The devaluation of the peso has caused widespread mayhem in Argentina but winemakers are giving the move a cautious welcome.

Thousands of people are rioting in protest at government restrictions on withdrawing their savings.

But José Alberto Zuccardi of La Agricola in Mendoza firmly believes the situation will improve. ‘Clearing up the economic situation will be beneficial for Argentina in the long term,’ he said.

So far 27 people have died in riots. Police have responded with tear gas and rubber bullets as demonstrators storm banks and destroy cash machines. Casilda in Santa Fe, La Plata, Salvador de Jujuy and the capital Buenos Aires have been affected.

Ater the peso was released from a 10-year peg to the US dollar and fell 50% in value, the government froze bank withdrawals in an effort to prevent a slide into total economic chaos. People were allowed to withdraw only around £750 (€1,200) per month – the main cause of the discontent.

Violence has not so far affected the province of Mendoza, where most of Argentina’s top wineries are located.

Although producers say foreign investors will be put off by the economic and political situation, they also reckon the devaluation of the peso will finally give Argentina a much-needed edge in the export market.

‘Some of the foreign investments that were planned will not be done due to the political and economic problems,’ Zuccardi said.

But he added the country’s wine industry was in good shape and ‘well-positioned to face the crisis.’

‘The economic measures…will benefit exports. A devaluation of the peso has been announced which should give us the possibility of being more competitive in the export markets.’

Colin Cameron, a spokesman for the Pernod-Ricard-owned Etchart in Mendoza said, ‘There is some uncertainty about how things will work once all the new economic measures are in place. At the moment the situation has not affected the export side of Etchart.’

Written by Adam Lechmere, and agencies18 January 2002