Peruvian fishermen have faced three consecutive years of instability associated with the occurrence of El Niño. Since 2014 the climate cycle has weakened the supply of anchovy, the sector’s prime catch, with negative impacts on exports of fishmeal and fish oils. Despite a weak performance in 2016, the sector’s recovery is expected to gain momentum in the second quarter of 2017 as sea conditions return to normal. Efforts to diversify the export base are also expected to stimulate growth in aquaculture.
Peru’s fisheries sector accounted for 1.1% of GDP in 2016, according to the National Institute of Statistics and Informatics (Instituto Nacional de Estadística e Informática, INEI), while it made up 6% of total exports for the year. With plankton-rich waters, brought from the south by the Humboldt Current, the Peruvian coast is the perfect environment for anchovy, which accounts for 90% of Peru’s fisheries sector value. Thanks to the unparalleled resource, Peru accounted for 8-9% of the global anchovy catch by weight in the early 2000s, with production reaching as high as 8m tonnes in 2005. However, in recent years the rise in the passage of Kelvin waves linked to El Niño, which raises the temperature in Peru’s cold territorial waters, has forced anchovy to migrate away from their normal areas at times.
Low anchovy stock led to the cancellation of the second fishing season of 2014 by the Ministry of Production (Ministerio de la Producción, PRODUCE), which is responsible for issuing the total allowable catch (TAC) for Peru’s two fishing seasons. The decision followed a survey by the Marine Institute of Peru in October 2014, which found that anchovy biomass was down to 1.45m tonnes, from between 10.8m and 12.1m in early 2013. The measure led total catches of anchovy to fall by 45% to 2.3m tonnes that year, the lowest level since a strong El Niño event in 1998.
While anchovy catches experienced a partial recovery in 2015, reaching 3.6m tonnes, the impact of the climatic cycle continued to be felt in 2016. Peruvian fishermen captured only 51% – or 917,247 tonnes – of the 1.8m tonnes of TAC issued by PRODUCE in the first season of 2016 in the north-central region, the main fishing zone. However, signs of recovery were visible late in the year. The second season of 2016 began on November 15 in the north-central region with a TAC of 2m tonnes. According to the National Fisheries Society (Sociedad Nacional de Pesquería, SNP), by the end of December 1.36m tonnes of anchovy had been captured, the equivalent of 68% of the TAC.
Fishmeal & Oil
Between 95% and 98% of Peru’s anchovy catch is destined for the production of fishmeal and fish oils for export. With a 29% share of global exports, Peru remains the leading exporter of fishmeal, the majority of which (75%) makes its way to China, where it is used for aquaculture feed. The EU, in turn, remains the country’s largest export market for fish oils. The cancellation of the second season of 2014 led export volumes of fishmeal and fish oil to fall to a six-year low in 2015, contracting by 14% and 23.9%, respectively, to a total of $1.43bn, significantly below a peak of nearly $2.3bn in 2012. The downward trend continued into 2016, with fishmeal exports decreasing by a further 13.7%, according to INEI.
Lower supply in global markets pushed prices to historic highs in late 2014, with one tonne of fishmeal reaching $2400, but by August 2015 it had fallen to $1650. Though prices began to contract again in late 2016, they are expected to fluctuate between $1200 and $1600 per tonne in 2017, according to Rabobank.
To stimulate growth in the sector and reduce dependence on the delicate resource, PRODUCE is working to increase fishing for human consumption, with a targeted rise in the commercialisation of key species, including tuna and giant squid. In December 2016 the ministry issued a decree to modify fishing regulations for tuna, aimed at promoting sustainable development of the industry. Tuna catches are expected to rise by 80% in 2017 to 36,000 tonnes, up from 20,000 tonnes in 2016.
Given its strong smell and pungent flavour, efforts to increase human consumption of anchovy have so far yielded limited results. According to the SNP, only 1-2% of Peru’s anchovy catch is currently destined for human consumption. Even so, in January 2017 PRODUCE announced plans to launch a pilot project aimed at creating a fleet dedicated to the activity.
Meanwhile, the private sector is working to tap into the human consumption segment by moving the resource up the value chain. “Achieving new production lines and new ways of exploiting the resource will require significant investment in research and development, but that is the path ahead to diversify uses and increase human consumption,” Jorge Risi Mussio, general manager at the SNP, told OBG. Since 2015 the SNP has been working on an innovation project, co-financed by the National Innovation Programme for Competitiveness and Productivity, aimed at finding ways to use anchovy as a food fortifier. “We are looking to integrate productive platforms by using the nutrients in the anchovy to strengthen mass consumption products, such as milk,” Risi said.
A robust regulatory framework remains key to ensuring the sector’s long-term sustainability. Since 2009 Peru has made significant advances to strengthen its regulatory framework and curb overfishing. Nevertheless, illegal fishing and informality continue to pose a challenge for Peru. To protect the anchovy biomass, authorities preventively closed 96 fishing zones, totalling more than 293,400 sq km, during the second season of 2016.
Commercial vessels have long been restricted from fishing within five miles of the coast, with this area – which is home to the predominant share of juvenile anchovy – reserved for artisanal fishermen. In a bid to protect reproduction areas and encourage anchovy fishing for human consumption domestically, in 2013 the previous government extended this limit to 10 miles from shore. The measure was, however, once again reversed to five miles under President Pedro Pablo Kuczynski’s government after it became clear the rule had little impact on domestic consumption, while it also coincided with warmer water temperatures continuing to hurt the local fishmeal industry.
Peru’s aquaculture industry seems poised for significant growth. The activity accounts for just 2% of total fish exports at present, but aquaculture production is expanding rapidly. Annual production increased more than four-fold since 2006, from 28,400 tonnes to a peak of 125,700 tonnes in 2013, according to PRODUCE. Aquaculture is now expected to become an engine of growth for the country’s fisheries, with the potential to represent up to 15% of the sector’s GDP in the next five years.
In March 2016 the government approved the General Law on Aquaculture, which was aimed at stimulating and regulating the sustainable development of the industry, and established an aquaculture executive board, composed of representatives from the public and private sectors, to identify the measures needed to build on the progress made.
The country has also launched the National Programme for Fishery and Aquaculture Innovation, a $120.9m initiative aimed at improving the sustainability of industrial and artisanal fishing, while increasing the productivity and diversity of Peru’s aquaculture. The scheme received a boost in January 2017 with the approval of a $40m loan by the World Bank to further innovation. These measures are expected to boost aquaculture exports by 20% over the next five years to over 70,000 tonnes, or $690m. The sector accounted for more than 102,000 jobs directly in 2015, a figure that is projected to rise by 30% by 2021.
The aquaculture industry has not been immune to the instability in the sector. Total production fell to 90,976 tonnes in 2015, while exports slipped to $233.3m, from $288.7m the previous year. Moreover, in the first seven months of 2016 exports reached $130.4m. Shrimp, scallops and trout are the most exported species, going primarily to the US and the EU, though efforts are ongoing to gain access to the Chinese and Brazilian markets for shrimp exports in the short term, and to Russia in the medium term. The domestic market is also growing. Local aquaculture sales have nearly doubled since 2011, increasing from 20,265 tonnes to 39,215 tonnes in 2015, with trout accounting for the largest share of that total.
As sea conditions return to normal, 2017 is expected to be a recovery year. “We expect capture rates to return to their regular levels in 2017, with anchovy catches surpassing 6m tonnes,” Risi told OBG. “As the industry recovers we could also see an increase in reinvestment rates.” This, coupled with the decision to include the sector under the Works for Taxes scheme – a programme which allows companies to pay a portion of their tax bill by undertaking public works – is expected to stimulate sector investment, creating further bases for long-term growth.