CHILE: SEAFOOD ANNUAL
AGR Number: CI5031

From:   AMERICAN EMBASSY, SANTIAGO, CHILE
To:    USDA/FAS Washington D.C.
Country:     CI
Year:        1995
Report Code: 54  Post Report Sequence Number: 002
Report Title: Seafood
Report Type:  A  - Annual Report
Report Subject: CHILE: SEAFOOD ANNUAL
Approved By: RICHARD B. HELM
Drafted By:  LUIS HENNICKE
Security Classification: UNCLASSIFIED, NOT OFFICIAL USDA DATA
Date Due (MM/DD/YY): 09/15/95
                

Report Code: CI9554A       
AGR Number: CI5031           Page:     1
             
Seafood
                                                                        
   General Summary                                                             
                                                                               

The fisheries industry plays a major role in Chile's export-led economy.  For almost two decades, the value of exports of fisheries products have averaged an annual growth rate of nine percent, the largest rate of expansion of any economic sector in Chile.  Exports of the fisheries complex reached U.S. $1.36 billion in 1994, or approximately 12 percent of Chile's total export earnings.                                                                                

Aquaculture has developed into a major component of Chile's fisheries sector, accounting for 25 percent of all edible fish exports.   Chile's salmon output is expected to expand about 20 percent in both 1995 and 1996.   Growth in production fell below earlier expectations principally as a result of destructive storms and sluggish demand from Chile's principal customer, Japan.  The medium-term forecast of industry specialists is for a production level of about 100,000 metric tons (eviscerated weight) within six to eight years.  Consistent quality controls on the part of the Chilean industry and sophisticated marketing campaigns are helping to stimulate increased world demand for fresh and frozen Chilean salmon.   Although industry analysts have trimmed their earlier forecasts for salmon output of up to 150,000 tons by the year 2000, total Chilean aquacultural output will continue to grow based on development and growth of new species, including trout and turbot.                                        

The outlook for Chile's wild catch is uncertain as a result of years of overfishing.  In addition, the catch is affected by the "El Nino" phenomenon, which involves a shift in the path of the Humboldt current.  The Government has taken measures to attempt to limit the expansion of the fish catch and preserve the biomass.  A reduced catch in the future, either as a result of natural causes or because of fishing limitations, will likely mean a move toward production of higher-quality fish meal for export.  Given the prospect for stable or declining catch, growth in output in the Chilean fisheries sector will likely result solely from expansion of aquacultural production.

                                                                             

Report Code: CI9554A      
AGR Number: CI5031           Page:     2              

Seafood                                                                         
  
    Total Edible Fishery Prods.

                       Global Economic Data Exchange System

                    
Commodity: Total Edible Fishery Prods. (0300000) (METRIC TONS)
                
Beg. Month/Year of Marketing Year: 
                                                              01 / 94                                       01 / 95                                       01 / 96 
CHILE                                              Revised 1994                             Prelim 1995                             Forecast 1996

Trade Matrix
                                                                   
  Total Edible Fishery Prods.                     Units: METRIC TONS                             

Report Code: CI9554A
AGR Number: CI5031            Page:    3              

Seafood                                                                         
  
    Total Edible Fishery Prods.                                                  


PRODUCTION                                                                      
                                                                               

GENERAL
                                                                               

Chile is one of the world's top producers and exporters of fish meal (currently second behind Peru).  Although the wild catch is primarily processed as fishmeal and fish oil for industrial purposes, fish and shellfish are also packed as fresh, chilled, canned and frozen products for direct human consumption.  Fish and shellfish products account for the largest share of Chile's non-mineral export sector.  As a result of an apparent overfishing in last few years, the wild catch could begin to decline in the coming years.  As a result, future growth will likely only take place in the farmed fish sector.                                                    

The Chilean fishing industry draws upon four fish types: pelagic (dark-fleshed fish typically found from the ocean surface to a depth of 100 meters), demersal (white-fleshed fish and crustaceans living near the ocean bottom), benthonic (shellfish species attached to the ocean floor) and aquacultural production of a variety of fish, shellfish and algae species.                                   

Pelagic species are captured from Region I to Region VIII at a distance of up to 150 miles offshore.  Demersal species are taken from the continental shelf, a strip of 10 miles in average, from Region IV to Cape Horn in Region XII.  Benthonic species are caught all along Chile's coast.                                                         

The fishing industry, including permanent and temporary industrial and artisanal activities, employs 124,000 workers of whom 44 percent are in artisanal activities, 15 percent in the industrial fishing fleet, 27 percent in processing plants, and 14 percent in aquaculture.  The fishing industry represents 2.6 percent of Chile's total labor force.                                                               

Chile's fisheries landings rose almost 23 percent in 1994 over a year earlier, principally as a result of an increased resource
availability, mainly demersal species and aquaculture species.  The prospects point to lower landings in 1995 and 1996, but with higher returns as more value-added products are produced and exported.

Report Code: CI9554A
AGR Number: CI5031            Page:    4              

Seafood                                                                         
  
Total Edible Fishery Prods.

                                                 
      PRODUCTION FACTORS

During 1994, there were an estimated 578 fishing vessels operating in Chile in the pelagic and demersal fishing industry with a total estimated fishing capacity of 187,847 cubic meters.  The pelagic fleet is now frozen at this size by a new fishing law, and new vessels will be allowed to enter the fleet only as replacements.  This law will be an important factor in maintaining a more stable catch in the future.                                                                               

The demersal fishing industry employs around 30,000 workers, mostly from Region V southward, either on board of vessels or in 441 fish processing plants constructed or refurnished over the last decade.                                                                           

PRODUCTION MIX    

                                                              
Spanish sardines, jack mackerel and anchovies are the main species supporting the pelagic industry.  Frozen products based on pelagic species have little popularity in most markets.  The only exception is swordfish, exports of which have increased more than ninefold since 1968.                                                                               

The demersal industry utilizes several species of hake, sea bass and other lean, white flesh fish.  This subsector has shown significant growth during the last few years.  The benthonic industry relies on landings of crab, mussels, clams, oysters, scallops and sea urchins as well as Chilean abalone.  Shellfish harvesting is carried out exclusively by self-employed fishermen.  Benthonic landings have grown steadily at an average of 9 percent during the last ten years.  The benthonic industry processes most of its landings into frozen and canned products, sharing the demersal industry's processing facilities.

The sector is developing processed fish products and aquacultural output as a means of compensating for the current leveling off of the catch.  In addition to salmon, a variety of farmed species are under extensive and intensive cultivation.  These include trout, turbot, flounder and one species of Australian lobster.  Chile also cultivates shellfish species in outdoor cages, such as mussels, Chilean and Pacific oysters, and scallops.  California abalone and sea urchins are being raised under environmentally controlled conditions, but have not yet been introduced commercially.

Report Code: CI9554A       
AGR Number: CI5031            Page:    5              

Seafood                                                                         
  
    Total Edible Fishery Prods.

                                                 
PRODUCTION MIX

Aquaculture has grown in importance in part as a result of the difficult market for traditional landings.  These factors include a
decline in international prices for swordfish (the only important pelagic fish species for human consumption in Chile) as a result of overfishing and the consequent depletion of both demersal and benthonic resources.  Since 1980, Chile's farmed salmon production has grown from only one metric ton to over 60,000 tons (eviscerated weight).
                                                                               
Chile's aquaculture industry enjoys a competitive advantage as a result of the the excellent water quality of countless fjords and bays located miles from urban or industrial centers.  Other factors encouraging growth include high quality raw materials for fish food, relative inexpensive labor costs for trained workers, a well-established aquaculture infrastructure and service network, and international prices which continue to be attractive.  The aquaculture industry is developing rapidly in some of the most remote parts of Chile, mainly in Region X and Region XI.  The combination of traditional fisheries and aquaculture activities should allow Chile to continue to maintain its ranking among the world's top fishing nations.
                                                                                                                                                               

CONSUMPTION
                                                                               

In Chile there are no statistics kept on total edible fish product consumption.  Figures in the PS&D are principally a residual of
production an exports.  Large variations from one year to the next could result from different sources of data for production and trade and/or the accumulation of stocks of canned products.

According to industry sources, consumer demand for fish products in Chile is virtually stagnant.  Over the last few years, per capita consumption has grown very little.  As a result, Chile's large productive potential and relative limited consumption pushed producers towards foreign markets.  Some types of fish, however, are still very important in the domestic economy; for example, salmon consumption is increasing moderately in the Chilean market.  Although specific statistics are unavailable,
domestic consumption of canned fish is considered to have remained almost stable.
                                                                               
In the past, farmed shellfish species, such as oysters and mussels, were produced almost exclusively for domestic consumption.  As aquaculture facilities expand for export, the domestic market is losing its relative importance.

Report Code: CI9554A       
AGR Number: CI5031            Page:    6              

Seafood                                                                         
  
    Total Edible Fishery Prods.

                                                
     
TRADE

Although Chile's canned fish production capacity exceeds current demand, recently there have been investments in new state-of-the-art production facilities aimed at turning out large volumes of high-quality, low-priced canned fish in order to compete in Asian markets.  Specialized facilities for shellfish canning have been added in order to fulfill both the volume and quality requirements of the export market.

Output of fresh and frozen fish products is increasing, with the largest export value in the whole fishing sector.  Chile's southern
fisheries are leading the way with a combination of trawlers, long-liners and salmon aquaculture facilities all playing a dynamic
role in the current growth in production and exports.  Pacific and Atlantic salmon, as well as salmon-trout, are capturing new markets as output increases.  As demand for fresh salmon has begun to level off in the U.S., additional salmon production has been directed toward the Japanese market where frozen salmon is in high demand.

Chilean producers of edible fish products have increased their presence in most international food fairs in an effort to gain new
markets.  They have also maintained promotional campaigns to increase recognition of Chile as a source of high-quality fish products.

Exports of fresh and frozen fish and shellfish products show the fastest growth in the fisheries sector.  Three groups dominate the market: salmon, hake and sea bass.  Japan is Chile's largest export market for fresh and frozen edible fish, although European and Latin American countries are beginning to increase their share.  Some analysts in the industry foresee increased potential in the short run to expand exports to Asia.  Additionally, as Latin American countries grow and bilateral and regional agreements are in effect, exports to these countries should expand.  Further expansion of exports for edible fish products will be based mainly on expansion of aquaculture production in the coming years.

Report Code: CI9554A       
AGR Number: CI5031            Page:    7              

Seafood                                                                         
  
    Salmon, Whl/Evisceratd

                                                      
                      
Global Economic Data Exchange System

                    
Commodity: Salmon, Whl/Evisceratd (0340100) (METRIC TONS)                      
Beg. Month/Year of Marketing Year: 
                                                                01 / 94                                        01 / 95                                     01 / 96
CHILE                                                Revised 1994                               Prelim 1995                           Forecast 1996

                                                                               
Trade Matrix   

Salmon, Whl/Evisceratd         Units: METRIC TONS                                                             

Report Code: CI9554A       
AGR Number: CI5031            Page:    8              

Seafood
  
    Salmon, Whl/Evisceratd 

PRODUCTION
                                                                               

Although salmon production in Chile reached another record level in CY1994 total output fell short of our earlier estimates.  Industry analysts point to several reasons for the slowdown in the expansion of output, the most important of which was a strong wind storm that capsized and destroyed many cages and pens in Region Ten (Puerto Montt and Chiloe Island), releasing a large number of fish.  A similar situation occurred a year earlier.  Additionally a larger than normal supply of Alaskan salmon to the Japanese market during the second half of CY1994, slowed down the demand in that market, reducing and delaying harvesting operations.  Finally, total volume has declined as a result of the recent increase in the percentage of Chile's value-added salmon exports (i.e., filet without tails and orts are with a greater value added, that is more exports of fillet without
tails and wings reducing the final volume of exports.                                                                               

For 1995 and 1996, total salmon production is expected to grow at a significant, albeit slower rate than in the past.  In 1995 extreme low temperatures in the far south (Punta Arenas) during the month of July and August are expected to reduce output in that area, although the effect on Chile's total salmon output is unclear.                                                                               

Theft is still a problem which neither producers nor government authorities have been able to solve.  Divers approach cages and destroy nets, freeing salmon which are later caught by local fishermen.  As a result of a decrease in alternative fish resources due to the increased catch of the fish meal industry, small fishermen lacking other fisheries resources are turning to the easy catch of salmon in areas near aquacultural operations.  Although salmon fishing in such areas is illegal, enforcement is virtually impossible.                                                                               

Despite the above factors, industry sources believe that Chile's natural comparative advantage and the absence of legal constraints to salmon production will lead to further expansion in output for the foreseeable future.                                           

The Chilean salmon and trout industry is composed of approximately 55 companies with 230 coastal concessions employing over 8,500 workers, most of whom are located in Region Ten.  Chile produces and exports a variety of salmon products, including fresh and chilled, frozen, canned, dried and salted, smoked and dehydrated salmon.  The most important component of the sector is fresh/chilled, and frozen salmon.

Report Code: CI9554A       
AGR Number: CI5031            Page:    9              

Seafood
  
    Salmon, Whl/Evisceratd

Natural conditions in Chile are exceptionally suited to efficient salmon production.  The country's significant comparative advantage over other major producing countries lies principally in its ideal environment for salmon culture, and low costs for land/farming areas, feed and labor.  Excellent water temperatures in the fresh water lakes in the Tenth Region and the ocean south of Puerto Montt have contributed greatly to the success of the industry.  Because water in Chile does not freeze during the winter months, salmon receive more sunlight, grow faster and reach commercial sizes 6 to 12 months earlier than in Norway, which reduces production costs significantly.                                                                               

In addition, the consistently high quality of the final product, cheap supplies of fishmeal (the principal feed utilized) and off-season production are important factors in the impressive development of the sector.  Feed comprises 60 percent of production costs and is a critical element affecting growth rates and the quality of the harvest.  Most of the feed used by the Chilean salmon producers is manufactured domestically.  The Chilean industry utilizes the most advanced production and processing technology available.                                                                               

Foreign investors have made large investments in salmon and trout production during the past decade.  In addition to domestic investors, salmon producers from Norway, the U.S., Canada, Japan, and New Zealand are currently operating in Chile.      

As salmon species are not native to Chile, the country has had to rely exclusively on imported fertilized eggs to create production.   However, genetic selection of the best salmon in Chilean waters has become a common practice, thus making local producers less dependent on imported eggs.                                                                               

CONSUMPTION
                                                                               

There are no official figures for fresh and chilled domestic consumption in Chile.  Figures in the PS&D were estimated as a
residual of production and export data.  Although Chile has still a small domestic market for its farmed salmon production, domestic consumption is increasing gradually.  Evidence of the gaining popularity of salmon is the increasing number of restaurants and fish markets that offer fresh salmon on their menus.  However, because Chile's salmon producers' main target is the export market, there are no promotional campaigns to increase domestic consumption.

Report Code: CI9554A       
AGR Number: CI5031            Page:   10              

Seafood                                                                         
  
    Salmon, Whl/Evisceratd

PRICES

The average export price for fresh, chilled and frozen salmon exports fell from $5.20/ton FOB in CY1993 to $4.88/ton FOB in 1994.  The value of CY1994 salmon exports was $255 million, up from $226 million in CY1993.                                      

TRADE

Over 98 percent of Chile's salmon production is exported.  Japan and the United States are the primary markets, capturing over 90 percent of total exports in 1994.  Over 70 percent of Pacific Salmon (Coho) is frozen and exported to Japan, mostly via ocean freight.  The Japanese prefer Chilean salmon because of the intense color, freshness and consistent quality of the Chilean product.  Atlantic salmon is normally marketed fresh-chilled, and transported via air freight to markets in Europe and the United States.                                                                               

Although Chilean producers consider Japan the most important market for future expansion, a large effort has been undertaken to expand exports to the U.S. during the last few years.  Chile has joined other principal salmon producers in the $1,000,000 generic market promotion campaign in the United States.  Other promotional campaigns will also taken place to develop new market in Korea, Taiwan and other countries in the Far East.  The Chilean Government, through the Government export promotion agency, ProChile and the Exporters Association, will also carry out promotional campaigns in Europe in different food fairs.  Chile will continue promotional efforts in Latin American neighbor countries such as Argentina and Brazil where sales of Chilean salmon have increased at an average annual rate of 80 percent for the last three years.  In all, Chile exported fresh and chilled salmon to over 70 countries during 1994.

Report Code: CI9554A       
AGR Number: CI5031            Page:   11              

Seafood
  
    Salmon, Whl/Evisceratd                                                       

POLICY

Other than the export promotion activities described above, the Chilean Government has virtually no role in salmon production and/or exports.  There are no legal limits on the size of holdings.                                                                               

Chile is now in its fourth year under the fisheries and aquaculture law enacted in September 1991.  Modifications have been proposed to make the law more flexible and to incorporate changes in the industry since the law was enacted.  The 1991 Fisheries Law addressed the most pressing issues regarding aquaculture.  The new law established property rights for investors, which are granted for an indefinite period and are transferable.  The law also attempts to prevent ecological damage resulting from the both introduction of exotic species which could harm native species and diseases from imported eggs or live individual fish or shellfish.  Other bylaws regulate the minimum distance between pens in a given area and establish procedures to manage the compatibility of species raised in an area in order to prevent conflicts among aquaculturalists.                                         

In addition, Chilean Government officials indicate that the implementing regulations for the current Environmental Law (passed in January 1993) will contain provisions aimed at protecting Chilean waters from the environmental impact of aquacultural operations.                                                                               

STOCKS

No stocks of fresh chilled and frozen salmon are kept by producers and/or exporters.

Report Code: CI9554A       
AGR Number: CI5031            Page:   12              

Seafood

   Salmon, Whl/Evisceratd                                                       

TABLE: Chile - Total Salmon Production In Metric Tons                                                   
                                                                               

                                                                               
TABLE: Chile - Fresh and Chilled Salmon Production In Metric Tons                                                   
                                                                               

Report Code: CI9554A       
AGR Number: CI5031            Page:   13              

Seafood

   Salmon, Whl/Evisceratd                                                       

TABLE: Chile - Frozen Salmon Production In Metric Tons