Argentina's wineries are still struggling to come to terms with the fallout from the country's current economic crisis, which has seen pensions seized by the government, restrictions on cash withdrawals, a freeze on dollar transactions and a devaluation of the peso by 30%.

The crisis first manifested itself in early-December when the Argentine central bank defaulted on its debt repayments. Fearing a run on the peso as confidence collapsed, the government limited cash withdrawals from banks to US$1,000 a month, stopped all dollar transactions and seized pension fund assets. These drastic measures kicked a large hole in the country's black economy, which relied on cash for transactions, and led to rioting in some poorer areas of Buenos Aires.

A series of interim governments came and went throughout December, before, early in the new year, the latest incumbent, Eduardo Duhalde, calmed matters somewhat by devaluing the peso.  Argentina's currency had been pegged for a decade at a rate of one to one with the US dollar, a move originally ushered in by Carlos Menem, aimed at restoring confidence in the peso.

Duhalde re-positioned the ailing currency at Pesos1.40 to US$1 for the purposes of foreign transactions, while allowing the peso to float freely on the domestic market. This twin-track approach was aimed at making the country's exports more attractive and bringing in some much-needed hard currency, while simultaneously preventing imports from rising in an inflationary spiral.

For the country's wine producers, the situation is complicated and uncertain. Most wineries pay their foreign suppliers in dollars, and, with the freeze on dollar transactions for a month from the start of December, these have obviously not gone through.

"They understand it's not that we don't want to pay them," says Andres Kemeny, export manager of Finca Flichmann. "We've given the instruction to the banks, they're just waiting for permission from the government to put them through."

The government is expected to rescind the freeze on dollar transactions shortly, though the other economic restrictions are expected to stay in place for the foreseeable future while Argentina's banks attempt to recoup both their debts and their credibility.

The Argentine domestic wine market meanwhile is in a state of flux. It has always been intensely competitive, particularly at the lower end, and consumers and suppliers can expect a certain amount of controlled chaos as brands jostle for position while their newly liberated currency finds its level.

The situation is further complicated by the fact that demand for wine has been falling steadily in Argentina for a number of years, a process that will surely be exacerbated by the current restrictions on cash withdrawals and economic uncertainty.

Most of the wineries remain in something of a state of shock at the moment, less than a week after the currency devaluation. The caution of iconic winery Nicolas Catena, which sells 80% of its wine on the home market, is typical. "We hope the devaluation of the peso will create export opportunities," says a spokesman. "But we are not sure yet. We need to wait and see how the new exchange situation will work."

What is obvious is that while the wineries will be paying 30% more for products from abroad such as barrels and other winery equipment, the price of their wines overseas suddenly looks considerably more attractive.  Exports, in other words, hold the key for the country's wine producers as much as they do for the economic health of the country itself.

In contrast to Catena, La Agricola exports an astonishing 60% of its production, and its director Jose Alberto Zuccardi sees a silver lining in the economic gloom.

"Devaluation had to happen," he says. "It will cause a lot of problems, but it is a benefit to exporters. In the last two years, it was a difficult situation because the relationship between the dollar and the peso was not real."

In the last two years, Argentina's neighbours competitors, Chile and Brazil, have both significantly devalued their currencies: Brazil from Real1.1 to Real2.5 to the dollar, and Chile from Peso500 to Peso700 to the dollar.

"You can imagine how much more competitive they were," sighs Zuccardi. "After Brazil devalued we knew very clearly that something was wrong. It was the biggest market for Argentine products, we used to export a lot to them, but that changed overnight."

Now, with the country's wines effectively 30% cheaper than before, supermarkets and merchants abroad are licking their lips in anticipation. Some 80% of Argentine wine sales to the UK, the country's largest export market, are own label sold at less than £4 ($6) a bottle, and some observers are expecting a dogfight as producers use their weakened exchange rate to lure buyers and bring in much-needed sterling.

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"We'll always see predatory practices," said one merchant. "The job of supermarket buyers is to achieve the best deal and pass that on to their customers." He doubts, however, that such behaviour will hold true in the upper echelons of the market where some companies have been investing significantly, such as Catena with its Argento brand.

If the current economic crisis sees Argentina's export managers clocking up the air miles from South America to Europe and the States, they are unlikely to run into quite so many foreign speculators in departure lounges coming the other way. Foreign companies have spent big buying up or building wineries in Argentina, and while none have shown signs of pulling the plug on their Mendoza operations, they are unlikely to be in a hurry to expand either.

"Some companies who were ready to put more money in or expand are probably considering putting it on hold, but they're certainly not pulling out," said Kemeny. "Most of these wineries focus on exports and this situation will benefit them." Indeed, while a long way from ideal, the situation is not quite the disaster it looks to outside observers. "You probably have a worse impression," says Zuccardi. "We are working normally; we didn't stop, and the harvest looks good." Certainly, one of the country's giant hail storms would just be the last straw.