Industrial Subsector

The industrial subsector is characterized by a purse seine fleet of about 750 vessels with an average capacity of 225 metric tons, employing about 26,000 fishermen and plant workers. Most of these vessels target small pelagic species (primarily anchovy), of which more than 90% is processed into fishmeal, a flourlike substance high in protein that is then used throughout the world primarily as an animal feed supplement and in aquaculture farming. The majority of nonmanagement laborers are fishing fleet, fishmeal plant, and cannery workers. A significant number also work in associated industries such as net making and repair, engine repair, and shipping services. Most of the women employed in this industry work in the canneries. Throughout the period of commercial fishing, the industrial subsector has wielded strong political influence through lobbying activities and through explicit "places at the table" within the policy-making process.

ENSO warm events directly impact the anchovy stocks (there is a southern stock, which is shared with fishermen in northern Chile, and a larger north-central stock). During the onset of a warm event, the environmental conditions make the anchovy particularly vulnerable, as the pockets of cool, nutrient-rich water are reduced in area and are located near the coast. During the onset of an ENSO event, because the anchovy population becomes more concentrated near shore, they become easier to catch. The initial rise in catch is followed by a sharp decline, as the woresening conditions cause the fish to move deeper (out of the range of the nets) in search of food, and/or migrate southward in search of cooler waters. It is a combination of this spatial shift and fishing pressure that can rapidly reduce the short to midterm availability of stocks. In addition, during warm events, the reproduction and growth cycles of the anchovy are delayed and/or stunted, and in extreme cases, the fish may die because of poor environmental conditions. The impact of the reduction in anchovy population propagates through the food chain as, for example, and seabirds and marine mammals lose their food supply and are forced to dive deeper for food or to migrate southward. Widespread death of sea birds (e.g., guano birds) due to starvation is not uncommon during extreme ENSO events.

The short- and long-term impacts on the short-lived pelagic fish stocks are influenced not only by the current climate and fishing conditions but also by the state of the fish stock prior to the onset of an event, predation by other species, and other variables that are not directly ENSO related. For instance, if the stock is in good shape prior to an event, the odds increase that the stock will recover in a relatively short time period. The timing of the ENSO event may also influence the impacts. If the event peaks during the summer, as opposed to the winter, the absolute sea surface temperatures will be considerably higher, making a significant difference between slowed recruitment and reproduction versus actual survival of the organisms. However, in the case of extraordinary events like those of 1982-1983 and 1997-1998, the prior state of the stocks may be irrelevant and overwhelmed by the magnitude of change in environmental conditions.

The history of this fishery is one that illuminates the impact of ENSO events as well as the ensuing sociopolitical changes these climate shifts may spur. Prior to fishing, the anchovy stocks supported massive bird populations, whose excrement— guano—was the most effective natural fertilizer at the time. Fueled by the increased post-World War II demand for fishmeal and the collapse of the California sardine fishery (also blamed on overfishing combined with ENSO effects) (Radovich, 1981), the state-promoted Peruvian industrial fishing sector boom began in the mid-1950s and lasted until the early 1970s. In the context of weak regulations and technological advances, its catch increased to more than 12 million metric tons (primarily anchovy) by 1972. The ENSO-influenced anchovy collapse in 1973, coupled with political change in the country, led to a nationalization of the fishery, resulting in massive layoffs and a restructuring of the industry. During this epoch, the fishermen's labor union was much more influential and active, fighting against the nationalization of the sector in 1973 and then against denationalization in 1976 (Radovich, 1981).

In the 1970s and 1980s, the exploitation of sardines slowly replaced that of anchovies in the upwelling zone. The intense 1982-1983 ENSO event aided this regime shift, further reducing anchovy catches from an historic low of 118,168 metric tons in 1983 to 24,818 metric tons in 1984 tons. Sardine catches increased from 1,172,000 in 1983 to a peak of 3,398,000.

During the 1990s, however, anchovy reclaimed the ecological niche from sardine and returned to its primacy in commercial importance. Landings over the years up to the 1997-1998 ENSO event averaged more than 5,958,000tons. The 1997-1998 event, however, led to a decline in catch from over 8 million metric tons in 1996 to over 6.6 million metric tons in 1997 and less than 4 million metric tons in 1998, and almost 6 million metric tons in 1999.

During ENSO warm events, some of the fish migrate southward to relatively cooler waters. Fishmeal plants in the southern section of the country increase catch (and profits), while the plants to the north face difficult times. Some firms have adapted by building plants in the north, central, and southern parts of the coast to take advantage of the spatial fluctuations in resources. Others have decided only to operate fleets, which they can then move up and down the coast as the movement of the resource dictates. Other firms own both plants and fleets, which allows them to better hedge the supply in the face of uncertainty. A larger scale economic response to the high variability of the fish stocks by the largest fishing firms is diversification into canned fish products, agriculture, mining, and other industries.

The few years preceding the 1997-1998 ENSO event were characterized by increasing catches combined with high fishmeal prices that spurred large investments in new boats and plants (as occurred in the years prior to the 1972-1973 event), financed by loans from private banks. Overcapitalization coincided with the onset of the 1997-1998 event and despite a relatively rapid recovery of the anchovy stocks, low fishmeal prices have greatly reduced the financial recovery of the industry. In terms of labor, unlike in the early 1970s, union power has at present virtually disappeared from the fishing sector, having been replaced by the large fraction of short-term contract (as opposed to permanent) workers. The government, following an extreme neoliberal philosophy has not been willing to subsidize the industry.

Many of Peru's banks have major investments in the industrial fishing sector (at the end of 1996, the industry as a whole had borrowed over US$270 million and by the start of 1999 the industry was alleged to owe the banks approximately US$1.5 billion). As ENSO events begin to evolve, banks must make decisions on whether to make new loans. Once an event is underway, they will often refinance loans on terms based upon expectations of the upcoming quarter's catch. The banks respond to a range of information, including rumors and media coverage. Some banks hired scientists from the government agencies as consultants and co-sponsored ENSO forums to evaluate the event and its impact on the fishing sector. Despite the early awareness of the 1997-1998 event, the recent history of overinvestment in vessels and plants led to major defaults on loans by virtually all the fishing firms. This exacerbated the countries' economic crisis by adding to the unpaid debts of the agriculture and mining industry, and several large banks were forced to close down or merge with other banks to survive. By the end of 1999, the catch had returned to fairly good levels. However, the fishing firms' economic situation could not be remedied and the industry remained in a crisis. At the time of the writing of this chapter, the government is discussing the need for a major restructuring of the industry, including reducing the fleet size and number of plants, and implementing additional regulatory mechanisms such as individual transferable quotas.

Regulations are made by the Ministry of Fisheries. In theory, its decisions are informed by the recommendations of the board of directors of the governmental scientific organization in charge of fisheries and oceanographic studies. Regulatory mechanisms include species as well as minimum size restrictions, closed seasons (vedas), spatial as well as gear restrictions, and statistical reporting. These are not consistently enforced as regulators face difficult decisions during the various stages of ENSO. During the 1997-1998 event, the Ministry of Fisheries implemented several short additional fishing bans to protect some resources (though they were heavily contested by the industry) and actually passed a special decree granting licenses to allow fishermen to temporarily fish jack mackerel (Trachurus murphi) and chub mackerel (Scomber japonicus) with sardine nets (smaller size mesh than normally allowed) during this event. Thus, there is a constant trade-off between trying to conserve the species, preserve jobs, and appease the politically powerful industrial interests. It is in this context that ENSO forecasts can become a key factor in public-sector policy formation.

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