2003 CLAS Summer Research Report Elizabeth Havice Environmental Science, Policy and Management "Fishing, Free Trade and the Chilean State"

Introduction:

Upon initial contemplation, Chile’s fishing industry appears to be a vast success. As the world’s largest exporter of farmed fish, the rapidly expanding aquaculture industry generates upwards of a billion dollars in export revenue each year, as well as the promise of economic development for the entire nation. My research in Chile during the summer of 2003 was centered around two primary objectives. First, I aimed to gain an understanding of the economic policies that have enabled rapid growth of the fishing industry. Furthermore, I examined not only the economic impacts of such policies, but also the distinct characteristics of growth as they have played out in those communities participating in and affected by the fishing industry. Second, in accordance with Chile’s neoliberal free trading scheme, in the past months, Chile has pushed forth a series of bi-lateral trade agreements designed to increase market access and further enhance economic growth. My research largely focused on identifying how Chile’s commitment to bi-lateral trade agreements will further impact the growth of the fishing industry and development in general, thus exacerbating both the positive and negative impacts of the neoliberal economic model.

Artisanal fishing communities in Chiloe.

Historical Perspective:

In order to understand the functioning of Chile’s economy, it is necessary to first briefly visit the historical context under which the economic framework that underlies today’s economic policy was formed. In the early 1970’s, the democratically elected socialist government of President Salvador Allende was overthrown by a United States backed military coup. The successful coup signaled the beginning of 17 years of brutal military rule under General Agosto Pinochet and the formation of new, and highly innovative economic framework that focused on free markets, privatization of government holdings and placed a strong emphasis on the export of the country’s rich natural resources as a central source of economic development. The success of the framework served to act as a model for the expansion of such policies, later deemed “neoliberalism”, to developing nations across the globe. Although military rule ended in the early 1990’s, its legacy continues to be reflected in modern Chile, a nation that is today governed by the same set of guiding economic principles, adheres to the constitution created under military rule and continues to push forward the mantras of free trade, privatization and exportation.

In the current era, Pinochet’s economic policies have lead to the birth of a burgeoning use of Chile’s coastal resources eliciting new and complex interactions among Chile’s three main fisheries communities: the industrial capture industry, which has historically offered fish products to the international community and today acts as a main provider of fish meal and fish oils; the aquaculture industry, that is primarily focused on the production of Atlantic salmon almost entirely for the international market; and the small scale traditional fishers known as artesanals that have historically harvested fish and shellfish for subsistence but are today linked to both local and international markets.

Fish market in Castro, Chiloe.

In order to achieve my stated research goals, I began a series of investigations focused on understanding the role of each of these industries in forming and shaping Chile’s socio-economic conditions, particularly in the capital of the country’s tenth region, Puerto Montt. Through a series of interviews with government officials, academics, private sector representatives, and workers and fishers, union and non union alike, I attempted to gain an understanding of the most pressing issues placed forth by the rapid growth of the aquaculture industry and the ever increasing demand for Chile’s aquatic resources. Furthermore, although overshadowed by the glowing economic success of the aquaculture industry, an equally important aspect of understanding the socio-economic characteristics of the fishing sector is determining the impact that each of the resource extraction industries has on the others. Who is it in the tenth region that is most impacted by economic growth of this fashion, and how? Each of these two parts can be necessarily linked by the common thread of government intervention and regulation (or lack thereof) that guides the shape and outcomes of industry growth. As we will see, understanding the role of the government policy is absolutely essential for understanding how the industry operates.

Findings:

On the most basic level, the impacts of the rapid growth in presence of the fishing industry can be largely grouped into two main categories: environmental and social. The environmental impacts of large scale capture industry as well as the aquaculture industry are indeed undeniable. Large scale over exploitation in the capture industry has lead to the collapse of nearly all of the target fish species and as a result a strict system of regulations has been implemented to control capture rates and access areas for both the industrial fleet and artisanals alike. Such depletion has not only important ecosystem implications, but also, development implications as strict regulations have limited catch rates and thus opportunities for individual and community work opportunities.

The aquaculture industry is also at the center of the debate around the environmental expenses of natural resource exploitation. Highly dependant upon antibiotics and anti-fungicides that keep high concentrations of salmon from infecting each other with diseases inside of their open water pens, the industry seeps an extremely high amount of foreign and toxic substances into Chile’s fjords. High concentrations of salmon excretion and the remnants of fish feed that settle onto the ocean floor beneath the pens, as well as ‘escapes’ of the Atlantic Salmon, a fish foreign to pacific waters, have been charged with negatively impacting environmental health and vastly changing ecosystem composition. While the government has developed strict regulations to maintain the health of the oceans, such regulations are rarely enforced either as a result of inadequate capacity or, as some will argue, as a reflection of the government’s priority for economic growth above all else. In either case, the result has been that the aquaculture industry has the freedom to continue to expand without consideration for environmental damages. Furthermore, such implications impact the viability of the industrial and artisanal capture industries whose territorial access and capture quotas have been greatly diminished.

Increased international demand for Chile aquatic resources has also lead to undeniable social impacts, both positive and negative. While the need for fish processing plants has created thousands of jobs in the region, it has also raised concerns about worker rights, access to unions, unfair wages, and long working hours without compensation. While rapid economic growth has created opportunities for investment, increased purchasing power and access to the international community, it has simultaneously quadrupled the cost of living and nearly double the population of Puerto Montt, placing pressure on social services, creating an ample and highly flexible workforce and a clear distinction between those with the resources to invest in new business opportunities and those without. While market access has opened the opportunities for profit among artisanal fishers who previously fished only for subsistence, it has at once created a corrupt and highly divided community that has become so destabilized as to excluded itself from the benefits of participation in the global economy. As such, economic disparity and the division between those with and without becomes increasing clear in Chile’s richest fishing region.

Fishermen trolling in Chiloe.

The Role of Free Trade

The momentum of the industry has been bolstered by Chile’s comprehensive commitment to free and open markets, a movement that has been further complemented by the Chilean government’s recent commitment to a series of Free Trade Agreements, most notably, with South Korea, the European Union and the United States. Since export taxes on fish products were already below 1% prior to the formation of such agreements, the direct financial impact on the fishing industry itself is not of imperative economic significance, however, the ideological impact of bi-lateral agreements cannot be underestimated in assessing the relationship between free trade and the expansion of the fishing industry.
First and foremost, the passage of free trade agreements, especially with the United States, has been hailed as the cornerstone of President Lago’s term in office. International attention and demand for Chilean products has lead to a national sense of pride and accomplishment and a sincere desire for national participation in the global trading system.

While the economic impact of the agreement will not be directly felt by the fishing industry in the way of taxes and tariffs, it will be felt throughout Chile and eventually will come full circle to be reflected in the patterns of economic and social development. Decreased revenues are forcing the state to slash social programs and decrease monitoring efforts in the areas of labor and environmental regulations, while the burden of compensating for the income deficit is being passed on to the public in the way of consumer taxes. Furthermore, free trade agreements force Chile to erase protective measures such as a required minimum deposit for foreign investors and price controls on central agricultural crops, shifting regulatory responsibility away from the government and into the hands of the potentially fickle market. Such changes, while encouraging foreign direct investment that will continue to grow the aquaculture industry, pose a significant threat for not only the environment, but also, unrepresented individuals, such as workers and artisanal fishers, that lack the political and economic presence to safeguard themselves from the volatile nature of the market.

Concluding Remarks

As with any research project, my experience in Chile lead me to more questions than answers, and as such, I cannot help but conclude this brief report with a few central themes and overarching impressions that allow for this research project to be more broadly applied to international studies of development as guided by neoliberal policies.

One of my most striking findings was of the comprehensive market dependence created by strict adherence to neoliberal ideology. Not only does the ideology mandate private enterprise to be regulated by the market, but it forces all players to utilize market forces to achieve their goals. As such, industry supporters and dissidents alike work from within the market to achieve their goals, and the result reconstructs the role of academics, activists and government officials. For example, with respect to Chile’s fishing industry, academics are no longer collecting information on the environmental impacts of aquaculture, but rather the variance of impacts in an array of different types of production. In other words, public institution research is focused on looking to the technologies and methods with the least impact rather than actually quantifying and assessing the impact of environmental changes as a whole. As the market has developed, academia has had to reshape its role to create research efforts that fit within the permanence of the export industry. The result is that strictly ecological research has been compromised which further disenfranchises civil society from knowledge about the impacts of the fishery industry and reduces the ecological accountability of the industry. This change has been facilitated in part by an increasing dependence of universities on private funding that dictate academic research projects.

Non-governmental organizations (NGOs) working for labor rights and increased environmental standards are another group that has been forced to utilize the market to achieve its goals. With little governmental response to their outcry, NGOs are increasingly turning to the regulatory powers of the market in hopes that public awareness and outreach campaigns can change consumer buying patterns enough to force the market into shifting towards more environmental and labor friendly practices. As such, outreach and advocacy groups are increasingly as reliant on the market as the industry itself.

Salmon processing plant in Puerto Montt.

Closely related to the topic of free market ideology is the subsequent role of the state as a regulatory body over the fishing industry. Free market ideology has meant that states have continually decreased their national presence by privatizing everything from health care, to the public transportation system to industrial ventures. Despite the seemingly hands off, free market approach, the government is a highly present and highly bureaucratic system in all regions of Chile, one of the freest economies in the world. As such, while the government appears to be a passive and non-regulatory body, it is actually highly present in facilitating the expansion of the neoliberal agenda by, in the case of the fishery for example, regulating or deregulating access to natural resources, creating government branches that assist in the expansion of related exports and contracting private organizations to develop new technologies and projects. The significance of this role in understanding power structures is that, in this instance, the state actually functions as a part of the private sector by facilitating, above all other things, the growth and expansion of the private industry.

Finally, I cannot fail to mention one final paradox that Chile offers in the present ideology of development. While the international community continues to stress the importance of democracy in creating a just and equitable form of social development for all, it simultaneously points to Chile as an example of an undeniably successful development regime. The paradox is that, as mentioned above, Chile’s economic and social policies were developed under the strict power of military rule, and in fact, the wide scale success of liberal economic policies may in fact be attributed to their formation in the absence of democracy. Failure to consult the public allowed the military government to comprehensively and thoroughly implement a set of revolutionary reforms. The paradox brings forth the inevitable question of how civil society factors into economic policy making and furthermore, how necessary democracy is in the process of economic and social development. How would Chile be a different place today if civil society was consulted about the types of economic policies that they wanted implemented? Could Chile still house a thriving economy and simultaneously enjoy the benefits of enforced environmental legislation and labor laws? Or would it have already collapsed like its democratic Argentine neighbors?

Such questions propel me into the future of my studies at UC Berkeley as I delve more deeply into the relations among trade, international and national governance systems and development, and most importantly where there exists space for humans and the environment to be adequately represented. This study has been an excellent starting point for investigating the array of factors that must be considered when determining the course of resource exportation based developed. I would like to extend my most sincere thanks the Center for Latin American Studies for making this research possible.