social advantage, the long winter veda, which 

 has been increasing over time to reach 3V2 

 months in 1970, is only due to an excessive 

 catch capacity of the fleet relative to the resource 

 available. Given a maximum sustainable yield 

 of 9V2 million tons, increases in capacity or 

 technological improvements of the fleet will 

 mean a longer winter veda. 



During the two years from 1966-67 to 1968-69, 

 hold capacity increased by 16,000 tons per 

 year, or about equal to old tonnage leaving the 

 fleet. During 1969-70, however, about 32,000 

 tons of new construction entered the fleet and 

 according to interviews with the various ship- 

 yards that rate of construction has continued 

 for the remainder of 1970 (Holmsen, 1970b). 

 Thus, the fishing season (the number of fishing 

 days permitted) has gradually declined from 

 289 in 1963-64 to 166 days in 1966-67 and 155 

 days in 1969-70. To catch a quota of 9V2 million 

 tons, a 145-day fishing season would have been 

 sufficient in 1969-70. Due to the amount of new 

 construction, with the same abundance and 

 availability of fish as last season, the fleet 

 would be able to catch 9^/2 million tons in less 

 than 140 days in 1970-71. As long as fishmeal 

 prices are high and factories have to pay con- 

 siderably more to independent owners per ton 

 of fish than the cost per ton for operating their 

 own vessels, construction will continue, resulting 

 in a shorter and shorter season, to the detriment 

 of the industry as a whole. There are similar 

 examples from other fisheries where overall 

 catch quotas have been established with no 

 limit to entry, such as Pacific halibut and 

 yellowfin tuna. 



Peru is short of investment capital and par- 

 ticularly short of foreign exchange. In addition 

 to being a misallocation of capital, however, the 

 pressure of an excessive fleet poses the danger 

 of pressure on government to keep the season 

 open longer than the period recommended by 

 stock assessment experts. 



Processing Capacity 



The same problem of overcapacity is found in 

 the processing phase. Some years ago, the gov- 

 ernment prohibited the building of more fac- 

 tories and issued licenses restricting the input 

 to a specific tonnage per hour for the existing 



fishmeal plants. The technical capacities of 

 various plants were increased, however, without 

 regard to the license. Last year, the government 

 started to enforce the law and several firms had 

 to buy plants to bring their own licensed capac- 

 ity up to their technical capacity, even when 

 they had no use for the purchased plant's build- 

 ings or equipment. Thus, some consolidation 

 took place and the total licensed capacity now 

 reasonably reflects the total technical capacity. 

 The licensed capacity is about 50% more than is 

 needed, however, even with the short season 

 now in effect, and the excess capacity would of 

 course be even greater if the fleet size were re- 

 duced so the season became longer. 



The fishmeal industry as a whole is deep in 

 debt, liabilities about equal to assets. Since 

 some firms are in a good financial position, this 

 means that many firms are thoroughly insolvent, 

 and would have been bankrupt but for a mora- 

 torium on debt collection. 



DESIRABLE OBJECTIVES 



The problem facing the Peruvian anchoveta 

 industry is how to reduce the excess capacity 

 both in the catching and the processing phase, 

 so that excessive closed seasons can be prevented 

 and the productivity of the remaining production 

 units improved. 



A reduction in capacity and lengthening of 

 the fishing season has a fourfold advantage: 



1. Less pressure will be placed on the govern- 

 ment to exceed recommended levels of catch. 



2. Fewer investment funds will be needed for 

 the industry. 



3. The remaining units will be more produc- 

 tive and thereby, the economic situation 

 for the industry will improve. 



4. The sustainable yield in the fishery will 

 increase, as more fish wiL be caught at a 

 higher age or larger sizes. 



The cost savings which will accrue depend on 

 the percentage of fixed and variable costs in the 

 catching and processing phase. For the catching 

 phase, it will also depend on what percentage 

 of the variable costs are associated with volume 

 and what percent with time. 



Based upon budgetary data for 1970-71 from 

 a handful of companies, the following break- 



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