by Bill Bonner
"All we know is that gold has gone over $1,500…and America’s ability to repay its debts has been put in doubt by the credit agencies. That’s all the news that worked its way up to us in Salta province. But, after a week on the high plains, that’s all we need to know… the show goes on, in other words… with the feds desperately pumping up the money supply…and investors desperately trying to protect themselves by buying gold.
Nothing has changed since we’ve been away. And our guess is that nothing much will change…except that the markets and the economy will continue bouncing up and down, generally downwards, all the way to Hell. That’s where you end up when you try to fight a surplus of debt by adding more debt and dollars to the system. You get ups and downs. You get plot twists and surprises. But as long as the feds continue to add to the world’s supply of debt and dollars, the last infernal act is inescapable.
So, let’s get back to our report on life in the Andes. We told you about the cattle business yesterday. It’s a terrible business up in the high Andes. Too cold. Too dry. Too far away. Every cow is a four-legged cost center. Today, we’ll tell you about the other business we don’t want to be in – wine. But let us pick up where we left off.
Our little crowd had gathered in the main casa as the replacement padre was just about to bless our new statue of San Miguel. It is a statue carved from a single tree trunk, ordered from sculptors in Ecuador and shipped down the ranch. About 6’ tall…in a light, yellowish wood…a bit like blond mahogany. It turned out very well…with a beatific St. Michael, handsome in a feminine way, with a curly hair and fine features. It is about as nice as any statue of San Miguel we’ve ever seen. So we put it in the living room.
When the backhoe arrived last year, the priest had come over and blessed it. That seemed to work out fairly well; we figured we had nothing to lose by letting his replacement do his magic on the new statue. San Miguel is supposed to protect you from evil. And with all the powers not just of a saint but of an archangel, he ought to be able to do a fair job of it. He is seen in the wooden version with his foot on the devil’s head. The padre admired him. Then, he took out some holy water…and small card with notes, underlined and ragged from years of wear and tear. He sprinkled water on the statue and then said,
“Let San Miguel take all the people of this house and this ranch under his protective wing. Let him cast out evil. Let him bring the devil under his control and crush him beneath his foot. You can see him doing that in this statue. Let San Miguel help this ranch and help all those associated with it prosper and flourish in the love of Jesus Christ. Amen.”
We were beginning to doubt that even an archangel could bring prosperity to this outpost. The wine business came to us like a head cold. There was a vineyard on the property when we bought it, unbeknownst to us. It was less than 2 acres…and hidden away in a remote valley, about a two-hour ride on horseback from the main house. The place is beautiful, but not at all efficient nor especially productive. But when we actually made some wine, we found that it was very good. High altitude malbec, they call it. “Ecological,” Jorge adds, since we don’t know anything about using chemicals and can’t get them up there anyway.
So, we decided to plant more vines – mostly to give the gauchos something to do and to make the valley look better. Now, we’ve got almost 5 hectares planted. Like it or not, we’re in the wine business. Of sorts. What an awful business for a dilettante! We hired a consultant to explain it to us. Giving us a look of pity, mixed with disapproval, a look normally reserved for alcoholics or syphilitics, he began: “Well, when I started playing golf a few years ago, I practiced and practiced. I spent a lot of time and money on it. I was thinking maybe of doing it professionally. And then, when I played with a real pro, I asked him what he thought I should do. He said – ‘take two weeks to think it over…and then throw away your clubs and never play again.’ That was good advice. That’s what you should do with your grape business.
“Where you are, on the other hand, everything will be much more expensive. Because it takes three hours to get to your place from Cafayate, which is where all the wine expertise and supplies are. Each bottle will probably cost you $6 or $7…or maybe even $10…before it is shipped somewhere for sale. And then the distributor will want a big cut…and then the importer (if you’re selling outside of Argentina) will need a cut…and then the retailer or restaurant will also want a large part of the retail price. And you’ll have no bargaining power whatsoever. Because you are tiny. And because you are new to the business. There’s no way you’re going to make any money selling at mid-range prices. But unless Parker or someone will give you a rating over 90…you won’t be able to go much beyond mid-range pricing.
That seemed like good advice. But what to do? If we get out of the cattle business and the wine business…what business is left? What will the gauchos do? Why does the farm even exist? “Don Bill,” Jorge, the ranch manager approached us just before we left. “Thanks for getting the backhoe. It has been a big help to us. And thanks for investing in the farm. You know, the previous owner didn’t put any money into the place. We didn’t have any machinery. It just felt like we were going downhill. But now, we all feel like we’re making progress. The grapes look good this year. The valley is green, thanks to all the rain. Our new reservoirs will be in operation soon. The place is finally becoming what it ought to be. It’s very beautiful…and we’re very happy to have you here.”