Required Report - public distribution

**Date:** 6/3/2004

**GAIN Report Number:** CI4015

CI4015

**Chile**

**Wine**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)Christine M. Sloop, Agricultural Attaché

U.S. Embassy Santiago

**Prepared by:**

Luis Hennicke, Agricultural Specialist

**Report Highlights:**

**A smaller but excellent quality wine production is expected in 2004,
with another expansion in exports. Wine producers expect to increase
both foreign and domestic sales as a result of a second year in a row of
good quality production. Fewer table grapes will be used in wine
production, as larger amounts of grapes for premium wine become more
available.**

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Santiago \[CI1\]

\[CI\]

Table of Contents

[**Executive Summary 3**](#executive-summary)

[Planted Area 3](#planted-area)

[Production 3](#production)

[Table 1: Chile - Wine Production, Consumption and Exports
4](#table-1-chile---wine-production-consumption-and-exports)

[Trade 4](#trade)

[Table 2: Chile - Wine Export Prices
5](#table-2-chile---wine-export-prices)

[Table 3: Chile - Real Domestic Farm Gate Wine Prices
6](#table-3-chile---real-domestic-farm-gate-wine-prices)

[Stocks 6](#stocks)

[Policy 6](#policy)

[PSD Table 7](#psd-table)

[Export Trade Matrix 8](#export-trade-matrix)

# Executive Summary 

Chile's wine production is expected to be smaller then last year, in
spite of large newly planted areas and the replacement of existing vines
with improved varieties, which are coming into production. Abnormal
weather in some production areas (frost and rain) affected the 2004
harvest in quantity but not in quality. The quality of both red and
white wines is expected to be excellent.

Chile has an estimated 8,000 producers of wine grapes. The wine industry
has expressed some concerns about the explosive increase in the planted
area during the last few years. Total planted area has increased over 70
percent in the last 7 years. Industry sources indicate that once the new
areas come into production, wineries will have to invest in new
processing and storage facilities to absorb the annual additional
output.

# Planted Area 

Chile's Ministry of Agriculture's new estimate of total planted area of
vines for wine is 111,000 hectares. Out of the total planted area,
around 76 percent are red varieties (20 red varieties, of which almost
half are Cabernet Sauvignon). Also, close to 75 percent of all planted
area is irrigated. New vineyards are still being established, and
existing operations continue to expand and/or replant to varieties in
high demand. As a result, Chile's total volume of exportable wine is
expected to continue to expand in the coming years.

The number of wineries has increased from 25 to over 120 in the last ten
years. The established wineries are increasingly concerned that growth
in planted area in Chile and in other countries will lead to a fall in
international prices due to excess-production. The industry's strategy,
therefore, is to develop premium quality and reserve wine exports, while
reducing sales of bulk wine. This strategy has begun to be implemented
with the replanting of vineyards with distinctive varieties suited to
local climatic and soil conditions. Chile's wineries also are expected
to reduce the use of surplus table grapes, as their own production of
wine grapes increases.

# Production

Wine production in MY 2003 (Jan-Dec, 2003) increased significantly when
compared to last year, as a result of a significant increase in the
harvested area and excellent weather conditions. Good weather was also
responsible for the excellent quality of grapes harvested in most areas
for white wines. Some rain in the summer and fall, allowed an ample
temperature variation that also resulted in an excellent harvest for the
red varieties.

Wine production in MY2004 (Jan-Dec, 2004) also is expected to be of high
caliber in terms of quality. Chile's grape harvest was earlier and
reportedly smaller than usual this year, but the weather was excellent
in most growing areas. There are high expectations for top quality wine
production, because the grapes reached maturity earlier than usual this
year. A hot dry summer made the grapes ripens faster than normally,
reportedly producing a smaller, thick-skinned fruit with a more
concentrated flavor. Winemakers say that 2004 will be a vintage to
remember for its quality.

As production of higher quality wine increases, as a result of an
expansion in planted area of improved wine varieties, the use of table
grapes for wine production is expected to continue to decline.

+-------+------------+------------+------------+----------+---------+
| #     |            |            |            |          |         |
| #  Ta |            |            |            |          |         |
| ble 1 |            |            |            |          |         |
| : Chi |            |            |            |          |         |
| le -  |            |            |            |          |         |
| Wine  |            |            |            |          |         |
| Produ |            |            |            |          |         |
| ction |            |            |            |          |         |
| , Con |            |            |            |          |         |
| sumpt |            |            |            |          |         |
| ion a |            |            |            |          |         |
| nd Ex |            |            |            |          |         |
| ports |            |            |            |          |         |
+-------+------------+------------+------------+----------+---------+
|       |            |            |            | **E      |         |
|       |            |            |            | xports** |         |
+-------+------------+------------+------------+----------+---------+
|       | **Area     | **Pr       | **Per      | **Mill.  | **Mill. |
|       | Planted**  | oduction** | Capita**   | Ltr.**   | US\$**  |
|       |            |            |            |          |         |
|       | **(Th.     | **(Mill.   | **Con      |          |         |
|       | Has)**     | Ltr.)**    | sumption** |          |         |
+-------+------------+------------+------------+----------+---------+
| 1982  | 105        | 603        | 52         | 8        | 11      |
+-------+------------+------------+------------+----------+---------+
| 1988  | 66         | 423        | 35         | 17       | 22      |
+-------+------------+------------+------------+----------+---------+
| 1989  | 66         | 390        | 30         | 29       | 35      |
+-------+------------+------------+------------+----------+---------+
| 1990  | 65         | 398        | 25         | 43       | 52      |
+-------+------------+------------+------------+----------+---------+
| 1991  | 62         | 292        | 22         | 65       | 85      |
+-------+------------+------------+------------+----------+---------+
| 1992  | 62         | 370        | 17         | 74       | 119     |
+-------+------------+------------+------------+----------+---------+
| 1993  | 62         | 486        | 13         | 87       | 128     |
+-------+------------+------------+------------+----------+---------+
| 1994  | 53         | 411        | 13         | 111      | 143     |
+-------+------------+------------+------------+----------+---------+
| 1995  | 54         | 385        | 15         | 130      | 182     |
+-------+------------+------------+------------+----------+---------+
| 1996  | 56         | 481        | 16         | 185      | 294     |
+-------+------------+------------+------------+----------+---------+
| 1997  | 63         | 536        | 16         | 224      | 428     |
+-------+------------+------------+------------+----------+---------+
| 1998  | 75         | 547        | 17         | 251      | 540     |
+-------+------------+------------+------------+----------+---------+
| 1999  | 85         | 481        | 19         | 240      | 534     |
+-------+------------+------------+------------+----------+---------+
| 2000  | 104        | 679        | 15         | 276      | 585     |
+-------+------------+------------+------------+----------+---------+
| 2001  | 107        | 580        | 15         | 299      | 600     |
+-------+------------+------------+------------+----------+---------+
| 2002  | 109        | 574        | 15         | 356      | 610     |
+-------+------------+------------+------------+----------+---------+
| 2003  | 109        | 687        | 16         | 402      | 680     |
+-------+------------+------------+------------+----------+---------+
| 2004  | 111        | 633        | 17         | 442      | 750     |
| 1/    |            |            |            |          |         |
+-------+------------+------------+------------+----------+---------+
| 1/    |            |            |            |          |         |
| FAS   |            |            |            |          |         |
| For   |            |            |            |          |         |
| ecast |            |            |            |          |         |
+-------+------------+------------+------------+----------+---------+
| So    |            |            |            |          |         |
| urce: |            |            |            |          |         |
| Nat   |            |            |            |          |         |
| ional |            |            |            |          |         |
| Ag    |            |            |            |          |         |
| ricul |            |            |            |          |         |
| tural |            |            |            |          |         |
| So    |            |            |            |          |         |
| ciety |            |            |            |          |         |
| (SNA) |            |            |            |          |         |
| and   |            |            |            |          |         |
| Ce    |            |            |            |          |         |
| ntral |            |            |            |          |         |
| Bank. |            |            |            |          |         |
+-------+------------+------------+------------+----------+---------+

## 

## 

# Trade

Chile's wine exports for MY 2004 are projected to continue to grow, as
foreign demand for good quality, low priced wine remains strong.
According to industry sources, new markets, such as China and India, are
expected to be an important factor for further expansion of exports.
Improvements in quality and continued low prices also are expected to
spur overseas demand.

Chile traditionally exports both bottled and bulk wine. Although an
increasing number of wineries are making a big effort to increase
premium bottled wine exports, low quality bulk wine grew nearly three
times as fast as bottled wine in 2003. Nevertheless, bottled wine
represented 60 percent of total wine exports. Currently, there are more
than 70 Chilean wineries exporting. Over 60 percent of Chile's total
yearly production is exported, supplying more than 100 countries.

High wine stocks together with a fall in domestic wine prices are the
main reason for a continuous decline in wine imports. Wine imports from
Argentina are mainly lower quality wine in tetra pack cartons and/or
bulk. U.S. wine is also available, usually in premium outlets. However,
demand is dampened by prices well above the local market average. The
tariff rate for U.S. and other wine imports is 6 percent ad valorem.
There is also a 19 percent value-added tax and a 15 percent liquor tax
applied to all wines sold in Chile. The FTA agreement with the US is
expected to only have a limited effect on wine export volumes to the US,
as the duty for most wine is 6.3 cents per liter and is scheduled to be
phased out over 12 years.

+-------------+--------------+-------------+------------+------------+
| ##  Ta      |              |             |            |            |
| ble 2: Chil |              |             |            |            |
| e - Wine Ex |              |             |            |            |
| port Prices |              |             |            |            |
|             |              |             |            |            |
| **(FOB      |              |             |            |            |
| current     |              |             |            |            |
| US\$ per    |              |             |            |            |
| He          |              |             |            |            |
| ctoliter)** |              |             |            |            |
+-------------+--------------+-------------+------------+------------+
| Years       | **Sparkling  | **Bottled   | **Other**  | *          |
|             | Wine**       | Wine**      |            | *Average** |
+-------------+--------------+-------------+------------+------------+
| 1990        | 236          | 143         | 42         | 111        |
+-------------+--------------+-------------+------------+------------+
| 1992        | 239          | 184         | 76         | 161        |
+-------------+--------------+-------------+------------+------------+
| 1994        | 246          | 172         | 49         | 129        |
+-------------+--------------+-------------+------------+------------+
| 1996        | 252          | 239         | 79         | 159        |
+-------------+--------------+-------------+------------+------------+
| 1997        | 262          | 261         | 108        | 191        |
+-------------+--------------+-------------+------------+------------+
| 1998        | 269          | 282         | 119        | 215        |
+-------------+--------------+-------------+------------+------------+
| 1999        | 233          | 290         | 108        | 223        |
+-------------+--------------+-------------+------------+------------+
| 2000        | 247          | 289         | 91         | 228        |
+-------------+--------------+-------------+------------+------------+
| 2001        | 247          | 286         | 63         | 189        |
+-------------+--------------+-------------+------------+------------+
| 2002        | 260          | 241         | 51         | 171        |
+-------------+--------------+-------------+------------+------------+
| 2003        | 264          | 246         | 55         | 169        |
+-------------+--------------+-------------+------------+------------+
| Source:     |              |             |            |            |
| Central     |              |             |            |            |
| Bank of     |              |             |            |            |
| Chile       |              |             |            |            |
+-------------+--------------+-------------+------------+------------+

+--------+--------+--------+--------+--------+--------+--------+-------+
| ##     |        |        |        |        |        |        |       |
|   Tabl |        |        |        |        |        |        |       |
| e 3: C |        |        |        |        |        |        |       |
| hile - |        |        |        |        |        |        |       |
|  Real  |        |        |        |        |        |        |       |
| Domest |        |        |        |        |        |        |       |
| ic Far |        |        |        |        |        |        |       |
| m Gate |        |        |        |        |        |        |       |
|  Wine  |        |        |        |        |        |        |       |
| Prices |        |        |        |        |        |        |       |
|        |        |        |        |        |        |        |       |
| (CH\$  |        |        |        |        |        |        |       |
| Per    |        |        |        |        |        |        |       |
| Liter) |        |        |        |        |        |        |       |
+--------+--------+--------+--------+--------+--------+--------+-------+
| 1981   | 1985   | 1990   | 1995   | 2000   | 2001   | 2002   | 2003  |
|        |        |        |        |        |        |        | 1/    |
+--------+--------+--------+--------+--------+--------+--------+-------+
| 194    | 104    | 108    | 161    | 368    | 110    | 148    | 196   |
+--------+--------+--------+--------+--------+--------+--------+-------+
|        |        |        |        |        |        |        |       |
+--------+--------+--------+--------+--------+--------+--------+-------+
| Ex     |        |        |        |        |        |        |       |
| change |        |        |        |        |        |        |       |
| rate:  |        |        |        |        |        |        |       |
| US     |        |        |        |        |        |        |       |
| \$1.00 |        |        |        |        |        |        |       |
| =      |        |        |        |        |        |        |       |
| C      |        |        |        |        |        |        |       |
| H\$608 |        |        |        |        |        |        |       |
+--------+--------+--------+--------+--------+--------+--------+-------+
| 1/     |        |        |        |        |        |        |       |
| Price  |        |        |        |        |        |        |       |
| are in |        |        |        |        |        |        |       |
| April  |        |        |        |        |        |        |       |
| 2004   |        |        |        |        |        |        |       |
| C      |        |        |        |        |        |        |       |
| hilean |        |        |        |        |        |        |       |
| pesos. |        |        |        |        |        |        |       |
+--------+--------+--------+--------+--------+--------+--------+-------+
| S      |        |        |        |        |        |        |       |
| ource: |        |        |        |        |        |        |       |
| ODEPA  |        |        |        |        |        |        |       |
| (Mi    |        |        |        |        |        |        |       |
| nistry |        |        |        |        |        |        |       |
| of     |        |        |        |        |        |        |       |
| A      |        |        |        |        |        |        |       |
| gricul |        |        |        |        |        |        |       |
| ture). |        |        |        |        |        |        |       |
+--------+--------+--------+--------+--------+--------+--------+-------+

# Stocks

Stock figures in the PS&D include wine, which is in the aging process
for both the domestic and export market. Stocks have been increasing in
recent years, as domestic sales and exports have not kept pace with the
increase in production due to an explosive increase in planted area. A
small decline in stocks is expected in 2004, as the rate of production
will expand less than the rate of increase in exports and domestic
consumption.

# 

# Policy

Wine production and exports are regulated and certified by the
Agriculture and Livestock Service (SAG) of the Ministry of Agriculture.
All wine produced in Chile for both the domestic and export market is
periodically sampled by SAG. SAG also issues the export certificates
that include the wine's origin and quality. The government provides no
direct subsidies to support wine production or subsidize exports.
Although Chile does have a successful market promotion campaign called
"Flavors of Chile" that includes wine.

+-----------------+------+------+------+------+------+------+-------+
| # PSD Table     |      |      |      |      |      |      |       |
+-----------------+------+------+------+------+------+------+-------+
| Country         | *    |      |      |      |      |      |       |
|                 | *Chi |      |      |      |      |      |       |
|                 | le** |      |      |      |      |      |       |
+-----------------+------+------+------+------+------+------+-------+
| Commodity       | **Wi |      |      |      |      |      |       |
|                 | ne** |      |      |      |      |      |       |
+-----------------+------+------+------+------+------+------+-------+
|                 | **20 | **R  | **20 | **Es | **20 | **Fo | **    |
|                 | 01** | evis | 02** | tima | 03** | reca | UOM** |
|                 |      | ed** |      | te** |      | st** |       |
+-----------------+------+------+------+------+------+------+-------+
|                 | **   | **   | **   | **   | **   | **   |       |
|                 | USDA | Post | USDA | Post | USDA | Post |       |
|                 | Offi | Esti | Offi | Esti | Offi | Esti |       |
|                 | cial | mate | cial | mate | cial | mate |       |
|                 | \    | \    | \    | \    | \    | \    |       |
|                 | [Old | [New | [Old | [New | [Old | [New |       |
|                 | \]** | \]** | \]** | \]** | \]** | \]** |       |
+-----------------+------+------+------+------+------+------+-------+
| Market Year     |      | 01/  |      | 01/  |      | 01/  | MM    |
| Begin           |      | 2002 |      | 2003 |      | 2004 | /YYYY |
+-----------------+------+------+------+------+------+------+-------+
| TOTAL Grape     | 0    | 0    | 0    | 0    | 0    | 0    | (1000 |
| Crush           |      |      |      |      |      |      | MT)   |
+-----------------+------+------+------+------+------+------+-------+
| Begin Stock     | 0    | 0    | 0    | 0    | 0    | 0    | (1000 |
| (Ctrl App)      |      |      |      |      |      |      | HL)   |
+-----------------+------+------+------+------+------+------+-------+
| Begin Stock     | 5652 | 5652 | 5708 | 5709 | 0    | 5902 | (1000 |
| (Other)         |      |      |      |      |      |      | HL)   |
+-----------------+------+------+------+------+------+------+-------+
| TOTAL Beginning | 5653 | 5653 | 5709 | 5709 | 5524 | 6012 | (1000 |
| Stocks          |      |      |      |      |      |      | HL)   |
+-----------------+------+------+------+------+------+------+-------+
| Prod. from Wine | 5385 | 5385 | 5500 | 6595 | 0    | 6060 | (1000 |
| Grapes          |      |      |      |      |      |      | HL)   |
+-----------------+------+------+------+------+------+------+-------+
| Prod. from Tabl | 358  | 358  | 340  | 274  | 0    | 270  | (1000 |
| Grapes          |      |      |      |      |      |      | HL)   |
+-----------------+------+------+------+------+------+------+-------+
| TOTAL           | 5743 | 5743 | 5840 | 6869 | 0    | 6330 | (1000 |
| PRODUCTION      |      |      |      |      |      |      | HL)   |
+-----------------+------+------+------+------+------+------+-------+
| Intra-EU        | 0    | 0    | 0    | 0    | 0    | 0    | (1000 |
| Imports         |      |      |      |      |      |      | HL)   |
+-----------------+------+------+------+------+------+------+-------+
| Other Imports   | 26   | 26   | 25   | 7    | 0    | 7    | (1000 |
|                 |      |      |      |      |      |      | HL)   |
+-----------------+------+------+------+------+------+------+-------+
| TOTAL Imports   | 26   | 26   | 25   | 7    | 0    | 7    | (1000 |
|                 |      |      |      |      |      |      | HL)   |
+-----------------+------+------+------+------+------+------+-------+
| TOTAL SUPPLY    | 1    | 1    | 1    | 1    | 5524 | 1    | (1000 |
|                 | 1422 | 1422 | 1574 | 2585 |      | 2352 | HL)   |
+-----------------+------+------+------+------+------+------+-------+
| Intra-EU        | 0    | 0    | 0    | 0    | 0    | 0    | (1000 |
| Exports         |      |      |      |      |      |      | HL)   |
+-----------------+------+------+------+------+------+------+-------+
| Other Exports   | 3561 | 3561 | 3800 | 4021 | 0    | 4420 | (1000 |
|                 |      |      |      |      |      |      | HL)   |
+-----------------+------+------+------+------+------+------+-------+
| TOTAL Exports   | 3561 | 3561 | 3800 | 4021 | 0    | 4420 | (1000 |
|                 |      |      |      |      |      |      | HL)   |
+-----------------+------+------+------+------+------+------+-------+
| Do              | 0    | 0    | 0    | 0    | 0    | 0    | (1000 |
| m.Consump(Cntrl |      |      |      |      |      |      | HL)   |
| App)            |      |      |      |      |      |      |       |
+-----------------+------+------+------+------+------+------+-------+
| Dom             | 2152 | 2152 | 2250 | 2552 | 0    | 2685 | (1000 |
| .Consump(Other) |      |      |      |      |      |      | HL)   |
+-----------------+------+------+------+------+------+------+-------+
| TOTAL           | 2152 | 2152 | 2250 | 2552 | 0    | 2685 | (1000 |
| Dom.Consumption |      |      |      |      |      |      | HL)   |
+-----------------+------+------+------+------+------+------+-------+
| End Stocks      | 0    | 0    | 0    | 0    | 0    | 0    | (1000 |
| (Cntrl App)     |      |      |      |      |      |      | HL)   |
+-----------------+------+------+------+------+------+------+-------+
| End Stocks      | 5709 | 5709 | 5524 | 6012 | 0    | 5244 | (1000 |
| (Other)         |      |      |      |      |      |      | HL)   |
+-----------------+------+------+------+------+------+------+-------+
| TOTAL Ending    | 5709 | 5709 | 5524 | 6012 | 0    | 5244 | (1000 |
| Stocks          |      |      |      |      |      |      | HL)   |
+-----------------+------+------+------+------+------+------+-------+
| TOTAL           | 1    | 1    | 1    | 1    | 0    | 1    | (1000 |
| DISTRIBUTION    | 1422 | 1422 | 1574 | 2585 |      | 2352 | HL)   |
+-----------------+------+------+------+------+------+------+-------+

# 

# 

+---------------------+---------------+-----------------+------------+
| #                   |               |                 |            |
| Export Trade Matrix |               |                 |            |
+---------------------+---------------+-----------------+------------+
| **Country**         | **Chile**     |                 |            |
+---------------------+---------------+-----------------+------------+
| **Commodity**       | **Wine**      |                 |            |
+---------------------+---------------+-----------------+------------+
| **Time Period**     | Jan-Dec       | **Units:**      | HL         |
+---------------------+---------------+-----------------+------------+
| **Exports for:**    | **2002**      |                 | **2003**   |
+---------------------+---------------+-----------------+------------+
| U.S.                | 313119        | U.S.            | 529711     |
+---------------------+---------------+-----------------+------------+
| **Others**          |               | Others          |            |
+---------------------+---------------+-----------------+------------+
| U.K.                | 602944        | U.K.            | 665934     |
+---------------------+---------------+-----------------+------------+
| Canada              | 306562        | Germany         | 440766     |
+---------------------+---------------+-----------------+------------+
| Germany             | 292381        | Canada          | 329785     |
+---------------------+---------------+-----------------+------------+
| Argentina           | 260833        | Denmark         | 302985     |
+---------------------+---------------+-----------------+------------+
| Denmark             | 253474        | China           | 291125     |
+---------------------+---------------+-----------------+------------+
| China               | 231820        | France          | 160080     |
+---------------------+---------------+-----------------+------------+
| France              | 148984        | Japan           | 136038     |
+---------------------+---------------+-----------------+------------+
| Sweden              | 127958        | Netherlands     | 121574     |
+---------------------+---------------+-----------------+------------+
| Japan               | 121702        | Sweden          | 112421     |
+---------------------+---------------+-----------------+------------+
| Netherlands         | 95736         | Ireland         | 101554     |
+---------------------+---------------+-----------------+------------+
| **Total for         | 2442394       |                 | 2662262    |
| Others**            |               |                 |            |
+---------------------+---------------+-----------------+------------+
| **Others not        | 805006        |                 | 829263     |
| Listed**            |               |                 |            |
+---------------------+---------------+-----------------+------------+
| **Grand Total**     | 3560519       |                 | 4021236    |
+---------------------+---------------+-----------------+------------+

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