Donald Trump Might Have Just Killed the Mexican Craft Brewery Scene
With the Mexican peso plummeting to record lows against the dollar, craft breweries in the country can't afford to import the ingredients they need to make beer.
Photo via Flickr user Quinn Dombrowski
De Vega is one of the hundreds of Mexican entrepreneurs who've entered the craft beer market. The trend is a recent one: While the country's first recognized "craft" brewery, Cosaco, opened in 1995, the industry has exploded in the past decade, seeing a 50 percent annual growth rate since 2005.
No one hesitates to credit America's beer revolution as Mexico's inspiration. The craft brew mecca, as de Vega sees it, is San Diego. Geography subsequently dictated that the Mexican trend start in Tijuana and Baja California, and over the years it's spread nationwide. Today, there are over 300 craft breweries in Mexico, and virtually all of them can trace their roots to US influence.
But now, ironically, the nation that started it all may have just ended it.
De Vega, who is 28, told me on the drive over to the tasting that he's got a problem. That problem is Donald Trump.
"I don't know why, but he fucking hates us," he told me. "It's like Hitler with the Jews. Like, what the hell are you doing?"
Predictably, this is not a rare sentiment south of the border. But de Vega is especially aggressive on the matter. Even the name of some of his beers, like the DemvoX ale, is a Latin play on "voice of democracy," inspired by his college protests of the wildly unpopular Mexican President Enrique Peña Nieto. He doesn't take kindly to bombastic politicians.
But it's not just Trump's rhetoric that has de Vega heated. The president-elect is actually poised to wreck his company.
The US Presidential election turned the world's financial markets into blown-up, untied balloons. Then, on the morning of November 9, when everyone woke up and realized a reality TV host was now responsible for the world's largest economy, those balloons were released. They shot up and down, backwards and sideways, and were utterly unpredictable for weeks. It didn't matter how many economics degrees your investment bank had sitting around a mahogany conference table—no one knew what would happen next.
Today, the Dow and Nasdaq indexes are boasting record highs. The dollar versus international currencies like the euro and yen has stabilized at levels roughly equal to what they were before November 9. But the Mexican peso is the proverbial toilet.
The morning after Trump's election, the peso fell 12 percent against the dollar. That's nearly an eighth of an international currency's value vanishing overnight. Twenty-four hours later, the exchange rate had grown to 20 Mexican pesos to 1 dollar for the first time in history, and today still hasn't dropped below that threshold.
This is obviously grim news for any Mexican industry that does business with the United States. But for the country's fledgling craft beer movement, it may be fatal. That's because every small brewer in Mexico imports virtually all of its ingredients: Bottles and labels tend to be sourced domestically, but hops and barley come from abroad. This improves quality, the cornerstone of any craft movement, but the fact is they couldn't use local goods even if they wanted. Big Mexican breweries—like Grupo Modelo, which owns Corona—have a stranglehold on everything from distribution networks to licenses with local bars, making it nearly impossible to source ingredients locally. If you want to start making beer in Mexico, you're going to be shopping internationally.
So during this decade-long Mexican craft beer boom, the smaller companies have imported everything. Which was fine—the two biggest exporters of quality beer ingredients are the US and the UK, traditionally stable economies with sterling international trade relations. But then Trump and Brexit happened, and now that business model is shot.
"Maybe Germany," de Vega suggests, after explaining the situation. "It used to be too expensive, but they have better quality ingredients, and now it's not so expensive [compared to other countries]."
Exchange rates aren't the only problem. Thanks to federal regulations, start-up breweries in Mexico often pay triple the tax rates of established big brewers, destroying their already narrow profit margins. De Vega and others worry that one-two punch will mean the end of their young industry.
At the tasting with de Vega, at Corazon de Tamal in La Condesa district of Mexico City, I fell into a conversation with one of the distributors, who echoed Jorge's worried sentiments: "The small companies will fail, because they are not yet competing in the beer market."
But he added that there may be a silver lining. "It could be that we create alliances between brewers to support each other, and all of us win," he told me.
I mention this potential positive to de Vega later. You can tell he's thought about it, and it appeals to his patriotism. The nationalism that was obvious in the car also extends to his company—he's not trying to conquer international beer markets, he just wants to make a quality product for his countrymen. And with his previous business plan now tits up, he too is hoping that national unity can save the craft beer industry.
"If it gets too expensive with the beer, maybe we get together and make our own malt and hops," de Vega told me after we'd shared a few of his beers.
"Trump gives us something we never have in Mexico. We always have divided villages, and the only thing that brings us together is a new rival. Maybe a new enemy brings people together."
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