Political intervention is key

Although the precise details of Marine Harvest Chile's reorganization will not be unveiled until May 11th. The company's CEO, Alf-Helge Aarskog, told Diario Financiero some of his company's plans and called on the government to modernize aquaculture regulations and establish a production quota for the entire country.

He said that Marine Harvest, like any other business, should be profitable over time. “Our operation in Chile has been losing money over the past five years, and 2015 was very bad. We have lost US$ 86 million (NOK 746 million). We need, therefore, to have a more efficient operation and that means, unfortunately, that many good people will have to leave the company.

“The real problem is that we do not have good regulations in Chile, politicians have to understand that aquaculture in general - and especially salmon farming - need smart regulations. Marine Harvest operates in Canada, Scotland, Ireland, Norway and the Faroe Islands, and we are profitable in all these regions. The common denominator is that they have better regulations,” he added.

Your company produced 62,482 tonnes in Chile in 2015, how much do you expect to produce with your new plan?

Our guide is 52,000 tonnes for 2016, but this number will be lower due to the proliferation of harmful algae blooms. We will communicate a new guide on May 11th.

Do you think the Chilean salmon industry has a future?

Salmon farming could be the most important Chilean industry in the future. The way to do this is quite simple, although courage and willingness to change is needed. The industry has not reached agreements internally, so politicians should step in and, based on the best practices of other countries, apply new regulations. We are willing to assist and coordinate with politicians and government specialists from other countries.

The answer is quite simple: first, decide a total salmon sustainable biomass for the entire country (eg 400,000 tonnes); second, divide this into the 1,300 licenses in the country (308 tonnes per license); third, separate the concepts of site and license. One license has the right to produce 308 tonnes but one site could also have multiple licenses; fourth, this will reduce the number of sites. Provide longer distance between them and that will be fair because it will be based on historical rights.

Is this crisis bigger than the ISA crisis in 2009?

It is not bigger, but it is very serious due to the lack of smart regulations for the future. This might harm the entire industry because nobody wants to invest in Chilean salmon farming. It is also very serious and sad that so many people lose their jobs because of an issue that could have been avoided with better regulation.

Why is it necessary to reduce production at a country level?

We need to reduce production because some operations will be closed and they will be many. With a better regulatory system we would have less farms, but larger, with a greater distance between them. I hope that the government will change the current system. Actions must come sooner or more people will lose their jobs.

How do you evaluate the new rules introduced after the ISA crisis?

After ISA a series of actions were implemented with zoning of neighborhoods, etc. Unfortunately, that new set of regulations did not address the growth rate, so lots of companies expanded too quickly and subsequently created a new situation with too high biomass and many biological issues. It's important to regulate growth in a biological production!

How do you evaluate the actions of the Chilean government in all this?

The government can and should play a much more active role. There are many good people in both Subpesca and Sernapesca, but in the end it is the politicians who change the law. The industry will not be able to regulate itself because there are many players with different interests.

What measures have been taken to reduce costs in Chile?

We have tried to save in all areas and unfortunately we have been forced to lay off 700 people in the last year. At the same time, we have invested in market development to increase the product price.

What additional measures can be taken?

Now it is about producing salmon in the most efficient way possible, with good fish welfare. At the same time, we are looking at all our operations to try to make them more efficient.

Do you think that this is going to achieve positive results in Chile?

Yes, but we need governmental help to create new regulations for the sustainable development of the industry, for our workers and for Chile as a nation.

Do you think the industry needs further consolidation?

It is a clear advantage to have more consolidation, because it is easier that four people agree on an issue than twenty-four people agree on the same.

The market was depressed in 2015, but salmon prices have begun to rise. How do you see the behavior for 2016 and 2017?

The market will be probably good in these two years, hopefully not again with uncontrolled production growth and then a new collapse, because so far there are no regulations to prevent that. We expect the government will soon create regulations similar to the Norwegian system, for example, so we can avoid another cycle of boom and bust.

The Norwegian salmon industry has been sending more salmon to the US, which has affected prices for the Chilean product. What new markets could open up for Chileans?

The US will always be the most important market for Chilean production, but the country should also focus on Central and South America, including consumption growth in its domestic  market.