Dispatch

Death of a Gambler

Argentina's high-stakes former president Nestor Kirchner will continue to be larger than life, even in death.

Nestor Kirchner, who died of a heart attack on Oct. 27, defined Argentina's "naughties" in both his timing and his temper. Not only had he ruled officially as president or unofficially as the decision-making presidential spouse since 2003, but he did so brazenly. Often, his behavior was akin to a high-stakes gambler who thought of his country like a casino he could manipulate without comeuppance. Tellingly, the price of sovereign bonds soared and Argentine stocks saw their biggest rise in two years upon the news of his death.

Kirchner's willingness to roll the dice will define his decade at Argentina's political helm, just as his predecessor Raul Alfonsin is remembered for re-establishing democracy in the 1980s, and Carlos Menem, who privatized industries in the 1990s -- occasionally with corrupt abandon -- is remembered as making Argentina the poster child for the Washington Consensus. Kirchner broke all of Menem's rules, nationalizing industry and increasing state interference, but he was effective at it. When the country was in fiscal crisis during his early years in office, Kirchner simply decided not to pay back most of what the country owed. He ignored the global monetary order and told the International Monetary Fund to get lost. And Argentineans loved it.

Kirchner really did love to gamble, even with his own money. In the small Patagonian town of El Calafate where he lived with his wife Cristina, the current president, a large casino hogs the prime location on the main street, dwarfing the hospital where he died. Before it was built, Kirchner -- who was for 12 years governor of Santa Cruz province, where El Calafate is situated -- would regularly drive into the next province to spend the night in a huge gambling house in Comodoro Rivadavia, owned by his friend Cristóbal López. He made the trip as often as gubernatorial business could allow -- and shortly before leaving the presidency, issued an emergency decree that increased the number of slot machines at Buenos Aires's main race course by 70 percent, while extending the expiry date of López's license to run them from 2017 until 2032.

As president, however, Kirchner arrived at the table with very few chips. He was handed the job without a popular mandate when Menem withdrew from the second round of the 2003 election. Kirchner had won just 22 percent of the vote in the first round, thanks to the political machinery borrowed from Eduardo Duhalde, the incumbent.

Those who worked on committees with him in Santa Cruz speak of Kirchner as a paranoid, pugnacious pragmatist -- traits that served him well in the period of economic and political disarray that followed Argentina's historic sovereign default of late 2001. He was known to scour newspapers regularly for hints about whom not to trust; his thuggishness was aided by his inclusion of family members and Patagonian friends in ministerial posts. He was not adverse to bizarre, high-stakes bluffing. In 2009, he rounded up powerful local mayors and celebrities to join him on electoral lists in the midterm elections -- never mind that many of them had publicly stated that they would not actually take up the jobs they were standing for.

Kirchner's biggest gamble, however, was to pursue economic growth with little regard for the inflationary costs. At first it was easy to grow the economy quickly, as Argentina's main export commodities, such as soy beans, fetched ever higher prices in the global marketplace, and empty factories and unemployed skilled laborers were put back to work. But as the money supply increased in Argentina, so did inflation. When signs of overheating became clear, Argentina's statistics agency conveniently manipulated the official figures, and Kirchner handed power to his wife in the hope that the couple might toggle the presidency between them again in 2011.

While Cristina was in charge, protests over ever-rising taxes on agricultural exports damaged the couple's brand, and Kirchner became a member of the lower house of Congress in an attempt to buoy his wife's presidency. He announced his candidacy at the eleventh hour, keeping his cards close to his chest. But Kirchner eventually had to concede his bid for a congressional seat to his challenger, Francisco de Narváez, a wealthy businessman. He resigned as head of the Peronist political party, and the couple in power was generally shaken. Desperately clinging to power, Cristina passed laws to cripple her most powerful media critic, grabbed cash from the Central Bank, and passed a political reform bill that makes it harder for small parties -- such de Narváez's -- to gain traction.

And then there were the couple's shady business deals. In 2008, as the economy was falling into recession, the couple reported earnings of more than 25 times more than they had claimed in 2007, coming from a hotel in El Calafate called Los Sauces. According to the official declaration of Cristina's assets, she and Nestor each owned 45 percent of Los Sauces. Odd then that Nestor Kirchner's shares raked in more than five times the amount that his wife's did in 2008. (An anti-corruption official looking into the matter resigned when he found his path blocked.)

Of course, Kirchner won't be back as president now, and it is unclear whether Cristina will run again without her husband by her side. Yet if his death ended a political dynasty, it may have cemented the Kirchner legacy. His surprise passing from a sudden heart attack was fitting for a master of political brinkmanship. With it, he escaped what may have awaited him in the courts. He also died on the morning of the national census, when all businesses except pharmacies are closed by law; Argentines invariably spent the day at home, watching positive images of him running on repeat, on almost every TV channel.

His death also makes the 2011 presidential election much more interesting, and potentially, far more fair than electoral politics have been for a while in Argentina. For the first time in many years, the political field in Argentina is now wide open. Kirchner's death has cleared the decks. It won't be an anti-Kirchner pile-on, like the midterm 2009 elections: Cristina will benefit from an outpouring of sympathy that accompanies the passing of a national figure in an exceptionally mournful country. Instead, candidates will have to do more to win the 2011 election on their own merit. So perhaps, ironically, Kirchner will have achieved in death what he destroyed so consistently in his political life: the chance for a more reasonable, policy-driven political discussion in Argentina.

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Dispatch

China Goes Sideways

Is the land of 120-proof rice wine and fruity swill really ready for fine foreign vino?

Qingdao is best known as the birthplace of Tsingtao Beer, a relic of the German concession here and China's most famous brew. But recently the town fathers decided to diversify their tourist offerings, building the fancifully titled Qingdao International Wine Street. The boulevard, completed last year, boasts 19 stores selling imported vino, three hotels, and an 8,800-square-meter subterranean wine museum. What it doesn't have are tourists. A year after opening, the wine shops make a feeble profit selling discounted bottles for local Communist Party banquets. When I visited recently, a security guard at the museum whispered to me conspiratorially that he sees fewer than 20 guests a day.

The empty storefront in Qingdao doesn't seem to reconcile with China's booming thirst for putaojiu ("grape alcohol"). As the country's prosperous class grows -- Euromonitor International predicts the middle class will expand to 700 million people by 2020 -- Chinese consumption of wine is mushrooming. The country is already the seventh-largest wine market in the world and will pass number six, Argentina, by the end of 2010. Vintners worldwide have gloated over the Middle Kingdom's newfound taste during some of the worst years on record for the industry (worldwide wine sales dropped 3.6 percent by volume in 2009).

But a nation of uneducated drinkers who show little interest in learning about wine's subtler notes (exhibit A: the empty halls of the Qingdao museum) and rampant counterfeiting mean that China's nascent wine explosion may end up corked.

Wine has a long history in China, dating back the 2nd century B.C., when the imperial envoy Zhang Qian returned from Europe with China's first grape seedlings and wine-brewing know-how. But for two millennia, wine remained on the fringes of Chinese alcohol, giving wide berth to beer and baijiu, the ubiquitous (and rather foul) rice wine that can reach up to 120 proof.

Chinese consumers have given wine a second look over the last 15 years, as the middle class embraces status symbols and health-conscious drinkers look for alternatives to the traditional firewater. Chinese wine consumption increased by 29 percent in 2009, according to International Wine and Spirit Record. (Brazil, the next fastest-growing market, rose by only 10 percent.) And that growing interest has been a shot in the arm for foreign wineries from Bordeaux to South Africa's Breede River Valley to California's Bay Area. Chinese wine imports were $477 million over the first eight months of 2010, an 85 percent jump over the same period last year, according to Global Trade Information Services.

But many wineries are having a hard time getting a line on Chinese oenophiles. Wine drinkers can be broken down into those drinking imported and domestic wines. The import-drinkers are wealthy, label-conscious consumers, concentrated in the economic powerhouses of Shanghai, Beijing, and Guangzhou (and increasingly some second-tier cities as well), where wine from far-flung vineyards has "an aspirational place among middle-class consumers, the affluent, and super-affluent," said Edward Ragg, a Beijing-based wine consultant.

Chateau Lafite is the wine of choice for those with serious RMB to drop. Just as the American hip-hop community rescued French cognac from the brink in the last decade, the Chinese obsession with this French Bordeaux is sending prices through the roof: Last year, Chateau Lafite sold its 2008 Lafite Rothschild for €185 a bottle, but that price hit more than €1,000 on the resale market last month, according to the Wall Street Journal.

The reasons for Lafite's success are something of a mystery, but Jean Marc Porrot, a wine importer in Shanghai, argued that it is a combination of the label's early entry into China, French origin and its Chinese translation of "lafei," which is easy to pronounce.

"Eighty or 90 percent of the people who buy Lafite know nothing about wine," said Porrot, who himself thinks the label is overrated and has only tasted it twice in his life.

Unlike Sideways-inspired yuppies in America who have moved beyond merlot and white zinfandel, Chinese oenophiles aren't exactly invested in distinguishing varietals. Chinese drinkers rank actual quality as the fourth-most important factor when buying imported wine, after provenance, word of mouth, and information on the back label, according to a December 2009 poll conducted by Wine Intelligence, a London-based market research firm. "[Taste] will not be a factor as such, but the label and prestige of the bottle in question is key," Ragg said.

Chinese drinkers who stick with domestic labels are also upwardly mobile, either drinking wine to further middle-class aspirations or for health reasons, but few Westerners would even recognize the cheap, domestic vino they swill. Even the pretense of sophistication that imported drinkers may boast is gone. Much of this domestic wine ends up pounded at banquets amid shrieks of gan bei! (literally, "dry glass") alongside beer and rice wine, or else -- horror of horrors -- mixed with Sprite. With 86 percent of bottles in China selling for under $6, this end of the spectrum still makes up the majority of wine drinkers.

And the local vintage still has a ways to go. I purchased a bottle of local red for 12 RMB (about $1.80) whose label promised, "It is clarity and has full-bodied ruit-smell [sic], vinosity [sic] and long after taste." What I got was a bottle of strawberry juice that happened to be alcoholic -- perhaps not surprising, given Chinese drinkers' preference for fruity, sweet wines.

"For the uneducated drinker ... wine is fairly intimidating, and there is a tendency not to want to lose face where wine is concerned," Ragg said. "These first-time or novice consumers will opt for cheap Chinese wine ... taking solace in a Chinese product," if they're even willing to pay what's still an exorbitant price, in China, for booze.

Vintners in Italy, Spain -- and especially the United States -- end up caught in between the two groups of drinkers. They don't have the same luxury cachet as French labels, and they can't or won't compete for the $6-and-under market. While Italian, Spanish, and American producers have still enjoyed double-digit growth in their exports to China, they have struggled to maintain market share against French wines.

American wineries, in particular, have had a hard time convincing Chinese consumers that the land of maidanglao (McDonald's) and kendiji (Kentucky Fried Chicken) can crank out high-quality (and prestigious) bottles. In 2009, U.S. wine accounted for just 5 percent of the Chinese import market, according to Global Trade Information Services.

Of course, foreign vintners probably rushed into things a bit precipitously. Despite the massive rise in numbers, China's per capita consumption is still negligible. In 2008, according to figures from the Wine Institute, Chinese drinkers swilled 1.08 liters, trailing most of the developed world and plenty of developing countries too. The market is growing because the number of Chinese consumers dabbling in wine is growing, but the market won't become the monster foreign labels were hoping for until wine starts being paired with food, drunk on a regular basis and viewed as more than a novelty.

"The best analogy I can think of is the gold rush," said Richard Halstead, Wine Intelligence's managing director. "The forty-niners ... many of them ended up broken and bankrupt and a few of them ended up with fortunes."

To make matters worse, even for those speculators who are striking it rich, counterfeiters have begun doing a brisk business slapping foreign labels on domestic, mouthwash-quality wine. Some analysts estimate that as much as 70 percent of the Chateau Lafite floating around Chinese wine cellars is fake. Those forgeries extend all the way down the food chain. An American winemaker touring China last year found a bottle of Charles Shaw, or "two-buck Chuck," which is sold exclusively in the U.S. supermarket Trader Joe's, said Linsey Gallagher of the Wine Institute, an advocacy group for California vineyards.

Not that many Chinese wine drinkers would be able to spot the difference. Leave Beijing, Shanghai, or Guangzhou and the knowledge of and interest in wine drops off precipitously, even in a prosperous port city like Qingdao. Wang Miao, a clerk at Qingdao Foreign Wine Trade Center, laments, "Chinese people drink wine like they drink beer. Except for tannins, they know nothing about wine."

It's a warm Wednesday afternoon in Qingdao, and the Tsingtao Beer factory tour has already punched 2,000 visitors by lunchtime. But that crowd hasn't found its way up the block to the wine museum, a converted bomb shelter where the corridor leading down to an underground tasting room is deserted, save for some bored-looking janitors.

"You should have been here yesterday," Xia Lijuan, a bartender tells me when I ask where all the visitors are. I raise an eyebrow. "There were hundreds of people."

Eventually a middle-aged man and his teenage son sidle up to the bar to drink the complimentary wine included with admission. Luan Zhong, a 42-year-old policeman, says he began drinking cheap Chinese wines as a teenager. But watching Western movies and TV shows got him to trade in his tumbler for a proper wine glass and start drinking slower. He savors the last of his free glass of Chilean cabernet sauvignon as his son looks on with pride. Luan Zhong asks for my number, and then stands to leave.

"I'll give you a call next week," he says. "You can come to my house for dinner. Do you like to drink beer?"

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