Topic Area: Regulating fisheries

Geographic Area: Chile

Focal Question: How successful has government regulation been in regulating Chilean fisheries?

(1) Pena-Torres, Julio, "The Political Economy of Fishing Regulation: The Case of Chile." Marine Resource Economics. Vol. 12, No. 4 (1997): 253-280.

(2) Ibarra, Alsonso Aguilar; Reid, Chris; and Thorpe, Andy, "Neo-Liberalism and Its Impact on Overfishing and Overcapitalization in the Marine Fisheries of Chile, Mexico, and Peru." Food Policy. Vol. 25, No. 5 (2000): 599-622.

Reviewer: Colin McKee, Colby College ‘01

In the late 1980s, the Chilean government began a process of reforming fisheries laws in an effort to enforce more stringent quota policies for common-pool fish stocks. Fish stocks were being increasingly depleted given the neo-liberal policies of trade liberalization and privatization, which began with Augosto Pinochet’s 1973 military coup. These efforts at reform in the past decade, however, have been largely unsuccessful given the relevance of information problems, distributional conflicts and lobbying pressures from organized interest groups. Chile’s example thus demonstrates that policies, which appear good in theory, can easily become distorted by the politics of implementation.

At present, fishing grounds have been divided into four geographical area (zone A, zone B, region VIII, and Austral), where zone A and region VIII have the most concentrated pelagic fish catches. Historically, zone A has been the most important industrial fishery. With the privatization of state-owned fisheries in this zone between 1974-78, fish stocks were increasingly harvested and by 1986 annual catches had peaked and were beginning to decline. In contrast, the southern VIIIth region did not witness significant entry until the early 1980s, whereby its annual catches have continually risen.

Prior to the late 1980s regulatory reforms, fishery laws were loosely defined and rarely enforced. While limited access was established in the 1960s to comply with objectives of a total allowable catch (TAC), it was criticized in the 1970s as preventing competition between potential investors during this new era of privatization and economic growth. The resulting outcome, Law Decree 2442, prevailed until 1986 and allowed for free access whereby all fishing permit applications were accepted. While authority fell under the regulatory body of SUBPESCA, and monitoring assigned to SERNAP, the former was largely inconsistent in applying regulatory instruments, and monitoring was . Such agencies also lacked the scientific information on fish behavior needed to establish a TAC. Growing frustration by private firms at the lack of standard regulatory methods, led to the establishment of seasonal closures as the standard method for fishing regulation. Northern fishing companies lobbied against the subsequent efforts to enforce TACs and each time succeeded in raising annual quotas. Between 1982 and 1986, not one transgressor was fined.

The process of privatizing fisheries between 1974 and 1978 led to rapid industrial concentration, which not only began earlier in the North, but was also more highly concentrated than in the South. The Angelini group, a conglomerate of several firms, represents around 55-65% of the total northern harvest, while the second largest group, Coloso, represents 20-25% (Pena-Torres, p. 260). The Angelini group’s operational sales of US$2.1 billion in 1992 accounted for 20% of Chilean total exports. So few firms, combined with one group’s importance in the Chilean economy, enhanced the effectiveness of lobbying efforts aimed at opposing catch quotas which limit incumbent firms’ harvesting.

The first effort at reforming Chilean fisheries came with the Merino Law in 1989. It defined two types of fisheries, those in full exploitation, such as the northern and southern pelagic fisheries, and the remaining ones where access remained free. For areas in full exploitation, the Merino Law sought to replace the current policy of freezing a fleet’s haul capacity, the freezing policy on a fleet’s haul capacity with individual, permanent, and marketable licenses, based on ITQs, which were a percentage of the annual global quota. The initial distribution of ITQs was to be based on individual firms’ percentage share of global catches in the previous three years. This proposal came under heavy attack by northern incumbent firms, as it limited their ability to move south towards more abundant fish stocks after northern harvests had declined. While northern firms opposed the use of ITQs, southern incumbent firms favored them as it reduced the competitive pressures of northern firms’ move south.

Lobbying efforts in opposition succeeded in deferring the passage of the Merino Law based primarily on questions of the government’s authority to limit access and sell property rights of fish stock. Regulators feared that if ITQs were to be found unconstitutional, their authority would be placed into question.

The Aylwin administration addressed these concerns and changed the Merino Law. Under the new law access to fisheries not in full exploitation had to be granted by SUBPESCA, more instruments were to be used in regulating full exploitation fisheries, and fishing agencies were given increased budgets, strengthened enforcement capacity, and greater rule-making capability. Again, while favored by southern incumbent firms, northern interest groups opposed the bill on the following four points: (1) concerns about the fairness of the initial allocation, (2) constitutional issues regarding the state’s right to limit access to fisheries and sell property rights for fish stocks, (3) accurateness of regulator’s scientific information used in establishing an efficient ITQ system, and (4) concern about fishery dynamics whereby a reduction in one stock was counterbalances by an increase in a competing specie (Pena-Torres, p. 268). Based on these arguments, the Constitutional Tribunal ruled several articles of the Merino Law unconstitutional.

The 1991 Fisheries Law established an improved regulatory framework to curb the depletion of fish stocks. While it maintained a full exploitation regime, it also incorporated two other categories where a fishery was declared to be either Under Recovery, which protects a previously full exploitation regime for a period of at least three years of biological closure, or Infant Development if exploitation is less than 10% of the regulator’s proposed TAC for the year.

ITQs remain a policy tool for regulation, but are subject to certain ad hoc restrictions, likely incorporated for the benefit of northern interest groups. For fisheries under full exploitation, ITQs can represent half of the annual TAC with the other half remaining renewable, but only to established fisheries and not new-comers. The government can publicly auction ITQs that together must be below 5% of the TAC for that year. For fisheries Under Recovery or in Infant Development, no maximum limit of ITQs exists. To date, ITQs have been applied only to red shrimp and cod fisheries, and not to the more heavily exploited pelagic fisheries more often under Full Exploitation status. Strong lobbying efforts were thus successful in writing the law to accommodate the northern incumbent firms.

This new law also continues to use catch quotas, seasonal closures, and minimum net and catch sizes, which empirical evidence has shown to be inefficient in curbing fisheries depletion (Pena-Torres, p. 273). While the law endowed Zonal Fisheries Councils with certain regulatory power, the councils are comprised of representatives from different interest groups involved in the fisheries industry, and the representation does not necessarily guarantee that their private objectives correspond to social ones. The government has, however, increased the budgets of SERNAP and SUBPESCA, the agencies involved in the regulation and monitoring of laws, established more efficient penalties for fishing violations, and has assigned legal jurisdiction to more powerful civil courts rather than local police courts.

In conclusion, the regulatory laws established by the Chilean government are sound in theory, and offer potentially efficient solutions to depleting fisheries stocks, but in practice they are primarily hindered by powerful lobbying interest groups, and significant distributional differences between fishing regions. More effective future laws must reach a medium where fisheries are sustainably harvested without compromising the economic growth attributed to fisheries’ exports.