Chile Economy — 11 June 2016


chile fishing law

Photo:  Jack Mackerel by Southern Pacific Review

11 June 2017.  Santiago, CHILE.

The Chilean government under President Piñera pushed through legislation that gave 92% of the $3 billion fishing quota to 7 families and to their heirs in perpetuity.  Now it has been shown that bribes were paid by the largest of these fishing companies to key politicians to steer votes their way. The Communist Party has proposed that in light of that evidence the fishing law be annulled.  But as the law is written the government would have to compensate these 7 families if they were to take back the fish that used to belong to the Chilean people.  So will that happen?  Here we explain all of that.

Chile’s Rich Ocean

Chile’s 2,600 mile coast, it is often said, is rich in fish.  The coast runs from the Magellanes, which is home to the furthest inhabited land at the bottom of the world, to the Atacama Desert North, which is the driest desert in the world.  The ocean is cold along the whole coast which is what keeps the climate mild. It is too cold for swimming for all but the hardiest of swimmers.  The ocean is filled with lots of marine life including tiny shrimp called krill which is why Chile is known for having so many whales.

There are two types of fish here that are fished for commercial gain.  There are: those for human consumption, like merluza and jibia (giant squid), and oily fish, which are ground up to make fish meal, a high protein feed for fish farming and livestock.  It’s called fish flour or harina de pescado in Spanish. The second category of fish includes jack mackerel (called jurel in Chile), sardines, and anchovies. Of course people can eat those, but the real money is in grinding them up.

And then there are two types of fishermen.  Industrial fishers have fleets of large boats (we can say > 8 meters).  Artisanal fishermen can have large boats too, but mainly they have boats that are at most 8 meters and they only have one of them.  There are 86,000 artisanal fishermen in Chile.  Most earn little money.

Sport fishing in Chile

And in a situation that is rather odd, there is almost no saltwater sport fishing here, even though the largest swordfish on record caught on a rod and reel was caught in Iquique.  Lots of fishermen travel to Chile to fly fish for salmon and trout in freshwater.  But the ocean is literally void of any pleasure craft of any kind, except there are a few sailboats.

Someone from Europe or the USA would find that odd. You can almost walk across the harbor in places like San Diego without getting your feet wet because of the large number of boats.  Recreational fishing is allowed in Chile, yet almost no one does that. A few fish from the beach. (Our publisher is getting ready to buy a 15 foot, 40 hp Zodiac to fish. He will have to import that boat since that model is not sold here.)

Over Fishing

The current law stems from earlier efforts to control over fishing that saw certain fishing stocks collapse, a situation found in other parts of the world too at times.

This article from Ciper Chile investigative journalists says that in 2001 scientists in Chile used acoustic means to measure the amount of jack mackerel down from Valparaiso to Los Lagos Region (Upper Patagonia) out to the 200 mile exclusion zone (By international treaty, 200 miles off each country’s coast is coastal waters where no foreign boats are allowed to fish.).  

Jack Mackerel is by far the largest part of the commercial market.  They swim in such enough enormous groups that you can count them by measuring the size of the blob. The scientists counted 6 million tons of jack mackerel (jurel in Spanish) in 2001.  In 2009 they counted zero.  Yet that study was restricted to only that section, albeit long 1,000 km, of the coast. Some areas were closed after that. Yet fishermen simply went elsewhere.

Fishermen interviewed in that article said that boats now have to go further out to sea and stay out longer due to declining fish stocks.  They talked of the old days when it was easy to stuff the holds after only a short while.  But then over fishing threatened everyone.

So the government passed laws in 1989 and 1990 to try to curb over fishing.  Those largely did not work for various regions. One tried to curtail fishing by limiting the size of boats.  Industrial fishermen found a loophole.  They would take a permit for a boat of say 600 cubic meters hold capacity and another one of 500 cubic meters to build a new and more advanced boat of the sum of the two: 1,100 cubic meters.

Those early laws did not set an overall quota.  When that was done under President Ricardo Lagos it resulted in a mad dash to the sea where all the fisherman fished as fast as they could until the quota ran out. Thus scooping up everything in one school.

But fish do not respect borders.  Chile has to follow international agreements since Russian, Chinese, Peruvian, and other countries fish for jurel as well, often with enormous floating factories that both catch and can those fish all in one spot. 

One study said that of the 79% reduction in the amount of jurel in all of the Southern Pacific, Chile is responsible for 88% of that.

Catching Juvenile Fish

Maintaining the stock of jurel means not killing off the juvenile fish before they reach breeding age and size at 26 cm. The young fish are born in the north of the country and off the coast of Peru where they then swim south in a wide arc that runs down the coast of Chile, across to Australia, and then up to New Zealand.

Ciper Chile said Corpesca, Chile’s largest fishing fleet, with 25% of the country’s quota, whose territory is the north of Chile, is violating that law and there is no enforcement of the law.  They said 95% of what Corpesca catches is under the legal limit. Corpesca says that fish of that size are a different species.  Corpesca then asked the government why they are not enforcing the law.  The regulators said that Corpesca is not violating the law.  Taken together all of this does not make sense.

Details of the Fishing Law and Demise of Its Sponsor

The current law is the culmination of a series of changes made in the 1970’s and 80’s, when there was no law, to putting something in place to try to stop the collapse of the fisheries.

The Ley Longueira, Ley de Pesca, or just Fishing Law was passed in 2011 and took effect in Jan 2013. It was necessary to pass some law as the previous one was set to expire at the end of 2012.  The new one was characterized as “a new norm that sought to protect a natural resource in decline from over exploitation.”

Pablo Longueira, ex minister of the economy under Piñera and former presidential candidate against Bachelet in the last election, proposed the law and pushed it through the congress. Longueira threatened a presidential veto if the privatization of the fish was not approved, in other words selling off what belonged to the people and government of Chile to private business.

Longueira is the politician who was set to be the conservative presidential candidate against President Bachelet in the last election.  He bowed out when he had a nervous breakdown.  Now he has quit the UDI political party in 2016 when it was shown that he had taken monies from the SQM mining company and then inserted language into the law favorable to the mining company.

(Note: The UDI has long been zealous in support of private business and privatization of public functions and assets.  Many of its members supported the Pinochet military government including the last presidential candidate, Evelyn Matthei, who said she voted to keep the dictatorship in a 1989 plebiscite that Pinochet lost, when democracy was restored in Chile.  Pinochet basically handed over the economy to laissez-faire, free-market economists from The University of Chicago, led by Martin Feldstein, who are referred to here as the Chicago Boys.

The Chicago Boys felt that all aspects of society should be privatized, which is one reason why we have a private social security system here, one that is grossly underfunded, as well as many private highways, water systems, and other things.

Pinochet came to power by ousting the Communist government, which of course would favor socialist policies over capitalist ones.  Today Chile’s president is Socialist and there are Communist Party members in her coalition.  But Chile is probably one of the most capitalist countries in the Americas, if not the world.)

What the Law Says

La Ley de Pesca gave away for free 92% of the fishing quota to 7 families of industrial fishermen.  That was without any kind of royalty payments common with other resources like minerals, including copper mined in Chile, which is Chile’s largest export. Those fishing licenses would be renewed every 20 years and, remarkably, pass onto their heirs, like some kind of peerage nobility.

None of the wishes of the artisanal fishermen were adopted in this measure.  This includes their desire to retain the first 5 miles offshore as theirs alone.  Now the industrial fisherman can fish within 1 mile of the coast. To track where they go the government has fixed GPS trackers on boats.

The law also took away the rights of the indigenous people of Chile, mainly the Lafquenches, to have a part of the ocean for themselves.  That apparently clashes with an agreement signed with the United Nations regarding the rights of Indians.

The quotas are set annually by the government agency Sernapesca.  Here are the annual quotas. In 2014, the quota for jurel was set at 27,049 tons for artisanal fishers and 265,374 tons for the industrial ones.  As you can see the artisanal catch is roughly 10% of the quota. Separate quotas are set for sardines, anchovies, and fish for the human market, like merluza.  All of those adhere to the same 92% allocation.

Here is data on the global quota for 2016.

Bribes Paid to Senator Orpis

After all of that, it has now been shown that the Chile’s largest fishing company, Corpesca, paid bribes to three key politicians from the Iquique region to influence the fishing law.  No other fishing company has been caught doing that.  

Three politicians from the northern desert region of Tarapaca, home of Corpesca, have been charged with various crimes related to taking money from Corpesca.  Two of them, Orpis and Rossi, are senators who sat on the fish committee that has jurisdiction over this bill. Another is a congresswoman.  Their means to solicit these funds were to submit fake invoices to the company for work not done.

The most high profile corruption case is against Senator Orpis (UDI) who is currently under house arrest.   He has been shown to have taken funds from Corpesca on a regular monthly basis, laundering some of that through a business belonging to his wife.  That is a violation of the tax law.  He has already been charged with accepting bribes.  That is a grey area as there is no campaign finance law on the books yet, which is the reason that President Bachelet is trying to get one passed now.

Also politician involved is Socialist Party Senator Fulvio Rossi. The PDI (similar to the American FBI) investigated Senator Rossi and showed at least one email linking Corpesca to financing his political campaign. Radio Bio Bio said, “Fulvio Rossi intervened in favor of Corpesca in relation to modification to the Fishing Law.” He resigned the Social Party in the wake of the different scandal, the same SQM corruption scandal that caught up Pablo Longueira.  

(Aside: The women swoon over Rossi because he is so handsome.  In a funny episode he was one of the politicians who help pushed the bill to legalize marijuana through the lower house of congress.  He said he smokes pot and enjoys it.  So conservative politicians moved to pass a rule that would prohibit pot smokers from congress.  But the left wing has a majority, so the bill went nowhere.)

Marta Isasi (UDI) also received support from Corpesca. She voted in favor of all bills that favored the industrial fisheries and against the provision that would say, “the government has absolute and exclusive dominion over the existing resources and those cannot be proscribed.” She also voted against any law that would have established a quota.

There is no documented evidence of a quid pro quo, only anecdotal.  Also there is no evidence that these politicians used these funds for their own personal enrichment as opposed to just using that to financing their campaigns.  For example, Rossi handed out monies to lots of politicians in Tarapaca to help with their campaigns.

Communist Party Makes a Motion to Annul the Ley de Pesca

In light of the bribery scandals mentioned above, the Communist Party in the lower house of congress put forth a parliamentary motion that would annul the fishing law.  That included the congressman from the Iquique region, home of Corpesca, Hugo Gutiérrez, also of the Communist Party.  

The motion was allowed by the parliamentarian.  Howl of protests erupted because technically there is no vehicle to simply cancel a law already passed by the congress.  Even liberal senators like Isabel Allende, head of the Socialist Party, said to do so would be unconstitutional.   

The Communist Party took this approach because it would be very expensive now for the government to buy back the fish.

Under the current law if the government takes back the fish they would have to reimburse the industrial fisheries, which would cost $10 billion.  Chile is not the USA, which can literally create money by selling bonds, so it must live within its budget.  The President has already had to cut back on other ideas, like free university education for everyone, due to budget constraints. So there is no money to buy back the fish.

Yet the President has said it is necessary to modify the current law and has promised to submit a bill this year.

But the president is in a weakened position, suffering low 24% approval ratings.  Further the congress is already over burdened with too many proposed laws.  Even her ministers say not everything can be addressed in the time she has remaining in office.  

Bills under consideration include the number one idea she campaigned on, to make higher and grammar school education free.  (See, we just told you Chile is among the most capitalist of nations.  Here even so-called public schools are not public as parents must pay tuition.) Also there are bills to prohibit price fixing, bills to prohibit giving money to politicians, a bill to allow abortion in certain restricted situations, reform of the private health insurance system, and marijuana legalization (proposed by others, yet grudgingly agreed by Bachelet).

The President also is also mired in her own corruption scandal related to influence peddling by her daughter-in-law and son.  The son went with the daughter in law to the Bank of Chile where they asked for and obtained a loan that the daughter-in-law used to buy and then flip industrial property for a huge profit, a huge setback for a Social Party president who is supposed to support the poor. The president has come under international criticism too as she recently filed a criminal complaint for libel against a website when that site released a recording where it was suggested that she would personally profit from that transaction. The site took down the recording quickly when it was shown that the witness was not credible.  The press law here includes jail time for libel, which is an assault on freedom of the press the critics say.

Relevant Videos

Above we have inserted links to the various articles we cite if you want to do further reading.  There is not much written on this topic in English. Here are three videos, all in Spanish. One is a video summary of the law.  And here is a funny one (Turn on subtitles to help you with the Chilean Spanish.).  The narrator says, “There are more fish in the super market than the ocean.” Another video you should watch is here. Here is one item in English, a short clip from the BBC Documentary “Looting the Seas.”



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