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Baja Wine Region Faces High Taxes, Low Water Supply

Evening Edition

Above: Baja California’s budding wine industry has been gaining recognition in recent years. But the region still has a ways to go toward its goal of becoming a Mexican Napa. Fronteras reporter Jill Replogle and KPBS video journalist Katie Euphrat take us to the wine valleys around Ensenada.

Aired 3/21/12 on KPBS News.

Baja California’s budding wine industry has been gaining recognition in recent years. But Mexico's principle wine region still has a ways to go towards its goal of becoming another Napa.

Special Feature Baja After The Boom

Read more about development & conservation in Baja California.

VALLE DE GUADALUPE, MX - This wine growing valley near Ensenada lacks Napa’s rolling, oak-studded hills. But it does look a lot like some of the wine valleys of Southern California. Sparsely vegetated, rocky slopes give way to rows of planted vines and occasional groves of olive trees rolling down towards the valley floor.

Baja California’s budding wine industry has been gaining recognition in recent years. Mexican wines — mostly from Baja — picked up 12 medals at last year's International Wine and Spirits competition in Spain. But the region faces big obstacles to becoming the world-renowned winemaking region it aspires to be: high taxes and — the bane of all western farmers — a scarcity of water.

"We have good land and a very suitable climate," said Isabel Morales Ríos, coordinator of the viticulture and oenology post-graduate program at the Autonomous University of Baja California (UABC) in Ensenada. "But if we want to grow as an industry, we need water."

More than 60 wineries have sprung up here since the early 1980s. Morales puts the number of wine producers in the region at around 150, but not all have their own vineyards, and only about half are registered businesses.

The wine program at the university is one of the ways the region is trying to professionalize. Victor Manuel Torres-Alegre teaches at the school. He has a doctorate in oenology, or winemaking, from the University of Bordeaux in France. He also runs his own vineyard, along with his family.

Torres-Alegre is a leader in the local industry’s efforts to move from one filled with passionate, but mostly amateur artisans, to one recognized for its world-class, professional winemakers.

"La Escuelita" winemaking school in Valle de Guadalupe, MX.
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Above: "La Escuelita" winemaking school in Valle de Guadalupe, MX.

"We have producers here who are making really high quality wine," Torres-Alegre said. "But there aren't many of us."

Beyond educating the next generation of winemakers, the region has other, perhaps bigger problems: It competes for water with the growing city of Ensenada.

A number of solutions to the region’s water needs have been proposed in recent years, including building a desalination plant to supply Ensenada. The latest proposal is to pipe in gray water — water leftover from sinks and washing machines — from Tijuana to use for crop irrigation.

But concrete plans to deliver the precious liquid have yet to materialize. Without water, grape growers can’t expand.

Baja California has about 8,000 acres of vineyards, compared to Napa’s 45,000 acres. While there simply isn’t as much land suitable for growing grapes in arid Baja, there is a lot more that could be planted.

Salt buildup is also a problem in the lower parts of the wine valleys. Salty soil can damage grapevines and decrease crop yield. It can also affect the flavor of the grapes.

Victor Manuel Torres-Alegre in his newly constructed winery, which is made of adobe to keep the wine cool in hot weather.
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Above: Victor Manuel Torres-Alegre in his newly constructed winery, which is made of adobe to keep the wine cool in hot weather.

And then there are the taxes. Currently, the sales and excise tax on wine in the state of Baja California is 41 percent. It was set to jump to 45.5 percent in February but the governor signed a last minute decree that postponed the tax on local producers for a year.

That tax “makes our wine a little more expensive compared with many other wines,” said Torres-Alegre.

In comparison, sales and excise tax on an equivalent bottle of California wine sold just north of the border, say in San Diego, is between 7 and 10 percent.

Alberta Ceja Medina is another leader of the Baja wine industry. She’s president of the state grape producers guild, and she runs the Xecue winery with her husband.

Ceja is realistic about the possibility of getting taxes reduced for the industry.

“In the history of Mexico, a tax has never been removed,” she said, chuckling. “We’re business people, we know we have to pay taxes.”

But she said there are other ways the government could help, for instance, by simplifying the paperwork winemakers are required to keep. And it could reinvest the taxes paid by winemakers in the form of credit back to the industry, she suggested.

The cellar at the Torres-Alegre Winery in Valle de Guadalupe, MX.
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Above: The cellar at the Torres-Alegre Winery in Valle de Guadalupe, MX.

Plus, they could speed up plans to find a new water source for the region.

There’s a big market at stake. According to Ceja, only about 30 percent of the wine consumed in Mexico is produced in the country. The wineries around Ensenada make the vast majority of that wine.

“If we don’t meet the demand, another country is going to meet it, or another state, another region,” she said. “The market is there. We’re the ones who have to get moving — the state, academia and the businesspeople.”

Video by Katie Euphrat

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