Peruvian Anchovy Case

     CASE NUMBER:        321
     CASE MNEMONIC:      ANCHOVY
     CASE NAME:          Anchovy Depletion and Trade

A. IDENTIFICATION

1.    The Issue

     Off the cost of Peru lies one of the most productive fishing
areas in existence. The coastal upwelling in this region, is the
result of deep oceanic currents colliding with sharp costal shelves
forcing  nutrient rich cool water to the surface. The phytoplankton
which thrives there is fed upon by a variety of creatures including
the Anchovy. The huge biomass feeds many creatures including,
predatory fish, guano birds, and mammals.  Due to their extreme
abundance and proximity to Peru the harvesting, Processing, and
exportation of Anchovies are major industries in Peru. These
currents occasionally change direction in what is known as an El
Nino Southern Oscillation (ENSO). When these irregular current
changes take place the surface temperature of the water rises and
nutrient rich environment which promotes an abundance of sea life
disappears. Coping with these irregular cycles and the problem of
over harvesting threaten the Peruvian anchovy industry, as well as
the related guano industry. 

2.   Description
     
     Costal upwellings exist where sub-surface global oceanic
currents come in contact with a land mass with little or no
continental shelf. The cooler, deeper waters are forced up bringing
with them diatoms that are nutrient rich compounds which settles to
the bottom when organic material in the ocean dies. Diatoms are
food for phytoplankton, therefore microorganisms like phytoplankton
are able to thrive in areas of high diatom concentration. Small
fish such as the anchovy and the sardine, which filter feed on the
phytoplankton, exist in abundance in these areas(1). Further still
up the food chain larger predatory fish as well as guano producing
birds feed on the anchovy. The abundance of food in this region has
led to its having a vast bio-diversity. This bio-system is so
enormous and the waters are so full of fish that coastal upwellings
account for almost one half of the worlds total commercial fish
catch. Upwelling zones are 66,000 times more productive than the
ocean per unit area in terms of  fish yield(2). For this reason 
the resources in this ecosystem have historically been viewed as
infinitely renewable.

     The 300 by 30 mile area adjacent to the Peruvian coast is the
most biologically productive example of a costal upwelling
ecosystem on Earth. The Peruvian current or Humboldt is a rotating
current formed by a combination of the prevailing winds of the
south Pacific and the rotation of the Earth. This current system
extends from the middle of the southern Pacific to the Peruvian and
north Chilean coastlines. Where this current collides with  the
steep continental shelf of pacific South America the cool waters of
the Peru current are pushed to the surface bringing with it
nutrients upon which phytoplankton feed. Carbon levels in this
upwelling are tens of times higher than those of the next most
productive upwelling region, the California current(3).

       The California current is another example of a costal
upwelling. There the Pacific currents in the northern hemisphere
are forced up by the California, British Columbian, and Mexican
coasts resulting in an abundance of anchovies and sardines. The
northwest and southwest African coasts driven by the Canary and
Benguela currents are also examples of productive coastal upwelling
zones. However none of these upwellings compare with the Peruvian
system in terms of bio-mass and diversity.

     These costal upwellings can be translated into profits by
intelligent entrepreneurs.  Anchovies and like fish can be
processed into fishmeal. Fishmeal is an important ingredient in
livestock feed and is valued for its high nutrient content.
Anchovies also yield fish oil which is another exportable
commodity. Anchovies are also the staple food of the guano
producing birds of the region.  So it is not surprising that the
anchovy has become an important natural resource for Peru. (SEE
GUANO CASE)

     Hundreds of years before Peruvians began harvesting and
processing anchovies into tradeable commodities, the people of that
region took advantage of the upwelling bio-system by mining guano
and using it as fertilizer. Guano is the droppings of primarily two
species of birds,  the guanay and the piquero, which feed on the
abundant anchovy. These bird droppings are extremely rich in
nitrogen which makes guano a good fertilizer for the arid soil of
continental Peru. Guano was used for this purpose by the indigenous
people of Peru long before Spanish explorers set foot on South
American soil. Once Peru had become colonized, international trade
became important. By 1948 the Peruvian guano industry was exporting
guano for use in high quality fertilizer. In 1875 more than 20
million tons of guano had been exported from Peru to the US and
Europe(4). Due to the lack of knowledge regarding conservation in
conjunction with the profitability in exporting guano, the resource
was employed at above sustainable levels. Currently the Peruvian
guano industry exists on a much smaller scale operating at
sustainable levels.

       After the Second World War the enormous natural resource of
Anchovies off the coast of Peru  began to be exploited at a
profitable scale. Fisheries were established along the Peruvian
coast to process this valuable resource for exporting.  The fishing
fleet of 1700 vessels removed 10.5 million metric tons of fish from
the waters in 1968, an amount as large as the entire US take of all
species for that year.  Meanwhile, 150 fishmeal factories employed
25,000 people in 1968. Peru quickly became the world's largest
producer of fishmeal with the majority of its exports going to the
United States(5). 

     The birth of the Peruvian anchovy industry coincided with the
death of the California sardine industry. The upwelling off the
coast of California was over fished and as a result no longer
produced sardines in quantities large enough to be profitable. It
was at this time that the Peruvian anchovy industry was beginning
to grow. Therefore much of the equipment used to over fish
California was sold to Peru(6).    

     As more efficient means of harvesting the anchovy became
available, the annual, take grew. In 1952 9.2 thousand metric tons
of anchovy were caught and processed in Peru, by 1961 that number
had reached 10.5 million(7).  Newer more efficient 350 ton capacity
boats with fish seeking radar were employed, and much of the manual
labor was replaced with hydraulic rigging equipment. As fishing for
anchovies became more proficient the risk of over fishing became
greater. 

     The Peruvian government has taken measures to ensure that the
anchovy is fished at sustainable levels. Studies indicate that the
maximum sustainable harvest is 9.5 million metric tons per year
which is only one fifth of the industries capacity. Rather than
limiting  the allowable catch for each vessel the Peruvian
government opted to regulate other aspects of the industry to keep
the annual catch at a sustainable level. The work week has been
limited to just five days while the season has been limited to a
fraction of the year in order to keep harvests down. While these
restrictions have controlled temporarily the loss of the natural
resources, new technologies have inched up the take year to year
leading to even more restrictions.  Gerald Paulik (1971) points out
that this type of regulation, technological advancement, and
counter regulation leads to waste of the economic potential of the
resource(8).

     The over capacity found in the Peruvian fishing fleet is
mirrored by the overcapacity in the fish reduction factories. It is
in these factories where the raw material of anchovies is processed
into the tradable commodities of fishmeal and fish oil. These
plants have the capacity to process 56 million metric tons of fish
per year, while the government's estimates of the maximum
sustainable yield is 9.5 million metric tons(9).

      Not only is this system inefficient but it also leads to the
temptation to utilize the excess capacity. Older less efficient
plants could be shut down allowing newer plants to process the fish
at a lower cost with a higher yield of final products per input raw
material(10).  Because of the immense overcapacity, regulators must
face arguments from the fish industry interest to allow them to
increase their take and subsequent production. To allow the take to
exceed the maximum sustainable yield would result in the quick
demise of the Peruvian anchovy industry. Therefore regulators are
put in the position of protecting the industry from itself.       
Care must be taken by those in charge as well as the industry
itself to ensure that future generations of anchovies will be
sustained. A consensus on the maximum sustainable level of harvest
must be made and its results strictly adhered to. Failure to do so
would lead the industry down the path made by the California
sardine industry, which over fished its upwelling until the
industry was destroyed. Peru is quite reliant upon the fishmeal
industry. Unlike the United States, Peru does not have an enormous
GDP capable of absorbing the loss of such a large and profitable
industry.

     The other industry affected by over fishing is the guano
industry. As anchovy stocks have decreased over the years so have
the amount of guano producing birds. The result is a decrease in
the amount of guano available to be made into fertilizer. Because
the value of guano in international trade is less than that of the
anchovies eaten to produce it, it is of no consequence to the
Peruvian economy should these birds disappear. However, without
guano the soil on the dessert plains of continental Peru is not
farmable, therefore if the guano birds disappear the Peruvian
economy would have to become more reliant on imports to feed the
countries people. None of this mentions the unknown biological
effects of eliminating a species from a bio-system.  

     On occasion the Peruvian current changes directions in the
months surrounding December. These changes are known as the El Nino
Southern Oscillation or ENSO and occur in irregular intervals.
Scientists do not fully understand the reasons or the impact of
ENSOs, but when they occur there is a great amount of disruption of
the bio-system.

       During an El Nino season the surface temperature of the
ocean will rise by as much as 3 degrees Celsius while the upwelling
will stop. As a result the diatoms and phytoplankton which are
normally abundant all but disappear. Further down the food chain
the anchovies, which prefer cooler water temperatures, migrate to
lower depths were cooler water and phytoplankton are available(11).
This makes them inaccessible to the  nets of the Peruvian fleet as
well as to guano producing  birds. Animals which feed on the
anchovy either migrate to where more food is available or die off. 

     The most recent ENSO occurred in 1982-83. This was a
particularly strong event whose first evidence was an increase in
surface water temperatures in the upwelling region. This was
followed by a decrease in the amount of phytoplankton and a
reduction in the spawning of anchovies. Anchovies were only
available in small amounts in patches of cooler water. The marine
birds on Christmas islands suffered huge losses. Only 150,000 of an
estimated 14 million birds returned to their homes the following
year. In addition the sea mammals which inhabit this region
migrated to cooler southern waters(12). 

     During this event other species of fish which prefer the
warmer waters moved into the Peruvian coast. Tuna, marlin, and
swordfish, all foreigners to the Peruvian coast, were taken in
large numbers by fishing boats in Peruvian waters. In addition
large amounts of scallops and shellfish were available under the El
Nino conditions which are less common under normal conditions(13). 

     The most devastating ENSO for the anchovy industry occurred in
1972. During the summer months the water temperatures rose and the
upwelling stopped. The limited availability of  anchovies had a
severe impact on the fishing industry. While the amount of
anchovies in the region was naturally reduced by the phenomenon the
fishing fleet still attempted to take its maximum sustainable catch
of 9.6 million metric tons, but were only able to take half of that
amount. This amount was enough to reduce the already thinned
anchovy stock and have a severe and permanent impact on the amount
of animals in the bio-system. 

     At its peak in 1971 the Peruvian fleet caught 10.2 million
metric tons of anchovy, the next year during the 1972 ENSO period
the take was only 4.4 million. During the following four years the
catch never amounted to more than four million metric tons(14). It
is clear that there was a catastrophic  impact on the anchovy
stocks by the El Nino of that year.  During this period the
industry made up some of the losses of anchovy by substituting
sardines. It is also clear that over fishing during the period of
an ENSO compounded the problem. The industry did not begin to 
recover until the 1980s when the next ENSO occurred. 

     El Nino events are two pronged assault on the Peruvian fishing
industry. Not only is there a reduction in the amount of available
fish, if the industry is not careful over fishing during an El Nino
season will result in a decline in  future stocks. The industry and
the Fishing Ministry must take ENSOs into account when making
fishing  policies. When these irregular events occur the government
must step in to temporarily  reduce the allowable catch until stock
recover enough to resume regular fishing.

3.        Related Cases

     SALMON case
     LUMMI case
     SHRIMP case
     GILLNET case
     SHARK case
     GUANO case
     BERING case
     

Key Words

(1): Trade Product            = Fish
(2): Bio-Geography            = Ocean
(3): Environmental Problem    = Species Loss Sea [SPLS]

4.        Draft Author: Kenneth Clark (May 1996)

B.   Legal Clusters

5.        Discourse and Status: Agreement and Complete

     Peruvian law has been written to maintain the annual take at
maximum sustainable levels in order to ensure the continued
existence of the species. These "Responsible Fishing Practices"
laws are in agreement with the FAOs recommendations for sustainable
growth(15).

6.        Forum and Scope: Peru and Unilateral

7.        Decision Breadth: 1

     Peruvian fishing law pertains only to Peru, however the impact
of changes in the anchovy population off the Pacific South American
coast effect northern Chile as well. 

8.        Legal Standing: Law

C.   Geographic Clusters

9.        Geographic Locations

     a. Geographic Domain     : South America [SAMER]
     b. Geographic Site       : [WSAMER]        
     c. Geographic Impact     : Peru

10.       Sub National Factors:   No

11.       Type of Habitat: Ocean


D.   Trade Clusters

12.       Type of Measure: Regulatory Standard

13.       Direct  vs. Indirect Impacts: Indirect

     Peruvian law limiting The over fishing of anchovies has
existed since 1964 when the season began closing for two months
during the winter, while limiting the catching of young fish. After
the impact of the ENSO of 1972 stronger restrictive measures were
implemented lengthening season closings and limiting fleet
size(16). 

14.       Relation of Measure to Environment

     a. Directly related :Yes Anchovy
     b. Indirectly Related    : No
     c. Not Related      : No
     d. Process Related  : Yes  Species Loss Sea

15.       Trade Product Identification: Fish

16.       Economic Data 

     In 1974 100,000 jobs existed in the Peruvian anchovy
industry(17). 

17.       Degree of Competitive Impact: Low

     Although domestic law limits the take of Peruvian Anchovies to
sustainable levels Peru is still the worlds leading exporter of
fishmeal. 

18.       Industry Sector:FOOD

19        Exporter and Importer: PERU and USA

     
E.   Environment Clusters

20.       Environmental Problem Type:   Species Loss Sea [SPLS]

21.       Species Information

     Name      : Anchovy
     Type      : NA
     Diversity : Sustainable yield of 9.5 Million Metric Tons/ year 
    IUCN Status: Vulnerable
     
     The anchovy's habitat is around coastal upwelling regions
where microscopic phytoplankton are abundant. Species loss would
result in the loss of the guano producing sea birds such as the
guanay and the piquero. In addition Larger predatory fish and
mammals would either disappear or migrate to other areas. 

22.       Impact and Effect: High and Product

23.       Urgency and Lifetime: Medium and 4-6 years

     Provided the industry does not exceed the maximum sustainable
yield and is careful not to overfish during ENSOs the species
should not disappear. Although stocks were severely depleted during
the El Nino of 1972 there has been a recovery.

24.       Substitutes:    Like

     Other fish such as the sardine can be used to make fishmeal.
However, the California current which posses a similar habitat was
over fished to the demise of the industry. Other types of oil such
as linseed can replace fish oil. 

F.   Other Factors

25.       Culture: NO

26.       Trans-Border: NO

27.       Human Rights: NO

28.       Relevant Literature

(See below.)

References

1. Romulo Jordan Biology of the Anchoveta 1: Summary of the Present
Knowledge Preceding   from the Workshop on the phenomenon Known as
El Nino. UNESCO: Guayaquil, Ecuador     1974.

2. J. Dana Thompson Climate Upwelling and Biological Productivity
Resource Managment and  Environmental Uncertainty. Wiely: NY, NY
1981.

3. IBID

4.Gerald J. Paulik Anchovies Birds and Fishermen in The Peru
Current Environment: Resources    Pollution and Society. W. Murdoch
Ed. Sinaur: Stamford Conn. 1971.

5.IBID

6. IBID

7. J. Dana Thompson Climate Upwelling and Biological Productivity
Resource Managment and  Environmental Uncertainty. Wiely: NY, NY
1981.

8. Romulo Jordan Biology of the Anchoveta 1: Summary of the Present
Knowledge Preceding   from the Workshop on the phenomenon Known as
El Nino. UNESCO: Guayaquil, Ecuador     1974.

9.IBID

10. Gerald J. Paulik Anchovies Birds and Fishermen in The Peru
Current Environment: Resources  Pollution and Society. W. Murdoch
Ed. Sinaur: Stamford Conn. 1971.

11. Haydee Santander The Peru Current System 2 : Biological Aspects
Preceding from the    Workshop on the Phenomenon Known as El Nino.
UNESCO: Guayaquil, Ecuador          1974.

12. Caesar N. Cavides El Nino 1982-83 The Geographical Review, vol.
74, No. 3 July 1984.

13. Wolf E. Arntz El Nino and Peru: Positive Aspects Oceanus, vol.
27, No. 2 Summer 1984.

14. FAO Anuarios Estadisticos Pesqueros 1971-1976 Ministero de
Pesqueria: Peru 

15. Enrique Ferrando Fishing Earth Space Research Group.
WWW.CISEO.UCSB.EDU/GEOS

16. Romulo Jordan Biology of the Anchoveta 1: Summary of the
Present Knowledge Preceding  from the Workshop on the phenomenon
Known as El Nino. UNESCO: Guayaquil, Ecuador     1974.

17. IBID