Rebirth of Malbec
(W.W. Norton, 2012)
Camila Bretón
FT contributor
Rachel Savage
Researcher
Robert Orr
Commissioning editor
Andy Mears
Picture editor
Steven Bird
Designer
Barbara Lawson,
Kate Bevan
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3. FINANCIAL TIMES WEDNESDAY NOVEMBER 13 2013
★
3
Doing Business in Mendoza
Consortium
pursues grand
plan of tunnel
through Andes
Infrastructure An ambitious project could
transform the region, says John Paul Rathbone
W
hen does a tunnel qualify as a pipe dream? Perhaps when it is to be
120km long, privately
built and financed, and
drilled through snow-capped mountains between two countries that nurture a longstanding animosity.
Not that Eduardo Eurnekian sees
one of the South American continent’s
biggest engineering projects this way.
Linking Argentina and Chile via a
train tunnel under the Andes may be
a difficult, and perhaps even visionary, undertaking. But it is not impossible. “The engineering is not the
hardest part,” says the president of
Corporación América, the Argentine
holding company leading the project.
“The hardest part is the financing.”
If Mr Eurnekian’s plans come to
fruition, engineers will, by 2015, be
blasting rock in the first phase of a
$3.5bn plan that aims to remove a
barrier for Atlantic economies that
are ever more dependent on Asian
trade. “Economic integration is
already happening in South America.
It’s inevitable,” Mr Eurnekian says of
the project. “The US built its first
transcontinental railway in the 1860s.
Why not South America now?”
The tunnel will join an increasing
number of infrastructure links
planned to cross the South American
continent – projects that mirror the
shift in the region’s trade patterns
from the Atlantic towards the Pacific.
The only significant Andean pass in
the southern half of the continent is a
high spiralling road with hairpin
bends so tight they are referred to as
the “snail”.
Furthermore, the Cristo Redentor
pass, which links Mendoza with Santiago in Chile, is blocked by snow for
40 days a year, often leaving trucks
stranded in sub-zero temperatures.
Mr Eurnekian’s consortium – which
includes Mitsubishi of Japan, Chile’s
Truck stop: snowfall often halts traffic on the Cristo Redentor pass through the Andes, adding to the expense of moving goods between Argentina and Chile
Grupo Empresas Navieras and Geodata of France – aims to remove that
bottleneck.
If they pull it off, the tunnel, which
will take ten years to build,
will link train and trucking hubs on
either side of the Andes, cutting shipping times between Argentina and
Chile and saving transport costs.
Brazilian goods seeking Pacific ports
will benefit too. Much of the processed
soya, wine and meat that Argentina
exports to China, as well as imported
Asian goods, are shipped around the
treacherous Cape Horn, adding nearly
3,000 nautical miles and another week
to the trip.
‘The engineering is not the
hardest part. The hardest
part is the financing’
Resource-rich region with
barrels of potential
Continued from Page 1
360km away, while Buenos
Aires is 1,200km distant.
But most of it comes from
the area’s desert roots –
Mendoza’s original name,
cuyo, means “sandy land”.
The area’s first known
inhabitants, the Huarpes,
cultivated
corn,
beans,
squash and quinoa using a
system of irrigation that
carefully rationed run-off
from Andean snow melt.
This system was built on
and expanded by the Incas,
and then by the Spanish
conquistadores.
Although the irrigation
system, which remains
today, allowed farmers to
cultivate more land than
they otherwise could, its
most important and lasting
contribution is cultural.
To function, it requires a
degree
of
co-operation,
responsibility and adherence to rules that Mendocinos boast are less present
elsewhere in the country.
It is no accident that Mendoza is the only Argentine
state never to default on its
debt, or that local politics –
a model of convivencia –
lacks the malice and vitriol
of Buenos Aires.
“Argentina
is
about
bonanza, Chile is about
effort. And Mendoza? It is
about the desert,” says José
Octavio Bordón, a former
Mendoza
governor
and
Argentine presidential candidate who was also ambassador to the US.
He adds: “Everything
grown or produced in Mendoza is solely because of the
effort of man. You can’t just
throw seeds on to the soil
and expect them to grow.
Here, you must work.”
This attitude can be seen
in Francisco Pérez, the
state governor, a member of
President Cristina Fernández’s ruling Victory Front
party and a man with the
energetic air of a workaholic executive.
“Look at this,” Mr Pérez
says jumping out of his
office chair. He strides past
photographs of Evita Perón
into a back room and flicks
a switch; a detailed analysis
of state finances, hospital
beds and schools soon
lights up a giant plasma
screen.
“All this is in real time,”
he adds. “No other state has
comparable systems. It
helps me formulate better
public policy.”
Foreign companies that
have set up here have
noticed Mendoza’s businessfriendly attitude and attractive macroeconomic conditions. Its annual economic
output is $16bn, it has low
unemployment, a shrinking
budget deficit and less
dependence on national
revenues to fund state
expenses than many peers.
Wine lands: Mendoza grapes are grown at altitude
Incomers include Danone,
the French food and drink
group, to bottle spring
water;
Saint-Gobain
to
make glass; Knauf, the German building company, to
quarry stone and gypsum;
and Globe Speciality Metals
of the US, which makes speciality wire.
Companies
are
also
drawn to the state’s eight
universities and its strategic location, next to the
switchback Cristo Redentor
road, the busiest mountain
pass between Argentina
and Chile. There is also the
prospect of a 120km train
tunnel being built to link
the two countries (see
above).
If that project gets built,
rail-borne Chilean trade to
the Atlantic, and Brazilian
‘Argentina is about
bonanza, Chile is
about effort. And
Mendoza? It is
about the desert’
and Argentine cargo to the
Pacific, would soar and
make Mendoza a hub for
the wider region.
“Mendoza is going to be
one of the geopolitical centres of the world,” enthuses
Mr Pérez – which might
seem unlikely until you
visit the area, hear the
accents of visiting Brazilian
and Chilean tourists, and
imagine the nearby world
streaming through.
Although it could prove a
pipe dream, Mr Pérez plans
to travel to Qatar to solicit
investment for the rail tunnel project.
In the meantime, the
state cannot escape Argentina’s broader problems.
That became painfully clear
in March after Vale, the
Brazilian mining company,
cancelled a planned $6bn
potash project in the state
because Argentine currency
controls and high inflation
had made the project commercially unviable.
Dreamstime
Sofia Pescarmona, a member of Impsa’s founding
family and a manager of the
turbine maker, echoes those
concerns. She says that
Impsa is proud of its Mendoza roots but they come at
a cost – especially when
allied with the near-pariah
status that Argentina, as a
sovereign state, suffers in
international markets.
Standing by a huge precision-engineered
propeller
that will soon be mounted
on a wind turbine in Asia,
she says: “Financing is one
of the main things that
makes us less competitive
that our peers . . . Staying in
Mendoza is, for us, as much
an emotional decision as a
rational one.”
Wine exporters, similarly,
bemoan the loss of competitiveness that has come from
the country’s high inflation.
But such disadvantages
could disappear quickly,
should Argentina start to
move into recovery – a possibility that may increase
as Ms Fernández heads into
the last two years of her
presidency.
The prospect of that
change is already piquing
greater international business interest. “I’ve had
more enquiries in the past
few months than I have had
in years,” says a regional
consultant and financier.
“People are seeking to get
in now, or at least thinking
about it.”
Still, there is no assurance that change will come,
or that the wait will be an
easy one, as the country
grapples with falling foreign reserves, currency
restrictions, high inflation
and a legal battle with holdout creditors that keeps it
all but shut out of international markets.
In the meantime, there is
always Malbec, which can
ease, if not cure, wider
Argentine ills. Watching
the sun set behind the
snow-capped Andes with a
glass of wine in hand, there
are certainly worse ways to
wait and contemplate more
prosperous times that may
not be so far away.
According to the rail project’s feasibility study, a tunnel could push
down shipping costs between Cordoba, Argentina, and Manzanillo,
Mexico, the closest big port with
direct rail links to the eastern US,
from $210 to $177 per ton of cargo.
Mendoza, which has strong infrastructure links with the rest of Argentina and Brazil, could then become a
regional hub.
“The tunnel has the potential to
transform Mendoza into the geopolitical centre of Mercosur,” says Francisco Pérez, governor of Mendoza
state, although, like many of the
plan’s supporters, he tends, in his
enthusiasm, to overlook the shortcomings of the Mercosur trade grouping of
Brazil, Argentina, Uruguay, Paraguay
and Venezuela.
Nonetheless, the consortium takes
the long view and has spent $25m on
feasibility studies. The Chilean and
Argentine governments have also
declared the project to be of “national
interest” and created a committee
that will eventually invite bids.
Although the project has progressed
in fits and starts since serious planning began five years ago, its pace is
expected to pick up after Chile’s
upcoming presidential election, which
Michelle Bachelet, the socialist former
president, is expected to win.
The 57km Gotthard Base Tunnel
beneath the Swiss Alps will be the
world’s longest rail tunnel when it is
completed in 2016. What differentiates
this South American project, apart
from being twice as long, is that it
will be built by the private sector –
and financed by private businesses
too.
Raising that finance is no easy task,
especially as Argentina is all but shut
out of international markets –
although Chile can raise funds at
much the same cost as France. The
consortium says it has proposed the
project be built and operated using
the kinds of government guarantees
that are common for road concessions
in Chile and Peru, thus potentially
increasing its appeal to investors.
Nonetheless, critics say the project,
which has only come this far after
active lobbying in Santiago and Buenos Aires and has not conducted environmental impact studies either, may
be more bother than it is worth.
“Instead of spending all that money,
why not just widen the road and cover
its most vulnerable parts with snow
roofs,” asks Leonardo Andreu, head of
the state’s chamber of commerce. “It
would be quicker and cheaper.”
The octogenarian Mr Eurnekian
acknowledges that the project will
take a long time to complete, even if it
does manage to secured the necessary finance.
“Will I see it completed before I die?
Perhaps not. But that doesn’t mean it
won’t happen.”

4. FINANCIAL TIMES WEDNESDAY NOVEMBER 13 2013
★
4
Doing Business in Mendoza
Tourists get taste of the good life
Outdoor pursuits Skiing, climbing and polo are all on offer before dinner, says Camila Bretón
L
ove brought Torey Novak to
Mendoza. The US national
met his girlfriend at university four years ago and
decided to move to Argentina. Now he speaks fluent Spanish
with a Mendocino accent, and runs a
tourist attraction that capitalises on a
sideline to Mendoza’s better-known
culinary and oenological attractions:
olive oil.
“We’ve planted an Italian variety of
olive tree that grows better here than
anywhere else in the world,” he says
of the premium oil served as part of a
broader tourist offering at Bodegas
Zuccardi, a winery which, like so
many in Mendoza, offers its visitors a
mix of drink sampling, food and, of
course, olive oil.
Diversification into the kind of
attractions that visitors might more
often associate with, say, Italy, is
characteristic of Mendoza’s end-ofthe-world cosmopolitanism. It also
shows how local businesses are seeking to broaden the state’s appeal
beyond its world-famous wines.
“Most people come here because of
the wine, especially Malbec. But then
they arrive and are struck by the
Andes and its rugged scenery,” says
Pedro Rosell, founder of Discover the
Andes, a tour company that offers
visitors private excursions into the
snow-capped mountains that line the
state’s western border.
As one saying goes, Punta del Este
for its beaches in the summer, Mendoza for its polo and wine in the winter. To those core attractions should
also be added skiing, rock climbing
and white water rafting.
“Over the past 10 years, the number
of tourists coming here has doubled,”
says Cecilia Gatta, head of planning
and innovation at Mendoza’s tourism
ministry. “Last year, we had 2.7m visitors; in 2003, we had 1.2m. To meet
that increase requires better infrastructure.”
To some extent, Mendoza is already
fairly well-endowed with tourist infrastructure. A province with 1m inhabitants, which in some ways still has
the air of a small village where a
summer siesta remains almost obligatory, Mendoza has 130 wineries that
are open to the public, a plethora of
restaurants and budget hotels, and
six five-star establishments.
Indeed, the bigger challenge for
Hit with the tourists: polo lessons are one of the attractions of the region
potential investors is less a want of
physical infrastructure than a desperate need for better institutional infrastructure, especially when it comes to
national economic policy.
“Today the biggest investment risks
are the country’s broader economic
policies,” says David English, another
North American who came to
Mendoza out of love – this time for
the state’s climate, people and the
business opportunity of helping other
foreigners who felt the same way
as he did to set up small vineyards
and hotels. “Inflation and the constant changing of the tax rules . . . can
make buying properties a difficult
and confusing process,” he adds.
Rodrigo López, managing partner at
NB Travel, a Mendoza-based travel
agency, points to the same problem,
which makes “us less competitive
against Chile, which has many of the
same attractions and is only four
hours away”.
High inflation and lack of
competitiveness are a common
bugbear cited by all Argentine
businesses, which frequently bemoan
the erratic state of national economic
policymaking.
Indeed, such factors might help
explain why the majority of Mendoza’s visitors are Argentines for
whom there can still be good value in
travelling within the country, especially as low interest rates and high
inflation mean there are few opportunities to save their pesos – so better
to spend them instead.
About 75 per cent of Mendoza’s visitors are Argentine nationals, while
the largest other groups are Chileans,
at 12 per cent, and Brazilians, at 3 per
cent. All told, in 2012, the sector
brought in 6.8bn pesos, about $680m
at black market exchange rates or
$1.15bn at the official rate.
But it could bring in more still if
there were direct flights from São
Paulo that would bring in additional
Brazilian tourists, who still enjoy the
spending power of the highly valued
real. Aerolíneas Argentinas, the stateowned airline, did have plans for a
direct flight to Mendoza’s small airport, which caters for 140 flights a
week. In the end, a compromise was
reached, with a cheaper onward flight
from Buenos Aires organised for Brazilians flying from São Paulo.
“It’s not quite what we hoped for,
but it was better than nothing,” says
Francisco Pérez, the state governor,
who lobbied hard for the route.
Despite such drawbacks, and the
bigger macroeconomic obstacles, the
tourists keep coming – to drink, eat
well, bask in desert sunshine, watch
one of the eight polo tournaments
that take place each year, or even
learn to play themselves.
“First we take visitors to the Club
de Campo, where a professional
teaches them polo. Then we take
them for a premium wine tasting at
the Bodegas Escorihuela Gascón,
followed by lunch,” says Gabriel
Casals, a director of tour organiser
Wines & Polo.
With that kind of mix, it is no
wonder that some visitors end up
buying a few hectares of vines for
themselves.
Winemaking made
easy for DIY vintners
Viticulture
Choose your grape variety,
come up with a name and
leave the rest to the experts,
advises Benedict Mander
Carlos Kawal has a broad grin on his
face as he poses for a photograph
with his family in front of the small
vineyard he has just acquired. The
magnificent peaks of the Andes
mountains rising steeply behind provide the perfect backdrop for the
commemorative shot.
Then everybody sets about planting
the first vines under the scorching
midday sun of the Uco valley and,
although the work is hardly strenuous, after little more than 10 minutes
of toil, everyone decides it is time for
lunch.
Fortunately, someone else will
plant the rest of the vines. That is
exactly why Mr Kawal, an economist
and former treasury secretary of
Brazil, has signed up to Vines of
Mendoza, an innovative project
through which enthusiasts can buy a
few acres of land, plant the vines of
their choice and make their own
wine.
The hard work – the maintenance
of the vineyard, the harvest, the fermentation process, bottling and labelling, and the tedious logistics of
exporting the final product to a chosen location – will all be done by
Vines of Mendoza staff.
The fun parts – choosing what kind
of grape you want to grow, devising
your own name and label for the
wine, and of course drinking it – you
can do yourself.
Mr Kawal, who spent most of the
previous afternoon assiduously tasting various blends of wine, is one
of more than 120 investors from
countries that also include the US,
Canada, Australia and the UK who
have bought lots of between 3-10
acres at the 1,500-acre estate run by
Vines of Mendoza.
After its first private vineyards
were planted in 2007, the debut harvest came in 2010. Last year, no fewer
than 230 wines using 18 varieties of
grape were made.
“As far as I know, it’s the first
project of its kind in the world,” says
Michael Evans, a former internet
entrepreneur who co-founded the
project.
A US citizen, Mr Evans first came
to Mendoza in 2004, fresh from working on John Kerry’s presidential campaign. Glimpsing something of California’s Napa Valley of the 1970s, Mr
Evans devised the plan that allows
winelovers to make their own wine
without any of the hassles that managing a vineyard entails – not to
mention the huge upfront costs of
building a winery.
Indeed, there’s an old joke in the
wine business: “How do you make a
small fortune from a vineyard? Start
with a large fortune.”
Mr Evans’ idea has caught on. The
nearby O. Fournier winery, which
produces some of Argentina’s most
celebrated wines, embarked on a
similar project last year, with more
than a third of its 84 plots sold or
reserved.
That is in spite of some more
skittish investors being turned off by
Argentina’s notoriously unstable
business climate. José Manuel
Ortega, owner of O. Fournier,
says two prospective buyers changed
‘We’re not aiming for the
Messis or Madonnas of
this world. We don’t want
any paparazzi here’
their minds after the expropriation
of the stake in YPF, the Argentine oil
and gas group, owned by Spain’s
Repsol. Another was discouraged
by a negative experience with
Aerolíneas Argentinas, the local airline.
At O. Fournier, those that take the
plunge are charged about $150,000
per hectare, the harvest from which
can produce about 3,000 bottles of
medium-quality wine a year –
although the precise amount depends
entirely on the quality of wine that
each separate owner prefers.
Buyers include one of the richest
families in Brazil, oil executives and
wealthy bankers, including a number
of senior executives at JPMorgan, the
US bank.
“But no footballers or pop stars.
We’re not aiming for the Messis or
Madonnas of this world. We don’t
want any paparazzi here,” says Mr
Ortega. “It’s a place where people can
recharge their batteries and have
peace of mind. That’s priceless for
rich people.”
Kendall-Jackson experience
offers vital lesson for investors
Business environment
Success requires a
willingness to do
things the Argentine
way, says Ian Mount
Jess Jackson, a San Francisco lawyer, changed the
face of US winemaking
when he founded the Kendall-Jackson company in California in 1982. By the time
he died in 2011, the man
behind the slightly sweet
Kendall-Jackson Vintner’s
Reserve Chardonnay was a
billionaire producing more
than 5m cases a year.
Yet, in spite of considerable investment, Jackson
was never able to repeat his
success in Argentina.
In 1996, he bought 1,100
acres in Mendoza’s Uco valley, later adding 1,750 acres
and a winery, led by Randy
Ullom, who ran his Chile
operations.
But, in 2003, after a series
of business missteps and
Argentina’s debt default,
which caused the peso to
lose almost three-quarters
of its value, Jackson sold
his Argentine business to a
Buenos Aires couple for
$2.5m – a $5.5m loss on his
investment, according to
Wine Spectator magazine.
Jackson was not the only
foreigner to enter the
Argentine wine business
only to discover that it
could be a minefield of
handshake deals, erratic
government policy and economic collapse.
“The growth and excitement that Argentina has
produced
continues
to
attract people. But Argentina is not an easy-to-dealwith country,” says José
Manuel Ortega, the Spaniard who runs Mendoza’s
O. Fournier winery.
About
$1.5bn
was
invested in the Argentine
wine industry in the 1990s,
about two-thirds of which
came from foreign winemakers. This led to a surge
in exports from $128m in
2002 to $920m in 2012,
according to the Instituto
Nacional de Vitivinicultura,
the Argentine wine agency.
But high inflation and
Missteps: in Argentina, Jess Jackson was unable to replicate the success of his US business
import restrictions in the
past two years illustrate
that doing business in
Argentina can be difficult.
For foreign investors, it is a
reminder
that
success
requires creativity and a
willingness to do things the
Argentine way.
It was a shortage of that
willingness that hurt Kendall-Jackson.
From the start, KendallJackson had problems getting enough water to its
land, which was outside
Mendoza’s traditional vineyard zone, as well as difficulties importing the US
plants it wanted.
“There was a way we
wanted things done: how to
make wine, how to grow
grapes, how to do the financial records,” Mr Ullom
says. “We’re very strict and
have some very focused
plans. It’s our way or the
highway.” In the end, the
rigid Kendall-Jackson chose
the latter path.
Foreigners in Mendoza
have since learned from Kendall-Jackson’s
experience.
But overseas investors are
again facing tough times.
Inflation has been about 25
per cent a year since 2010
and the national government
has instituted import controls to stem the outflow of
central bank reserves.
For Mendoza winemakers,
this means higher costs,
scarce
supplies
and
squeezed margins. The cost
of making wine has doubled
in the past four years, says
Valeria Mutis, an analyst at
Rabobank.
“The biggest problem the
industry is facing is a loss
of competitiveness,” Ms
Mutis says.
According to Caucasia
Wine Thinking, a market
analysis company, in the
first nine months of 2013,
Argentina exported 220.3m
litres of wine for $640.6m,
down 19.8 per cent and
5.5 per cent respectively on
the same period of 2012. The
entry level has been especially hard hit: exports of
bottled wine under $18/case
have fallen by 37 per cent.
In response, vintners
have become more creative.
Argentina’s government
‘There are a lot
of rules that
change day
to day, so you
have to be flexible’
encourages
exports
by
refunding various taxes to
exporters, but it does so
slowly. To cut the wait,
Pato Reich, the Chilean
chief executive of Renacer,
his family’s Mendoza winery, sells wine to local companies that need to export
in order to get permission
to import other goods (a
government requirement).
They export for Mr Reich
and handle the refund
delay. “There are a lot of
rules that change day to
day, so you have to be flexible,” he says.
Mr Reich has also learned
to plan. After he was unable
to import label paper, making it impossible to ship
exports
worth
about
$400,000 a month, Mr Reich
began to stock 10 months’
supply of corks, paper and
bottles, up from a three
months’ supply before. The
problem, he says, is that it
ties up $200,000 of working
capital.
Foreign owners also have
to learn that business in
Argentina runs on friendship. After applications to
import oak barrels were
repeatedly rejected, Mr
Ortega from the O. Fournier
winery explained his problems to Marcelo Barg, agroindustry minister for Mendoza, at a winery dinner.
The
barrels
were
promptly approved, just in
time for the 2013 harvest.
“You have to go and plead,”
Mr Ortega says.
There have been some
encouraging signs of late.
Carlos Clément, a Mendoza
shipping agent, says all but
one of his barrel import
requests
have
been
approved.
And Argentina is allowing
the
official
peso
exchange rate to devalue,
thus easing inflation’s bite
on exporters.
In the end, foreign wine
investors have to learn the
lesson of Kendall-Jackson,
and understand that Argentina is cheaper because life
is more difficult there.
As they say: you can’t
have your cake and eat it
too.

5. FINANCIAL TIMES WEDNESDAY NOVEMBER 13 2013
★
5
Doing Business in Mendoza
Oil chief wins
plaudits as YPF
seeks funding
for shale project
Resources Miguel Galuccio is working hard
to attract investors, reports Benedict Mander
M
iguel Galuccio is showing the strain. He took
over as chief executive of
YPF a year ago, just
after the Argentine government had nationalised the 51 per
cent stake in the Argentine national
oil company owned by Repsol of
Spain. It was an unenviable task,
even for such a respected engineer.
Argentina is, in many ways, a hostile environment for business, given
its exchange controls, high inflation
and cumbersome bureaucracy.
Yet since Mr Galuccio took over at
YPF 18 months ago, the company’s
share price has doubled, investment
has risen from $2bn in 2012 to $5bn
this year and exploration activity has
increased threefold.
Mr Galuccio has also managed to
turn round falling production in both
oil and gas – YPF has suffered a drop
in hydrocarbon output of 7 per cent
on average over the past decade.
In addition, he led a $150m bond
issue in New York in September,
despite Argentina’s ongoing battle
with creditors, who have often sought
to impound sovereign Argentine
assets abroad.
No wonder, then, that the 45-yearold is looking wan – it probably does
not help that he is just off an overnight flight from Europe, where he
was courting investors to develop
Argentina’s vast shale reserves.
“I’m very pleased with YPF’s
results,” he says, adding – about the
company, although he could just as
well be talking about himself – “we
have to be careful not to overdo it.
“The key is to grow profitably without destroying value,” he says, playing the role of shareholder valueconscious chief executive rather than
government placeman.
Central to Mr Galuccio’s strategy is
the plan to tap the immense Vaca
Muerta shale reserves, much of which
lie in Mendoza, alongside the state’s
sizeable conventional oil resources.
Mendoza’s conventional reserves
account for about a fifth of YPF’s oil
production, and it is home to one of
the country’s most important refineries. “It is the only province in Argentina that is completely [energy] integrated,” says Mr Galuccio.
Although he concedes that it could
take several years before development starts in Mendoza’s portion of
Vaca Muerta, as opposed to the share
in the neighbouring state of Neuquén,
the province remains a vital cog in
the workings of YPF.
One of the biggest challenges, however, is securing funding. Hence the
importance of September’s bond
issue. “It was something small to test
the waters,” says Mr Galuccio of the
$150m sum.
YPF was able to raise the money at
less than 8 per cent, compared with
double-digit rates on the country’s
sovereign debt.
YPF has also been raising debt
locally at even lower interest rates.
About half of YPF’s debt is in local
currency, compared with as much as
90 per cent in foreign currency before
the nationalisation.
However, perhaps Mr Galuccio’s
most significant achievement has
been to secure a $1.2bn deal with
Chevron to explore and develop a
concession in Vaca Muerta.
It was trumpeted as proof that a
large international company with
shale gas experience trusts Argentina. YPF hopes the deal will encourage other companies to follow suit.
Dow, the US chemicals company, has
since signed a smaller deal.
Respected: Miguel Galuccio, YPF
chief executive, is seeking
foreign investors to finance the
Vaca Muerta shale project
AP
‘Things are working out.
Everything we said would
happen is happening’
“Things are working out,” says Mr
Galuccio. “Everything we said would
happen is happening.”
Nevertheless, YPF faces big challenges, most obviously in the form of
the government’s continuing dispute
with Repsol, which is demanding
$10.5bn in compensation for its expropriated assets.
Antonio Brufau, the Spanish company’s executive chairman, rejected
Argentina’s proposal this year that,
as compensation, Repsol would be
granted a 47 per cent stake – estimated to be worth $3.5bn – in a joint
venture to develop Vaca Muerta. The
Argentine government would also
provide Repsol with a bond worth
$1.5bn, but this would have to be reinvested in Argentina, along with a
commitment to invest more to
develop the asset.
Mr Galuccio has found himself
caught in the crossfire. “Not everyone
understands that this is a conflict
between two shareholders – the state
of Argentina and Repsol. I am the
chief executive,” he says, underlining
that his duty is to defend the value of
the company for its shareholders.
“It cannot be that one shareholder,
Repsol, should try to take YPF hostage,” he adds.
There seem to be two options: a
negotiated solution, or a court settlement. “It would be better to reach an
agreement,” says Mr Galuccio, who
goes on to discuss a possible role for
Pemex, Mexico’s state oil company, in
negotiating a concord.
“We have very close relations with
Pemex,” he says.
Mr Galuccio knows Emilio Lozoya,
Pemex chief executive, from his time
in Mexico with Schlumberger, the oil
services company. Analysts have also
pointed out that Repsol needs the
support of Pemex if it is to expand its
business in Mexico.
Pemex, which owns 9.37 per cent of
Repsol’s shares, has already tried to
broker the deal that Repsol refused.
However, Mr Galuccio holds out hope
that it could yet play a role in resolving the conflict.
In addition to the difficulties caused
by the Repsol saga, problems in the
broader economy, from basic macroeconomic imbalances to government
strictures on repatriating profits, will
also make it hard for YPF to continue
to attract the investment it needs to
develop the shale reserves.
That may go some way to explaining why a much-touted deal with
Bridas, the Sino-Argentine energy
company, has so far failed to materialise. It is hoped that a potential
deal with Bridas could be of the
same magnitude as the Chevron
agreement.
Says Mr Galuccio: “The Chinese
could be very important for us. I
think it can happen”.
Exploration begins at
‘Dead Cow’ formation
The arid semi­desert scrub that
covers most of Mendoza conceals one
of the great unexploited riches not
just in the province, or even the
country – but in the world.
The gigantic shale formation at
Vaca Muerta, which in Spanish means
Dead Cow, is one of the most talked­
about prospects of the global oil and
gas industry, with the potential to
attract investors to the region for
years to come.
According to the US Energy
Information Administration, Vaca
Muerta is home to the fourth­largest
shale oil reserves and second­largest
shale gas reserves in the world.
While preliminary wells are being
drilled in the neighbouring province of
Neuquén, after Chevron, the US oil
and gas group, signed a deal to invest
an initial $1.2bn, Mendoza’s portion of
the formation – which accounts for as
much as a third of the total – has
hardly been touched.
This is expected to change over
the coming decade if a range of
geological, technical and financial
challenges can be overcome –
principally the need to secure the
billions of dollars that are needed.
But with Argentina shut out from
capital markets since its 2001 default,
YPF, the state energy company, has
to rely on attracting foreign investors
into joint ventures.
Aside from the Chevron deal, and
smaller investments from Dow of the
US and Germany’s Wintershall –
interest has been limited. Hopes of a
sizeable investment from Bridas, the
Sino­Argentine company half­owned
by China National Offshore Oil
Corporation, has yet to materialise.
Other commonly raised issues
include high inflation, export tax,
limitations on importing goods and
services, restrictions on the right to
remit profits abroad in dollars, high
labour costs and insufficient skilled
labour, according to Jose Valera,
co­head of oil and gas at Mayer
Brown, a Houston law firm.
Alejandro Bulgheroni, the investor
whose family owns the other half of
Bridas, says cutting operational costs
is central to allowing Vaca Muerta to
compete with similar projects around
the world. For example, the cost of a
shale well in the US is about $3m,
compared with $7m­$8m in Argentina.
“Large investments and several
years of work are needed for the
current good expectations to become
reality,” Mr Bulgheroni recently told an
energy conference in Buenos Aires.
Benedict Mander

6. FINANCIAL TIMES WEDNESDAY NOVEMBER 13 2013
★
6
Doing Business in Mendoza
Former banker indulges his taste for liquid assets
Vintner O. Fournier
owner has no regrets
over his career choice –
even if he will never
get to taste his best
vintages, writes
Benedict Mander
More at FT.com
From university to winery
●Q&A Nicolás Catena’s former life
as a professor of economics gives
him a unique advantage in continuing
his family’s prestigious winery. The
head of Bodega Catena Zapata
reveals the secret to making a great
vintage and explains how his previous
career has influenced his approach.
www.ft.com/mendoza
F
ourteen years ago, José
Manuel Ortega received a
telephone call that would
change his life forever.
“It was the typical call that
could so easily have gone unanswered,” recalls the former Goldman
Sachs banker, who at the time was
managing a $200m private equity fund
in Latin America for Spain’s Banco
Santander.
The caller alerted Mr Ortega to
a bankrupt tomato farm in the Uco
valley, about a 90 minutes drive south
of the provincial capital of Mendoza,
suspecting that he “might find it
interesting”.
And indeed he did. When the Spaniard arrived at the 263-hectare property in the shadow of the soaring
Andes mountains, he thought it was
paradise.
“It didn’t make sense not to buy it.
We got it for the price of the transformer and a few wells – the land
itself was basically thrown in for
nothing. Today, it’s worth about 20
times what we paid for it,” says Mr
Ortega, his eyes widening.
So began the story of the O.
Fournier winery, one of the pioneers
of the Uco valley, along with other
leading bodegas such as the 2,000-hectare Salentein estate and Clos de los
Siete, the winery of Michel Rolland,
the French oenologist.
As well as its wines, O. Fournier is
also famous for the futuristic design
of its winery, which has been likened
to the landing pad for an alien ship
or the perfect lair for a James Bond
villain.
“It would have been cheaper to hire
Brazilian models to hold umbrellas for
the workers,” quips the dry-witted Mr
Ortega of the distinctive overhanging
roof under which farm labourers
unload grapes by hand into vats, protected from Mendoza’s scorching
desert sun.
Nose for success: José Manuel Ortega’s attention to detail is such that his is one of the few wineries in the world that uses three different fermentation techniques
Despite getting the land relatively
cheap, setting up the winery was an
expensive project. Mr Ortega took out
five loans and mortgaged his house to
fund the €22m project – of which
about €4m came from his own pocket.
“When you start making a winery,
it’s a money pit. You just put more
and more in,” he says.
“I began with 5 per cent liquidity
and I’ve ended up with 14 per cent
alcohol,” he jokes.
Although Mr Ortega bought the
land in 2000, and set about planting it
right away, construction of the
ambitious project – designed by local
architects Eliana Bórmida and Mario
Yanzón – did not begin until 2002.
‘Former colleagues at
Goldman may be richer
than me but they are all
jealous of what I have here’
At the time, Argentina was in the
middle of a financial crisis, and
O. Fournier was the biggest construction project – perhaps the only major
one – in Mendoza that year.
No expense was spared or detail
ignored. “Either you do it correctly
or not at all,” says Mr Ortega,
stressing the numerous details that
go into making his wine special.
“Each one in itself may not be
such a big deal, but if you do them
all, it will make a difference,” he
explains. For example, O. Fournier is
one of the few wineries in the world
to use three different fermentation
techniques.
It has not been easy. The business
climate in Argentina has become
increasingly challenging under the
government of Cristina Fernández,
the populist president.
Price and currency controls have
made life especially complicated – Mr
Ortega complains that he was not able
to import French oak for his barrels
for more than six months.
With costs rising and profits
squeezed in his wine business, Mr
Ortega has diversified the project into
tourism, with a top-end restaurant on
the property, and plans to start building a luxury hotel.
He is also selling off small plots of
land to investors, who will be given
the opportunity to make their own
blends of wine at his winery.
And although he has sacrificed the
lifestyle of a high-flying banker – he
no longer gets his suits tailor-made in
London’s exclusive Savile Row but
buys them in Shanghai when on trips
to promote his wine – Mr Ortega has
no regrets.
“When I meet up with my former
colleagues at Goldman, they may all
be richer than me but they are all
jealous of what I have here,” he says.
“I didn’t get into the wine business to
make money. I got into it to do something unique. I’m more interested in
legacy.”
He admits he will never get to taste
his vineyard’s finest wines – it will
take decades for the still-young vines
to mature.
“That,” he adds, “is a pleasure I will
leave for my children.”