Chile’s salmon industry could be left behind without a long-term vision, sector observers say

Chile’s USD 5.2 billion (EUR 5.1 billion) a year salmon industry is the second largest in the world – representing 27 percent of world production – but it risks falling by the wayside if it continues without a medium- to long-term strategy, according to sector observers.

“Salmon farming is a relatively young productive sector in Chile, which has developed in the last 40 years and has been one of the main engines of progress and opportunities in [Chile’s southern] regions of Los Lagos, Aysén and Magallanes,” Chilean Salmon Council Executive Director Joanna Davidovich said during a webinar during the opening of the event “The Future of Salmon Farming in Chile.” She said the sector was responsible for developing local talent, generating quality jobs, and increasing knowledge, technology and innovation – all contributing to a sizeable productive chain that includes enterprises and suppliers of different goods and services. Overall, the economic impact results in improved standards of living for inhabitants of those areas where salmon farming takes place.

However, the main competing salmon-farming countries have proposed strategic plans to multiply their production in the medium term.

“If Chile's production level remains flat, by 2050, our share of the world market could fall to less than a third of its current share,” Davidovich warned. “Chile must not lose competitiveness and be left behind. We must remain a relevant global player… We must boost long-term economic growth, which allows us to progress. As a country, we must be able to look ahead and have a long-term strategy, and together define a roadmap for the productive activity and the virtuous circle it generates.”

The Salmon Council sponsored a sector study, “Externalities and regulation of the salmon industry in Chile and the rest of the world,” to define the main areas on which to focus. During the future of salmon farming event, Pontificia Universidad Católica de Chile economics professor and researcher Raimundo Soto – one of the authors of the study – presented some of the highlights.

Soto highlighted the salmon sector’s contribution to the country: 978,273 metric tons (MT) of salmon produced in 2021, with income from exports making salmon the country’s second highest export – surpassed only by copper. The salmon industry has one of the highest returns in Chile, with each job representing USD 172,700 (EUR 169,395) of exports – still behind copper which results in returns of USD 202,700 (EUR 198,817) – but way ahead of the third-place fruit sector at USD 62,900 (EUR 61,695). Further, in terms of efficiency, 56 kilograms of salmon is produced with 100 kilograms of feed, leading the protein sector, followed by chicken at 39 kilograms, pork at 19 kilograms and beef at 7 kilograms. The industry generates nearly 30,000 direct jobs, and an additional 40,000 indirect jobs.

Due to the food quality, limits to expansion of industrial fishing, efficiency in protein conversion, and changing consumer habits, worldwide production of salmon is expected to expand to 4 million MT in 2030 from 2.5 million MT in 2020. Norway plans to double exports by 2030, consolidating its leadership in 2020 of 1.5 million MT; Scotland at 200,000 MT expects to expand 50 percent by 2030, while Canada at 150,000 MT plans to grow moderately or not at all. Chile, with 1.1 million MT produced in 2020, “has no development plan, and this is a weakness when it comes to improving regulations,” the academic said.

He recognized that the sector had negative, mostly environmental externalities; and while it is desirable to intervene if the cost of intervention is lower than the benefit of reducing externalities, it is difficult to determine the type and amount of intervention that is optimal – “there is usually a trade-off between the optimal solution and the feasible solution,” Soto said.

Negative environmental impacts can include the generation of greenhouse gases, contamination and deterioration of the sea bed (eutrophication), affecting other species and the aquatic ecosystem, and externalities in the use of antibiotics. Salmon is one of the most efficient forms of animal protein production when it comes to emissions, with one of the lowest ratios between kilograms of carbon dioxide equivalent per 100 grams of protein produced. It is also efficient compared to other proteins considering the amount of total space needed to produce 100 grams of protein.

Despite the advantages, a drawback in Chilean salmon production is the use of antibiotics. While use has been falling overall, it is unstable: for every kilogram of salmon farmed, some 641 mg of antibiotics is used, and this can be considered high when compared to production in Norway and Scotland, Soto noted.

“There is insufficient empirical evidence on the positive and negative impacts of the industry in order to design or improve regulation. There is a pressing need and more exhaustive studies are needed when it comes to eutrophication and use of antibiotics,” he said.

The study had two main goals: to analyze how the regulations of other leading salmon-producing countries have driven environmentally sustainable industry development, and to make regulatory recommendations for Chile. Considering the international experience, the study points out that the current regulation in Chile needs updating. Its authors propose a focus on four main areas:

• Develop a national sustainable development strategy with a long-term strategic vision for the creation of a productive and innovation cluster. The current system that regulates the industry has been in operation for more than a decade and must be updated with strategic planning that includes the participation of the main public and private actors.
• Good environmental performance must be reinforced to promote sustainable growth while controlling externalities. This requires increasing scientific research to identify and quantify negative externalities in the short and medium term, and then define an environmental objective and condition industry growth to comply with that objective.
• Regulation should be defined on the basis of local production conditions and with a solid scientific basis regarding the oceanographic and health conditions in each location. Currently, Chile has a single regulation applicable to all the productive areas of the country.
• Increase productive efficiency via optimization of production cycles, with greater levels of flexibility to relocate licenses. Favor new locations that are efficient with current production technology while revoking licenses located in unproductive sectors, while also creating new licenses to encourage competition by reducing entry barriers.

Chile Undersecretary of Fishing and Aquaculture Julio Salas said it is very important to have the information contained in the report so Chile can work towards a sustainable, competitive and ecologically sound sector to guarantee “a just transition to sustainable salmon farming.”

However, he added that “the industry needs to get out of protected areas,” commenting on the study itself and referring to the government’s position to move salmon farming from national parks.

“This is an economically and socially relevant activity, which is why it is urgent to advance in modernizing production processes and current regulations,” he added.

Aquaculture Institute at Universidad Austral Director Sandra Bravo compared Chile with the situation of the salmon producing leader, Norway. Whereas the European country has production all along its coast, in Chile the conditions are favorable to salmon farming in only the three southernmost regions where famers have more than 1,300 concessions but use only a third of them to produce more than 1 million MT a year.

“We need environmental and oceanographic studies to know how much these areas can handle and how much the sector can grow. The state needs to define how important this is for Chile, what capacity it can handle and at what rate it wants to grow,” she said, encouraging Chile to take the example of Norway where 0.3 percent of the income from exports is destined to research, the majority of which environmental.

The participants highlighted the role of government and industry, in conjunction with the academic sector, in discussing the issues, supporting research to back science-led decisions, and taking a preponderant role in guiding sector growth.

“To promote the sustainable growth of Chilean salmon farming in the coming decades, we believe it is necessary to achieve a constructive, broad dialogue with all actors, which seeks to develop a modern regulatory framework and a country agenda that, together with protecting the environment, drives innovation and productivity,” Davidovich said. “We hope that the study and the webinar will be an input that will contribute to moving in that direction.”  

Photo courtesy of the Chilean Salmon Council