Chilean Wine Industry to Face Climate Change Head-On

Over the last couple of decades, Chile has enjoyed its position as one of the top winemaking countries in the world. Its wine trade’s current export value is estimated to be at US$1.8 billion. Experts predict that Chile’s wine trade revenues will go up to US$3 billion by the end of the decade. Though the country has been producing wines for over four centuries, its success story didn’t start until the 1980s. Prior to this period, most of Chile’s wines were made for local consumption. But at the start of the decade, Spanish producers began flocking to the country. They introduced modern winemaking and wine storage techniques to local farmers. The adoption of these contemporary practices put Chile on the map and increased its stature as a dependable global wine producer.

Today, the country is considered as the 4th biggest exporter of high-quality and ready-to-drink vinos. Chile’s success in the trade is largely due to its fine array of varietals. Aside from producing its flagship wine, Carmenere, the country also offers wine cellar favorites like Cabernet Sauvignon, Chardonnay, Sauvignon Blanc, Syrah, and Merlot.

The Chilean wine industry looks indomitable but that may soon change as global warming is wreaking havoc over Chile’s vineyards. How will the country’s burgeoning wine industry continue to thrive or even survive? Singapore Wine Vault investigates.

Chilean Winemakers Forced to Rethink their Vines

For years, Chilean winemakers have relished the Mediterranean-like growing conditions brought about by the country’s unique topography. Crammed between the Pacific Ocean and the Andes Mountains, the northernmost wine regions boasted of temperate climes that were ideal for vine growing.

But the situation today is vastly different from the golden days of Chile’s foremost wine estates. Global warming has severely damaged the delicate ecosystem that allows the country to grow its grapes. As a result, the north’s winegrowers are forced to watch their prized vines wither and die out. The unprecedented rise in temperature levels and the lower annual rainfall are pushing vineyards in Elqui and its surrounding areas to possible ruin.

With every degree that the temperature rises, farmers are forced to move up their harvest date by over a week. This has affected the grapes and resulted to high sugar levels but poor tannin content. Some cooler clime varietals like Merlot are also in danger of drying out. This comes at a most inopportune time for Chilean winemakers as they were hoping to elevate their status as premium wine producers.

The prolonged drought in the region has also led vignerons to forgo watering entire plots in their estates, limiting both wine production and quality. What little water they could find in basins were chock-full of saline content. Replanting their varieties meant waiting for years for the vines to mature. Changing their lineup of grapes also meant costly retraining for their farmers and staff.

In spite of the many challenges they face, the country’s vintners remain resilient. Armed with new water management and viticultural practices, they’re prepared to weather out the harsh effects of climate change.

Improving Irrigation and Expanding the Viticultural Landscape

To help local vignerons win the war against climate change, the government has stepped in with a multi-million dollar strategy to improve irrigation. Chile President Michelle Bachelet has ordered the construction of numerous river dams help increase the country’s water reserves. With this plan in action, vintners hopes to stop relying almost completely on the Humboldt Current to cool down their vines.

But the country’s winemakers are doing their share. They’re employing different irrigation techniques to help restore their verdant landscape. Some are even prepared to uproot their vineyards and relocate to the south where rainfall won’t be an issue. The latter approach to the problem will help open up new sites for vine growing. While this move will be costlier, it could potentially provide new possibilities of producing new types of wine.

The Silver Lining: Chinese Market to the Rescue

Chilean winemakers are also betting on the Chinese market to help increase the country’s wine trade further. While China’s economy has slowed down considerably, it is still the world’s economic juggernaut. It is true that the country is slowly limiting its importation of goods—particularly raw materials. While this could mean bad news for Latin America’s farmers and miners, experts are citing an increase in demand for consumables, which includes Chilean wine.

In an interview with The Drinks Business last November, Julio Alonso, Asia’s director for Wines of Chile, confirmed that China was set to become the South American region’s leading wine importer. Based on the sales figures from September 2014 to September 2015, Chilean wine exports to China have increased considerably in volume and value.

While market performance in the United States had stagnated to a measly 2 percent (%) rise in value (US$198.8 million) and volume (6.826 million cases), growth in the Chinese trade was at a whopping 32% in value (US$150.2 million) and 34% in volume (4.96 million cases). The promise behind these figures is more than enough to make up for the decline in the UK market, where sales are down by -6.17% in volume (6.26 million cases) and -11.8% in value (US$164.5 million).

According to Alonso, Chilean winemakers have the countries’ free-trade agreement to thank for their strong standing in the Chinese wine industry. The 2005 trade agreement which puts a 20% tariff in bulk wines and 14% tariff per bottle were gradually lowered until it reached zero this year. Though Chilean wines are still subject to the standard 17% value-added tax (VAT) and 10% consumption tax, Chinese merchants are no longer paying extra for these wines. This has been enough incentive for sellers to rigorously promote Chile’s high-quality vinos.

China’s massive demand for South American wines will no doubt help tide Chile’s wine industry over these trying times. With the added income rolling in, local winemakers can also continue to fund their fight against global warming.