New investments and union negotiations bode well for Argentina's fisheries sector

With more than 5000 km of coastline and important stocks of hake, shrimp, squid and other marine species, the Argentine fishing industry has long been a central pillar for the economies of the country’s southern states, and an important source of export revenue. Under previous governments, however, the industry lost competitiveness due to underinvestment and high costs. If the current government can broker a lasting agreement between companies and crew, Argentina has the potential to boost both the volume of catches and their export value.

A Stormy Passage

The Argentine fishing industry has seen its fortunes oscillate wildly over the course of the last 40 years. Boosted by government incentives to develop businesses in the south of the country, three cities – Puerto Madryn, Puerto Desado and Ushuaia – grew their industries to complement the country’s largest fleet at Mar del Plata. But a lack of regulation led to overexploitation and the collapse of hake stock in the 1990s, leading to the passing of the Federal Fisheries Act of 1998, which established the Federal Fisheries Council (Consejo Federal Pesquero, CFP) and authorised the introduction of fishing quotas. With fish sales generating foreign currency revenues and costs priced in pesos, Argentina’s fishing companies saw their margins expand rapidly upon the depreciation of the peso following the 2002 economic crisis. However, under the presidencies of Néstor Kirchner and Cristina Fernández de Kirchner, emboldened labour unions negotiated higher wages and extensive rights, thinning margins in the sector when the economy stabilised.

Calmer Waters

In 2010 the CFP introduced individual transferable quotas (ITQs) for four species: Argentina hake, Patagonian grenadier, Patagonian toothfish and southern blue whiting. Under an ITQ system, shares of the total allowable catch are distributed among individual fishing companies, allowing them greater flexibility in deciding when and where to fish, and preventing competition between firms leading to overfishing. Unlike concessions in the mining and energy sectors, all fishing rights are held by national companies and are renewable in 15-year increments. In addition, the Undersecretary of National Fisheries has invested in monitoring technology, and its website uses real-time satellite tracking of commercial vessels. “Today the Argentine fishing industry has reached the highest levels of organisation and good governance in its history,” Alan Mackern, the CEO of Estremar, a Ushuaia-based commercial fishing company, told OBG.

Export Potential

The fishing industry remains an important source of foreign capital, and each year four-fifths of the catch is sold to overseas buyers. In 2017 the total tonnage of seafood exports increased 6.9% to 475,591 tonnes, while export value totalled $1.98bn, a 16.8% rise from 2016, according to the Argentine Economics Department.

Shrimp remains the dominant product, with 183,294 tonnes of frozen shrimp totalling $1.2bn in value exported in 2017—up 15.7% in volume and 20.6% in value from 2016. Squid exports also surged 67.2% in volume and 92.8% in value in 2017. Exports of many fish, however, decreased in volume in 2017. Exports of hubbsi hake, for example, fell by around 5% from 2016 figures, to 100,948 tonnes, while export volumes of hoki and Patagonian toothfish were down 42.8% and 23%, respectively.

The EU continues to be the primary destination for exported Argentine seafood. Spanish buyers purchased 89,972 tonnes worth $471.2m in 2017, followed by China (with total purchases of $289.6m), the US ($174.9m) and Japan ($148.3m).

Investment

There has been a slight consolidation of the fishing industry in recent years. Between 2013 and 2017, the number of exporting companies fell from 247 to 174, while the market share of the 10 largest firms rose from 31.8% to 51.1%. This is largely due to the fact that the only way to enter the market is to acquire a firm or purchase its quota.

Under previous governments, difficulty buying foreign currency meant that major importing firms – such as Newsan Group, which is focused primarily on the sale of consumer electronics and domestic appliances – acquired fishing companies as a means to improve their commercial balance. In September 2017 Newsan announced the construction of its fourth new shrimp trawler at a cost of $2m.

No Small Fry

The Argentine red shrimp industry has become one of the most competitive segments of the local fishing industry. There are no quotas for the product, and despite bumper catches in 2015 and 2016, strong demand from the US market has led to rising prices. In 2017 shrimp exports to the US grew 4% by volume and 12% by value, with prices reaching $5.10 per pound in early 2018.

The industry’s two biggest players – local firm Grupo Conarpesa Armadores de Pesca (Conarpesa) and Spain’s Grupo Iberica de Congelados – have been active in trying to expand their fleet through acquisitions. By early 2018 the latter was locked in negotiations to acquire local firm Pesquera Santa Cruz, owners of six shrimping vessels, with an estimated deal value of $60m reported in trade press. Meanwhile, Conarpesa is looking to expand its fleet from 11 to 14 vessels with the refurbishment of two Uruguayan vessels and the purchase of a new ship.

Below Decks

However, the success of shrimpers also serves to highlight one of the limitations of the wider Argentine fishing industry: a conflict between companies and unions. Since coming to power President Mauricio Macri’s government has tackled long-standing conflicts between employers and unions on a sector-by-sector basis, focusing initially on the energy, construction and automotive industries. In September 2017 President Macri met with fishing companies in the Casa Rosada, the presidential palace, the first phase of a process expected to build collective agreements without reducing salaries. In addition, the government has reaffirmed its commitment to upgrading the Mar del Plata port, the largest fishing port in the country. The proposed expansion plan would see the port’s third terminal expanded to accommodate 50,000 twenty-foot-equivalent units (TEUs), an increase from its current 15,000-TEU capacity.

These continued investments are making the outlook for Argentine fisherman brighter than it has been in years – a trend that seems set to continue. In November 2017 Tomás Gerpe, the undersecretary of fishing, told local press that the government was pursuing strategies to improve monitoring and evaluation, expand export markets and resolve labour disputes. All three measures should improve the long-term sustainability of the industry. “I am sure we will experience a boost of value,” he said.