The Cuyo region is in the centre-west of Argentina and it comprehends the provinces of Mendoza, San Juan and San Luis, being Mendoza its largest economy. In 2022, 51.72% of Cuyo's Gross Geographic Product (GGP)i was generated by Mendoza.
Located within the Central Bioceanic Corridor and at the foot of the Andes Mountains, Mendoza has geographical soil and weather conditions that allow the development of several industries.
With 145,393 hectares planted with grapevines in 2023, Mendoza produces more than 70% of the country's grapes. In addition, it is the main national producer of peaches and plums with more than 75,000 hectares for the primary production of fruit trees, which is characterized by the presence of stone, seed and dried fruits.
Horticulture is in third place for agricultural production. In recent years the cultivated area was between 15,000 and 20,000 hectares, predominantly heavy vegetables such as garlic, potatoes, onions, industrial tomatoes, pumpkins and carrots. Together with leafy vegetables and cabbage, more than 45 horticultural species are grown. Approximately 95% of this production is destined to satisfying the demand of the domestic market.
“Due to the composition and nature of its soil, Mendoza has unbeatable agroecological characteristics and this is reflected in the large number of establishments certified and monitored by SENASA,” comments Julia Adano, Partner and Agribusiness spokesperson at Grant Thornton Argentina. “This natural seal, together with the industrializing potential, opens doors to countless markets, both national and international.”
The general trend towards industrialization of agricultural production has led the province to becoming a leader in the production of preserved peaches, prunes, olives, olive oil and wine. This last product represents 73% of the province's agricultural manufacture and 74% of the national wine production.
Mendoza is an attractive market for wine investments. The world-renowned Geographical Indication (GI) adds a differential value to wine production, making it an easier product to sell. A hectare planted with grapevines in Mendoza can cost up to 50% less than in Napa Valley, in the United States. “The recent approval of the Law of Bases (Ley de Bases) and the Large Investment Incentives Regime (RIGI, for its acronym in Spanish) can take the wine industry beyond - says Adano - and drive the adoption of new technologies that allow expansion to new international markets. The tax exemptions and easier access to financing proposed by the RIGI will possibly improve competitiveness and boost other industries such as tourism or biotechnology”.
With two productive sedimentary basins in its territory and 86 exploitation areas, the province of Mendoza is 4th in crude oil extraction and 8th in gas extraction. Its hydrocarbon industry makes up 20% of the GDP.
Data from the National Energy Secretariat indicate that, during 2023, oil production was 3,190,376 m3 and gas production was 572,801 Mm3.
“With the Cuyo basin already very mature and the Neuquén basin in decline, since 2017 the decrease in reserves has exceeded 40%,” comments Gabriel Righini, Audit Partner and Energy and Natural Resources spokesperson at Grant Thornton Argentina. “However, Mendoza could still recover in the long term the status of "producer province" it had during the 50s, 60s and 70s, thanks to the 35% of the Vaca Muerta deposit located there. Although for this to happen, large investments must be made in infrastructure so that the basin becomes economically exploitable.”
Mendoza also has great geological potential for mineral exploitation. In addition, in the southwest of the province there is the largest potassium deposit in Latin America and one of the largest in the world: the Huitriniana Basin.
The Potasio Río Colorado (PRC) project is located there, with an installed capacity of 95%, and in synergy with Vaca Muerta could exceed 1.5 million tons per year and be the main supplier to Brazil, while supplying the domestic market.
In recent years, the province sought to reactivate the Hierro Indio mine, in Malargüe, which had been inactive since the 1970s. “This project is very important, both for Mendoza and for the country”, says Estanislao de León, Audit Partner and Energy and Natural Resources spokesperson at Grant Thornton Argentina. "The exploration studies carried out determined that in only 5% of the formation there are at least 5 million tons of metallic iron. This metal is currently imported by Argentina and in the long term, it could come largely from this mine.”
The province also has copper and gold deposits. Currently, there are four exploitation projects which are not yet in the production phase: San Jorge and Cerro Amarillo for copper production and San Jorge and Don Sixto, gold.
“Mendoza has a high geological potential for mining”, highlights de León. “And although there are frameworks that regulate the activity -such as Law 7,722, which limits the substances that can be used for extraction- there are technologies that adapt to them and could boost Mendoza’s mining, making it an attractive market.
Furthermore, with the increasingly social demand for environmental protection, companies are constantly researching and developing more sustainable extraction methods with a lower environmental impact. With the implementation of the RIGI and other tax incentives offered by the provincial government, Mendoza could exploit its metalliferous potential.”
In the last three decades, Mendoza has exported 30% of its tradable sector, more than half of which corresponds to wines and musts. In 2023, Brazil, the United States and Chile were the main destinations for Mendoza's exports for US$337,572,728, US$253,014,529 and US$92,982,024 FOB amountsii, respectively.
“The low percentage of exports has multiple factors, including the low level of industrialization and quality expectations that do not satisfy foreign markets,” comments Fernando Fucci, Managing Partner and Director of the International Business Centre at Grant Thornton Argentina. “However, this situation can be easily reversed with greater investment in technological developments and incentives by the Provincial Government to boost regional economies in pursuit of greater international exposure.”
Manufactures of agricultural origin represent 71.63% of exports, while primary products 11.26% and manufactures of industrial origin 10.19%.
Wines (excluding sparkling wines) and grape musts in containers less than or equal to 2l, fresh or chilled garlic and unfilled polypropylene were the three most traded products abroad during 2023, with a relative share of Mendoza's exports of 57.34%.
Its privileged geographic location in the bi-oceanic corridor grants it greater commercial openness. The two border crossings to Chile and the proximity to its main ports open the doors to the dynamic markets of Asia more easily and at better costs than to many other provinces of Argentina.
“China, for example, is the province's 8th trading partner, when at the national level it is the second”, Fucci points out. “Redirect sales towards this country and others in the Asia-Pacific region could boost the productive export sector, enhance Mendoza’s international profile and put the entire Nuevo Cuyo region on the international trade map.”
Mendoza is one of the provinces with the highest primary surplus and the production of goods and services during 2023 amounted to US$19.6 billion. New investments and greater efficiency in the economy can boost the province's production and the development of regional economies.
“The academic level of the province’s universities and the qualified workforce are the basis for economic growth,” says Fucci. “Results from our latest International Business Report (IBR) indicate that 40% of businessmen in the Argentine mid-market have difficulties in finding qualified workers. Mendoza has prestigious universities and educational institutes, both public and private, which allow the province to have a qualified workforce and attract investments.”
The IBR also points out that 52% of the national mid-market leaders see energy costs as a limitation to their growth. Mendoza is a province that, due to its topographic characteristics, can lead the energy transition.
“Mendoza not only has critical minerals, such as copper; but the geographical advantages of its land also allow it to produce green energy such as solar, wind and hydroelectric power,” Righini points out. “With the right policies and incentives, the province could take advantage of its mountain rivers, dams and semi-arid areas for energy production and lead the transition in Argentina.”
Mendoza has potential in multiple industries and the ability to take beyond the economy of the entire region.
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i. The Gross Geographic Product (GGP) is the provincial equivalent of the Gross Domestic Product (GDP). It is the monetary value of the goods and services produced in the economy of a region or province in a given year. Source: Ministerio de Gobierno, Infraestructura y Desarrollo Territorial – Dirección de Estadísticas e Investigaciones Económicas de la Provincia de Mendoza. https://deie.mendoza.gov.ar/
ii. FOB (Free on Board): is a sales clause that considers the value of the merchandise placed on board a vessel for shipment in the country of origin, excluding insurance and freight. It covers the cost of the merchandise in the country of origin, transport of the goods and export duties.