In 2007, Eduardo Nogueira Junior, aged 59, underwent a surgical procedure. After the surgery was successful, the doctor ended up prescribing a glass of wine a day for the agronomist, in order to improve his cardiovascular health. “I didn’t use to drink wine. It was a lot about beer… I started studying, researching wineries and wine”, remembers Eduardo. This was the beginning of what would become today Maria Maria, a winery from Minas Gerais, located in the south of Minas, which collects international awards.
Eduardo is today one of 100 fine wine producers in the State. According to the Agricultural Research Company of Minas (Epamig), there were only 50 in 2020. With more than 1 thousand hectares of area planted using the double pruning technique, and an estimated increase of another 250 hectares per year, MG will have the capacity to produce 2 .4 million liters of wine in five to seven years. Today this market generates around R$120 million annually.
The evolution of winemaking in Minas Gerais has come up against, especially, the high taxation of wine, one of the highest among the country’s states. With a rate of 25%, the Tax on Circulation of Goods and Services (ICMS) in Minas is what weighs the most on business owners.
Furthermore, the product is taxed in a system known as Tax Replacement, where tax collection is concentrated on a single taxpayer in the production chain, in this case, at the beginning of it, on the wineries.
Valéria Verçoza, tax lawyer, explains that, in this system, the State calculates an added value margin that represents the valuation that the product undergoes throughout the stages of production and circulation of that commodity. “In the case of wine, a lower added value margin was initially stipulated, which then underwent a very significant change, at the beginning of 2021, and today is 115.32%”, she explains.
According to her, in other states, such as São Paulo, Espírito Santo and Rio Grande do Sul, there is no longer any provision for tax substitution for the circulation of wine. “In other words, the tax that is levied is based on the effective value of the circulation of the merchandise. When you have tax substitution, in some cases you may have an added value margin that is higher than what is actually being practiced in the operation. Therefore, the person responsible for collecting the tax becomes burdened, collecting tax in a higher amount than that actually charged”, she explains.
Without letting up on the charging method, but to try to ease the producers’ pockets, the government of Minas Gerais created a Special Taxation Regime to boost the production of Minas Gerais wines. The benefit, approved by the Tax Policy Committee of the Treasury Department, is available to the entire segment. It guarantees exemption from inputs for wine production — from raw materials and machinery to packaging — as long as they are purchased in the State. And upon sale, instead of the taxpayer paying the ICMS rate of 25%, they pay 3%.
The expectation is that, after the measure, the wine production chain will develop, attracting new investments, jobs and businesses. He highlights that the issue of tax treatment is essential for developing sectors, such as wine.
“It is very curious that this all started with the technological development of Epamig, which is double pruning […]. And then the return on investment in research becomes clear. And our perspective is that this segment will flourish, become more dynamic, become dense and can become a reference for the State of Minas Gerais, in addition to coffee and cachaça,” he stated.
Luiz Porto Vinhos Finos, located in Tiradentes, in Campo das Vertentes, is one of the wineries that obtained the benefit. Luiz Porto Junior, 38 years old, the company’s CEO, details that, in addition to the 25% ICMS, the sector pays 2% to the anti-poverty fund plus PIS/Cofins of 12% at the federal level. With the State’s new special taxation regime, the total percentage of the cost of production with taxes alone should reduce from 50% to 40%.
“It is still a very significant tax, but we see an effort by the State government to promote the nascent industry of special fine wines. […] To give you an idea, our wines are sold cheaper in São Paulo, Paraná, than in Minas due to tax substitution. So, this means that we at least have equal pricing”, he explains.
Junior says that there are bottles of Luiz Porto that cost between R$140 and R$150 in São Paulo, but in BH they are found for R$180 and R$190. He explains that, with the new regime, wine prices go up to be more accessible to Minas Gerais consumers, who highly value regionalism, are proud of their products, and take this factor into account when purchasing decisions.
“The fight is so that we can remove tax substitution so that we can collect taxes in the production chain in accordance with the circulation of goods itself, avoiding the need for cash flow from industries, which need to invest in technology, in the generation of jobs, expansion and machinery”, he says.
Information on the special taxation regime, however, has not yet reached all wineries. Eduardo Junqueira Neto, son of Eduardo Junior and commercial manager of Maria Maria, for example, was unaware of the news. “Any benefit, if really applied, is welcome. Let’s see,” he said. According to him, state taxes today are a hindrance to production because they increase the cost of the product: “it is an impactful slice of value”, he summarizes.
Last year, according to Eduardo, Maria Maria grew its production by almost 50%. During the pandemic alone, there was an 8% increase in sales.
Wine production in Minas
See how to request the Special Tax Regime:
The Sectoral Tax Treatment (TTS) is aimed at wine producer taxpayers located in Minas Gerais. See the rules:
- Not opting for Simples Nacional
- Be in good standing with the State
- Submit the request observing the form and deadline determined in Decree No. 44,747, of 2008
Visit: farm.mg.gov.br
Overview of wine production in Minas
- 1 thousand hectares of planted area using the double pruning technique
- R$120 billion generated by the segment in the year
- +250 hectares is the estimated growth per year
- 4 thousand tons of grapes and 2.4 million liters is the estimated annual production capacity with the entire planted area
Source: Minas Gerais Agricultural Research Company (Epamig)
Parreiral da Maria Maria, on Fazenda Capetinga, in the south of Minas. Photo: Instagram @vinhosmariamaria/Reproduction
Double pruning changed the history of wine in Minas
The development of the idea of Eduardo Junior, Maria Maria, and many other producers of fine wines in Minas, was only possible thanks to the innovative technique of double pruning, a pioneering project led by Murillo de Albuquerque Regina, then a researcher at Epamig, in the mid-2000s.
Lucas Amaral, 27 years old, winemaker at Epamig, explains that traditional harvests are carried out in the summer, in December and January, which coincide with the rainy season in Brazil, which is more prone to disease. Then, in double pruning, the flower is removed, which would later form the grape cluster, at the end of winter and also at the end of summer.
The harvest is only done in mid-July. “This period is beneficial, there is less rain, hot days and cold nights… A temperature range that will allow the grape to reach phenolic maturity and have the potential to make wines from barricades, for example, that are longer lasting”, explains the winemaker.
According to him, practically throughout the world only one pruning is carried out. The double pruning technique can be seen in Petrolina (PE), in the Northeast, and China has also been carrying out a similar process.
Eduardo Junior, from Maria Maria, says that he planted the first grape plants at Capetinga Farm, using the Epamig technique, in 2009. “It was 5 hectares, with 20 thousand seedlings. As it was a new project, I didn’t know if the grapes would grow, bear fruit, if it would produce wine, if it would be good… In 2012, we had the first harvest, a small one, and we found that the wines would be of high quality”, he recalls.
In 2013 there was the first harvest of the Maria Maria commercial crop. And in 2017, Sauvignon Blanc Bel 2015 was bronze at the Decanter World Wines Awards, one of the biggest awards in the world. Today there are already 60 thousand grape trees on 23 hectares and 80 thousand bottles of wine produced by Maria Maria per year.
“It is a very difficult market to conquer. There’s a saying that ‘whoever goes ahead drinks clean water’. We, as one of the first wineries in Minas, have already managed to make a name for ourselves, we have managed to improve the quality of our wines and today it is profitable, it gives a good income”, says Eduardo. The family, which also grows coffee, soybeans and corn, currently generates 20% of its revenue from wine.
According to Lucas, winemaker at Epamig, in addition to sauvignon blanc, the production of fine wines in Minas began with syrah, but today other varieties are cultivated, such as malbec and cabernet franc. According to him, the entire State is producing quality wine, from Serra da Mantiqueira to the Triângulo Mineiro to the North of Minas.
“Sauvignon wines are more fruity, from warmer regions and Syrah has the potential to produce more alcohol, they are ‘barricaded’ (stored in wooden barrels). As it is a very new producing region, we are testing as much as possible. Most of it is going well,” he explains.
The winemaker says that there are reports of grape production in the south of the state since 1800, with the arrival of immigrants, much of it also for fresh consumption. “[Mas] the double pruning allowed regions that did not have a tradition of producing fine wines to produce quality wine and made Minas Gerais expand its terroir”, ponders Lucas. As production in the State is very recent, Epamig has not yet cataloged the specificity of wines from each region.
According to Lucas, production using the double pruning technique is 30% to 40% more expensive, because there are two cycles for a single harvest. Production can take 8 to 20 months. But while a table wine costs between R$20 and R$30, a fine wine can be sold for up to R$100.
The research company also works as a kind of incubator for producers who are starting production and do not yet have their own winery. Around 80 have already been assisted in two decades of work, including from outside the State, and 27 are currently in the process.
Normally, producers have the land and vineyards and take the grapes to Epamig’s experimental winery in Caldas, where they are processed and vinified. “I take care of the incubator. We took producers from new regions and started making wine for them, validating this region. So, for example, I made wine from Uberaba, Araxá, Capitão, regions that had never made fine wines”, says Lucas.
Epamig’s winemaking research has been supported by public funding agencies, especially Fapemig. Since the year 2000, when studies began, around R$10 million has been invested in projects and there has also been investment of private resources, arising from the sale of seedlings and the provision of winemaking services.
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