(3) A third alternative would be to rely 

 entirely on a scrapping ratio. If a firm or in- 

 dividual wants to build a new vessel, he would 

 have to scrap a larger tonnage of old vessels. If 

 a firm has no vessels to scrap, it will have to 

 buy tonnage for scrapping. The time necessary 

 for an adjustment of the fieet size to the desired 

 level will be longer than under the previous 

 alternative. A scrapping ratio (based either on 

 gross tonnage or tonnage capacity) has to be 

 relatively high in the beginning, possibly three 

 to one, but will, over time, come close to one to 

 one, just sufficiently high to offset the effect of 

 technological improvements in vessels and gear. 

 If nobody is willing to scrap vessels at the 

 initial ratio (except for credits obtained when 

 vessels sink or burn) the effect will be the same 

 as an embargo on vessel construction. The 

 price of obsolete vessels will then be close to 

 zero, however, so some new construction will 

 surely take place. Some vessels, which ordinarily 

 would not have been removed from the fishery, 

 might be removed if the owner can sell them to 

 someone needing tonnage to scrap. 



This program falls somewhere between the 

 two previously mentioned, but neither does it 

 involve government outlays nor does it prevent 

 technological improvements in the fleet during 

 the transition period. All these three programs 

 would necessitate a scrapping ratio when the 

 fieet is reduced to the desired level. 



(4) Recommendations have been made to the 

 government of Peru to reduce fishing effort by 

 tying the size of the fleet to the licensed capacity 

 of the factories. The recommendations called 

 for a maximum of 1.4 tons of hold capacity per 

 ton of daily processing capacity.^ Even if a 

 ratio were imposed on a firm (some firms have 

 several factories) rather than on a factory so 

 that vessels can be used where fish are abundant, 

 there seems to be certain disadvantages with 

 such a program. While previous programs 

 mentioned have not differentiated between 

 factory owned and independently owned vessels, 

 the question now arises as to how to deal with 

 the 20% of the fleet which is independently 

 owned. Secondly, such a program would lessen 

 competition and freeze the industry in a given 

 pattern. 



•• This ratio is too high, as few firms currently have 

 a higher ratio. 



(5) To reduce the size of the fleet and expand 

 the fishing season, a quota system can also be 

 implemented. Catch quotas can be established 

 for individual vessels, factories, or firms. To 

 reduce uncertainties about investment, quotas 

 should be given for a number of years and not 

 for one season at a time. Further, due to changes 

 in recruitment and the amount of effort the 

 resource can bear, quotas should be allotted 

 as a percentage of the overall annual quota. 



A quota system for the purpose of reducing 

 the number of producing units would most likely 

 have to be based on an auction system. Such a 

 system, whether introduced on the vessel, 

 factory, or company level, would tend to elimin- 

 ate not only the less efficient producers but 

 also those which are financially weak. Such a 

 program would transfer significant funds from 

 the fishing industry to the public treasury. Due 

 to the structure of the Peruvian anchoveta 

 industry, a company quota would seem prefer- 

 able as this would reduce the size of the fleet 

 (overhead costs) more than a quota on factories 

 or vessels. Under the two latter arrangements, 

 many vessels may be tied up because they have 

 reached this quota, while others still are fishing 

 because a factory may be located in an area 

 where availability of fish is low in a particular 

 season resulting in excessive steaming time by 

 the factory fieet. Even company quotas would 

 result in an excessive fleet, however, as each 

 company would keep a fleet big enough to be 

 sure it will catch its quota. 



The various management alternatives so far 

 mentioned have been directed towards reducing 

 the capacity of the fleet and extension of the 

 fishing season and thus, reducing the size of 

 investment in the catching phase. Some of the 

 alternatives will have little or no impact on the 

 excess investment and low capacity utilization 

 of the fishmeal factories, while others will have 

 a significant impact. 



Reduction in Processing Capacity 



(1) Reduction of the total licensed capacity of 

 fishmeal plants will indirectly affect the fieet. 

 As indicated earlier, the industry as a whole is 

 in a poor financial position. By lifting the 

 moratorium on debt collection, many firms 



110 



