Peru aquaculture growth to continue

Peru is famous for its seafood, particularly ceviche, a dish based on fresh raw fish, citrus juices and chili. However, the country’s huge fishing industry is focused on the processing of anchovy into fishmeal and oils. The fish, shrimps and shellfish enjoyed by diners in Lima often come from aquaculture farms. Still small, this industry is set for major growth.

Global Demand

As disposable incomes increase, consumers make changes to their diet, introducing more protein in the form of meat and fish. The food fish supply – those that find their way to people’s plates rather than being used in other processes – grew at an average annual rate of 3.2% from the 1960s to 2013, double the rate of population growth.

With the world’s oceans and seas at risk of overfishing and subject to catch quotas, recent growth in fish consumption has been made possible by the development of the aquaculture industry, through which fish and marine animals are farmed in controlled conditions. Since the 1980s the annual global wild fish catch has grown from 69m tonnes to 93m tonnes in 2013. During the same period world aquaculture production has shot up from 5m tonnes to 63m tonnes. With high protein, low saturated fats and omega-3 oils, provision of fish is key to ensuring global food and nutritional security, according to the World Bank. By 2020 an estimated 48% of the world’s fish consumption will be provided by aquaculture.

Spawn

With over 3000 km of coastline and 3.5% of the world’s freshwater contained in over 12,000 lakes and lagoons, Peru has ideal conditions to develop a strong and diversified aquaculture sector. At present, however, the industry remains very small compared to the country’s giant fishmeal business. Fish farming accounts for just 2% of total fish exports, according to the Ministry of Production (Ministerio de la Producción, PRODUCE). Nevertheless, the segment is growing rapidly. In 2003 the Peruvian aquaculture industry produced just 13,751 tonnes. Since then the industry has grown 10-fold, with 2015 production expected to hit 130,000 tonnes and 200,000 tonnes forecast for 2018. Exports have grown from $34m in 2003 to over $300m in 2014. In the latter year a further $170m was sold on the domestic market. The products of the process are far more valuable by weight than Peru’s traditional anchovy products. Despite representing just 1-2% of total fish product export volumes, aquaculture accounts for 10% of revenues.

Peru’s primary aquaculture products are scallops and marine shrimps, farmed on the coast. Between 2005 and 2014 annual shrimp exports grew from $35.4m to $162.6m, while scallop exports rose from $28.7m to $132.9m. The northern coastal departments of Piura and Tumbes host many aquaculture projects, and account for 55% of national production. Although growth in these products has been strong, harvests can fluctuate from year to year due to disease – such as white spot syndrome, which affects shrimp – and climatic changes, such as El Niño.

The other major fish produced in farms is trout. Primarily farmed on Lake Titicaca, trout production grew from 5475 tonnes in 2005 to 32,527 in 2014, and the neighbouring Puno region – where trout is the primary product – is responsible for around one quarter of national aquaculture production. Peru also farmed 5469 tonnes of tilapia in 2014 and smaller quantities of Amazonian fish, such as arapaima.

Low Base

Compared to its neighbours, however, Peruvian aquaculture is in its infancy. According to the UN’s Food and Agriculture Organisation, Ecuador harvested over 332,000 tonnes of aquaculture products in 2013, mainly from its shrimp industry: more than 2.5 times the Peruvian total. Chile produced over 1m tonnes of aquaculture products and shipped over $4bn worth of salmon – a non-native species – in 2014. “One of the most attractive aspects of the Peruvian aquaculture industry is that we are starting from a very low base and there is a very high ceiling. There is a lot of room to grow,” Alfonso Miranda, president of the Fisheries and Aquaculture Committee of the National Society of Industries, told OBG.

Peru’s varied landscapes and ecosystems also give it a unique advantage for farming a more diverse catch than at present. “It is important that the industry diversifies its products – providing more reliable revenues from both exports and internal consumption – and that it spreads to new regions in a sustainable manner, providing jobs outside major cities,” Christian Berger, president of Pro Acuicultura, a Lima-based organisation dedicated to the sustainable growth of aquaculture, told OBG. Another advantage for the country is the availability of fishmeal, a primary feedstock of aquaculture production, given Peru’s huge anchovy industry. The sector’s potential has caught the attention of some of the country’s biggest companies. Agro-industrial player Camposol controls Marinazul, a major shrimp enterprise in the Tumbes region, while mining giant Grupo Hochschild owns Amazone, a firm that commercialises arapaima in Yurimaguas in the Amazon basin.

Challenges

Investment in Peruvian aquaculture could triple from its current $300m per year if the right conditions were in place, according to Miranda. “Investors are ready and willing to develop new projects in Peru, but they are waiting for clarity in terms of tax incentives for the industry and legal security of concessions,” he said. Aquaculture companies used to be taxed at the same rate as major agricultural exporters, paying 15% corporate tax instead of the standard 30%. However, that benefit ended in 2014 and they now pay the standard rate.

Perhaps the more worrying issue for large-scale investors is that fishery projects can carry similar risks to mining projects in terms of licensing and social protest. In June 2015 president Ollanta Humala cancelled a trout fishing concession on the northern shore of Lake Titicaca. Local firm Inversiones Mitano was awarded the licence to produce 3000 tonnes of trout per year in February, but local protests and pressure from Puno congressmen led authorities to reverse the decision. Announcing the cancellation, Humala said, “we are talking with authorities about how to create a fish farming culture for Puneños.”

Bait

In 2015 PRODUCE minister Piero Ghezzi identified aquaculture as one of five key industries that had the potential to bring added value to Peruvian exports and set up a group of private and public sector representatives to guide future policy. In June 2015 PRODUCE announced that it would invest $5m in a technology innovation centre (centro de innovación tecnológica, CITE) in the Puno region. “The CITE will drive the development of trout production and promote technology transfer for improved performance and the organised cultivation of other species with aquaculture potential,” said Ghezzi.

In August 2015 the new National Law of Aquaculture was passed. Recognising the development of the industry as an issue of national interest, the new law updates regulations on issues such as production chains and sanitary control, and streamlines the permitting of concessions through the National Aquaculture Register. However, the law does not reinstate the corporate tax reduction that many in the industry believe is necessary to stimulate the growth of the sector. Even without tax incentives, Ghezzi said that he believed the aquaculture industry could grow at annual rates of over 70% in the coming years.

The Way Forward

The global trend of rising fish consumption, coupled with Peru’s vast under-exploited potential, make aquaculture a logical focus of PRODUCE’s industrial diversification strategy. Sectors such as forestry have shown progress thanks to the combination of public-private policymaking through the working groups, and investment in research and development at the CITE. However, the infant industry grew accustomed to tax incentives, and many query why these incentives remain for agricultural exporters and not to aquaculture. In 2016 investors are likely to hold off from making major commitments while the issue of tax reform remains on the table.