POLITICS AND THE PROCESS

Are Individual Transferable Quotas a Real Option for Fisheries Management in Uruguay? - E. Bertullo

Are Individual Transferable Quotas a Real Option for Fisheries Management in Uruguay? - E. Bertullo

National Fisheries Institute (INAPE), Constituyente 1497 - C.C. 1612 Montevideo, Uruguay
<[email protected]>

1. PRESENT FISHERIES MANAGEMENT IN URUGUAY¹

¹ This presentation represents the views of the author and not necessarily those of Uruguay Government concerning present Fisheries Management practices, or their views or policies in relation to use of Individual Transferable Quotas in Fisheries Management.

The published regulations that describe the legal and institutional framework of the National Fisheries Institute (INAPE) include those for fish-allocation, fishing-effort control, measures for fish-stock conservation, research in oceanography, biology and fish population dynamics, monitoring and control of fisheries operations; development of land-based processing factories for export and local markets, and advisory support for artisanal fisheries and aquaculture.

The State Reform policy document (OPP 1998) describes INAPE´s management objectives as “to obtain the largest economic and social benefits from the aquatic resources including those from aquaculture and marine mammals through their responsible and integrated management, in the long term based on research and preservation that permits their adequate administration with the goal of supplying food for international and local markets”. Uruguay has signed the Rome Declaration of 10-11 March 1999, concerning the Code of Conduct for Responsible Fisheries.

Table 1: Fisheries of Uruguay - Composition of fish stocks

Fish stocks	Transboundary	Straddling	High migratory	High seas
Main species	Sea trout	Whiting	Swordfish and tunas	Toothfish
Total landings	11%	35%	1.1%	1.1%

Source: INAPE.

The natural fisheries resources available to Uruguay come from the River Plate and from the Argentine-Uruguayan Common Fishing Zone (CFZ) (Figure 1), located in the South-western Atlantic Ocean (FAO, Statistical Area 41).

In the River Plate and CFZ the main exploited commercial species are whiting (Merluccius hubbsi), croaker (Micropogonias furnieri), seatrout (Cynoscion guatucupa), silverbream (Cheylodactylus bergii), squid (Illex illecebrosus), toothfish (Dissostichus eleginoides) and red crab (Chaceon notialis) which are transboundary stocks. Swordfish (Xiphias gladius) and tunas (Scombridae spp.) highly migratory fish are also exploited. Toothfish and the Antarctic krill are caught in the CCAMLR² area, in accordance with the Antarctic Treaty which has been ratified by Uruguay.

² Commission for the Conservation of Antarctic Marine Living Resources

The main commercial species have annual landings between 120 000 - 140 000t/year and Table 2 shows the trend in landings for the period 1994-1998.

Under the present regulations the fleet is classified as either commercial fishing vessels (more than 10 GRT) or as artisanal boats (less than 10 GRT). All fishing vessels either licensed by the Government and are classified and authorized to harvest specific fish, molluscan or crustacean stocks. The licences are general permissions to participate in commercial fisheries and they are distributed to different target fisheries; they are temporary, renewable every two years and transferable.

Table 2: Total commercial fish landings in Uruguay

Year	Tonnes
1994	120 737
1995	126 495
1996	123 276
1997	137 009
1998	141 076

The commercial fleet has at present 103 fishing vessels (Table 3) to which the 112 fish licences are assigned. Some vessels are authorized to operate in “A” and “C” or “B” and “C” categories. It is not authorized to have “A” and “B” licences on the same vessel, but it is possible to have and “A” or “B” and “C” licences on one vessel.

Figure 1: Uruguay and Argentine Common Fishing Zone. Treaty of the River Plate and the Frente Marítimo (1973)

Map source: Fishing Biology Department (INAPE, 1999)

The fishing fleet is extremely old with vessels of 15-20 years or even more, generating in most cases a profit insufficient to allow the introduction of vessels with lower operational costs that would be more efficient.

2. MAIN FISHERIES PROBLEMS IN URUGUAY

2.1 Transboundary and highly-migratory fish-stocks

The distribution patterns of the targeted species and the estimations of their abundance over the whole area in absolute terms is complicated because the main fisheries exploit both straddling-stocks and some highly-migratory fish stocks. The past policies controlling allocation of the permitted catch encouraged the fishing companies to move towards an over-investment, excessive fishing-vessel size and too much equipment and labour, in an attempt to increase company yields to maintain profitability. Fishermen rushed to obtain the biggest share of fish that they could during each season, as was usual in many fisheries around the world.

The problem of bycatch and discards has also been recognized from time to time by the fishermen who always target the larger fish since they realise more valuable dockside-prices and thus better profits. INAPE has been evaluating the bycatch from the coastal fisheries (croaker and sea-trout) during 1999 with the government’s fisheries research vessel Aldebarán.

2.2 Present situation regarding government management by INAPE

Nowadays in Uruguay, fisheries management is focused on indirect methods of controlling fishing-effort, basically by licence control on the assumption that this provides an effective way of ensuring the conservation of the fish-stocks. The country also has many indirect methods to control fishing-effort such as closed seasons and areas, mesh regulations, minimum fish-size landings, etc. These controls imply increased surveillance and compliance costs to meet the more and more complicated regulations and stringent inspection requirements. The traditional fisheries for whiting, croaker and seatrout are limited-entry fisheries by Government regulation (INAPE, 1991, 1992).

The use of catch limits (TACs) is perhaps not a good tool for regulating fishing-management of the straddling fisheries between Argentine and Uruguay, beyond their ability to solve problems of resource conservation. The present system provides strong incentives for increased competition between fisherman which is manifested in the developing of a “race to fish” where each individual fishing vessel seeks to maximize its share of the available fish stocks as is possible. This has led to excess capacity for some fisheries and increased costs, reduced profitability and “capital stuffing” in many fishing companies. Some fishing companies (operating vessels and shore-based processing plants) have gone bankrupt during the last few years.

Table 3: Commercial fishing fleet in Uruguay
(September 1999)

Main species	Fishing vessel category	No. of licences	Fishing gear	Total fleet hold capacity (m3)
Whiting	“A”	28	Bottom trawls	8 218.12
Croaker and seatrout	“B”	20	Bottom trawls	2 017.42
Croaker and seatrout or whiting	“Art. 13, lit. B”	15	Bottom trawls	1 492.75
Non-traditional: Tunas, swordfish, silver bream, redfish, tooth fish, red crab, squid	“C”	46	Beam trawls, traps, hooks,	11 408.86
Toothfish in the CCAMLR area, and krill	“D”	3	Hooks, trawl krill nets	1 575.54
Total		112		24 712.69

Source: INAPE.

Other indirect methods of controlling fishing effort are used for management, such as closed seasons; e.g. the Commission has a closed season for the squid fishery and vessels are not permitted to fish from September 1 to March 30. The closed season and the TAC are determined each year and harvesting is permitted from April 1 to August 31.

This method results in fishing-vessel inactivity during the time banned for fishing, decreasing the yearly profits of the companies.

Under the Commission the whiting fishery has seasonally closed areas delimited geographically in order to reduce fishing mortality on certain life history stages or age-groups. Among the management controls for this species are mesh regulations for trawling which are strongly controlled by observers on board and/or inspectors ashore. For conservation and scientific research the Biology Department of INAPE using the fishing research vessel is doing some trials with net-selective devices (DEJUPA) for whiting.

2.3 Fishing licences

The existing licences are not exclusive or held in perpetuity because the law prescribes licence-cancellation for the following reasons:

i. after approval by INAPE of the investment project, the entry of the vessel to a specific fishery has a maximum period of time

ii. when there has been an infringement of the Fishery Law

iii. when the vessel suspends operations for any period of more than six months

iv. if the relevant parties do not present themselves at the INAPE to be licensed.

2.4 Some problems of fishing vessel owners

The most important fisheries in annual landings appear to be fully exploited, some species are probably overfished and for several years the fisherman have used excessive inputs of labour and capital. They compete for their share in order to have profitable operations, but obtain poor revenues. In some situations such as the coastal fishery, the loss of competition due to the regional financial crises, in this and earlier years (e.g. southern Asia) resulted in a long fishermen’s strike and lockout of 120 days (May to August, 1999). More than 40 vessels were in dock during this period, landings declined, labour and money were lost.

Due to the fact that the fishing effort in the most traditional fisheries has reached the MSY, the further increases in fishing effort have reduced the total catch that the fishing vessels can take on a sustainable basis; in the coastal fisheries the average fish-size has decreased, probably the bycatch has increased and the landings of the main fish species are less than in past years.

From the commercial vessel-owners’ comments, it is apparent that the main fleet problems are the non-profitability of the operational trips. The new, non-traditional, fishery increased their catches during 1998, and they are the source of the higher final catch figures of this 1999 season.

2.5 Some problems of the processing sector

The lack of raw material for processing, in the fisheries plants located on shore, limits operations and has been aggravated by constraints in the international seafood-market where prices have remained stable for our species and seafood products. From 1990 other situations such as social-security tax levels, government monetary-policy, bank-rates, and labour expenses resulted in the fish factories finding themselves at a lower competitive level than in past years, and some companies are closed at present.

Further, the financial recovery from 1995 to 1998 coincided with the financial devaluation in Brazil in January 1999. Brazil had previously absorbed nearly 40% of the volume of fish market exports from Uruguay. The non-traditional seafoods accounted for the higher exports during 1998.

3. ALTERNATIVE FISHERIES MANAGEMENT OPTIONS

3.1 Management programmes and Individual Transferable Quota (ITQ)

In Uruguay INAPE is starting to learn and identify the issues and difficulties relating to the introduction of an individual transferable quotas management programme, the potential political, social and economic costs. The first step is to clearly identify if ITQs are considered property, because by law in Uruguay a property right about anything means the absolute liberty to dispose of this right, and the concept of “the privilege to catch” has not enough legal basis in our country to be deemed a property. The natural resources legally belong to the State (Government) and the fisherman acquires the right when the catch is taken on board. The legal concept in Uruguay is based on the criterion that you have or do not have a right. If somebody has the right (e.g. over the fishery products captured by the fishing vessel), they can sell, rent, donate, or discard it.

Nevertheless any proposal for a quota regulation should take into account the biological assessment of the fish stocks and the advice given by the biology scientists regarding the annual TAC for each fishery. The biological and scientific staff of INAPE should improve their efficiency and should have more financial resources to develop their research programmes. And scientific operational costs of the R.V. Aldebarán from INAPE should be addressed in any fisheries management programme.

An important objective for management is the long-term conservation of the fish stocks and the requirement of maintaining an adequate sustainable yield in the long term. The fisheries administration should have the responsibility to ensure that any new management programme will be better in terms of conservation, labour and profits to the industry.

Perhaps an early problem with the ITQs will be attributable to programme design and may not be the result of inherent problems of the concept in relation to new fisheries management proposals. The traditional fishery-vessel owners are organizing themselves into a different way to manage the fishery (e.g. the word “quota” is often used by them), motivated by the fact that the economic yields at present are not profitable and they recognize the need to change.

The Commission has introduced consideration of the quota concepts also. The main straddling-fisheries makes the possible use for ITQs programme more difficult, and perhaps when the common fisheries quota programme arrives in the coming years, quota management might be easy to introduce, but under a percentage-share allocation-criterion.

The croaker landings (1997-1999) have a quota of 40 000t/year (22 500t for Uruguay and 17 500t for Argentine), but Uruguay’s share is used by all the fishing vessels of the Category “B” fleet. Some of those vessels have as a condition on the government licence a maximum landing constraint on the targeted species allowed to be landed per season, but this system has not been implemented. For this reason, the introduction of a share like a percentage of the TAC may be more difficult because, perhaps, some fishermen will assume that they have the “legal right” to have landing quotas measured in absolute quantities; this is a step to be further discussed.

As mentioned, there are not many published references in government documents to explicit fisheries management objectives, but the methods for regulating fishing-effort are well known. Fishing-effort is a complex concept and basically its evolution from 1995 to 1999 is showed in Table 4.

Obviously, the poor catches being obtained, the increasing vessel-time at sea, the loss of profits, some vessels being out of service in port, and the increasing administrative difficulties in managing fisheries, is prompting a change to the management strategies in the short or medium terms. This is not easy because redistribution of the benefits that come from fisheries is contentious and the sector has too much to learn and to debate, and political support is needed also.

I can see that it will be difficult to change the benefits from the fisheries because the revenues now are less than the costs, and traditionally the Uruguayan people, including fishermen, are very conservative; and surely not all the present fishermen want to leave the fishery for both social and economic reasons. Because of the country's economic recession there are no other investment or job options for people, and leaving the fishery does not assure employment alternatives.

3.2 Requirements for legislative and institutional changes

The Law 13.833 from 29 December 1969 provides for fishing authorizations (licences or permits) to take commercial catches in a timely condition and in selected waters by fishing vessels operation. Under Article 15 of this Law, INAPE is authorized to establish zones of capture and allocations, and for species conservation reasons to set the maximum sustainable yield (MSY), and to apply a species quota (as a dockside landing, amount/year concept). As was noted, this is recorded in the licence document issued by INAPE, and means that during the procedures of licence renewal the Administration includes in the document the maximum fish landings authorized for a fishing vessel during the season in question.

This is an indirect system to introduce a quota-control over a specific fish-stock, but only under a permission or licence condition on fish capture. The property-rights of the fishery resources in the natural environment were declared as belonging to the State, under the Art. 269 of the Law 16.736 of 5 January 1996. With this legal system it will be possible to introduce the ITQ concept in Uruguay, and it is not necessary to further change the Law.

Nevertheless, the River Plate Treaty and the Frente Marítimo, managed by the Commission restricts this law. The fisheries property-right according to the law of Uruguay is a “special” or “specific” property-right, because the current property-rights (applied to legal situations other than fisheries) means that the owner of this right can deliver it in any way he wants without restrictions.

In our fisheries the property right on the natural resources belongs to the State and the Government is responsible for the conservation, allocation, management and control of the fisheries. Fishermen's rights and property-rights to the fish begin only when the capture is on board. I assume that the property change option of the fishery resources in Uruguay, if it is necessary to develop ITQs, is not convenient and will be politically impossible in practice. In this hypothetical situation the fishery Law 13.833 should be modified, but at present I am convinced that the fishery resources property-rights in Uruguay will continue under the State's control.

To elaborate and discuss new legislation for the Parliament will not be easy because the country has not a fishery tradition and general knowledge about the natural resources dynamics and fisheries implications is limited. Any eventual new legislation would obviously have different political points of view though, probably with the same conservation aims. But, it would not necessarily have the same economic and social objectives, especially in relation to the fishing vessel owners, industry owners, fishermen and government bodies.

3.3 Institutional changes

The institutional mandate of INAPE, a government unit, is at present, part of the Ministry of Livestock, Agriculture. Revising this mandate for fisheries will be a not easy political change due to the diverse interests of the people involved in fisheries and related administrative activities. The present Administration has proposed to the Government the possibility of developing a more independent office but the new Law is not studied yet. Probably a constitutional but decentralized Service to be named National Administration of Fisheries (DINAPE), more autonomous, with fewer people and better-paid positions, and new up-dated objectives, could complete a future fisheries management option for the third Millenium. The basic concept is to propose and formalize a stronger institutional body for fisheries management, because without this institutional strengthening the risk of minimising even further the fishing sector in Uruguay is enormous.

A new integrated fisheries management system should introduce new concepts and relationships between biological, economic, financial, social, operational and political processes, involving all the participants, e.g. the Commission, scientists, fishery managers, fishing-vessel owners, unions, fishermen, industry operators and exporters in a specific fishery.

The TACs and political issues should be addressed in each fishery in order to establish the available quota, and calculate the number of individual quotas or shares in terms of percentage of the TAC. Government Decree 149/997 included the possibility of transferability of the licencees and the transferability of quotas is permitted by the present regulation. It does not seem possible to enable the transferability of just a part of an individual's share because it appears administratively complicated and too bureaucratic.

3.4 Initial allocations

Other issues must be addressed before the introduction of quota-management in fisheries:

i. The existing and projected guidelines and regulations from the Commission about the CFZ fisheries management.

ii. Selection of one or more fishery to be used as a pilot experience for an initial ITQ programme. For example the International Commission for the Conservation of Atlantic Tunas (ICCAT) manages the swordfish fishery, and Uruguay has an allocation of the 4.5% of the TAC; which means a total catch of 694t/year. This small fishery lands in two ports and there are only 10 fishing vessels in operation in Uruguay.

iii. Considerations about the initial quota allocation to the participants. The historical catches of participants should be very important, and a specific qualifying period should be established; one problem could be false fishing reports, missing fishing reports and the government monitoring system needed to control all the fishing operators in an equitable manner.

iv. The data requirements during the initial individual-quota allocation.

v. Policies and tools to ensure the economic efficiency and recovery of the fishery during the transfer process

vi. Mechanisms to ensure equity between “winners” and “losers”, with the least possible negative social and economic impacts. The employment rate is one of the main political targets of the Government.

vii. Establishing new fishermen's responsibilities, e.g. bycatch-reduction mechanisms by selective devices applied to bottom-trawling fisheries and proper attention to the fishery conservation regulations.

viii. Study of the options for payment of the fisheries management changes and its implementation (education, training, licencee’s costs, fishing vessels renewal, etc.).

ix. Procedures for quota administration, control and enforcement of quotas, e.g. control of vessels by satellite.

Table 4: Fishing effort on Uruguayan fisheries

Fishery	Number of vessels		GRT		Main engine power
	1995	1999	1995	1999	1995	1999
Whiting	24	28	10 479	13 832	27 700	36 011
Croaker & seatrout	33	34	3 900	4 049	13 091	13 045
Non-traditional	16	41	4 850	22 183	11 847	41 611
Total	73	103	19 229	41 235.74	52 638	90 667

Source: INAPE.

3.5 Future considerations

In accordance with Shotton (1998) some questions should be posed and be considered by all the people involved in the fishery. Obviously the implementation costs will be higher than the present INAPE administrative costs, and how to pay these is one of the elements to be discussed. Perhaps the Government does not want to pay this bill. And has the fishery sector the financial resources to pay the implementation?

In addition to such increased costs obviously the costed control measures for implementation should also be addressed (observers on board, Navy/INAPE control at sea; dockside inspections, etc.).

4. PROSPECTIVES FOR ITQ IMPLEMENTATION

4.1 Policy for the next fisheries administration in Uruguay

What is pending? Probably the main constraint to the introduction of an effective ITQ programme is the setting of an appropriate TAC for the straddling fisheries. This depends of the Commission's future regulations, which will involve conservation, economics, social and political issues, none of which are easy to resolve. Even introducing these concepts to the Ministry of Livestock, Agriculture and Fisheries will be very complicated; many Ministries do not have previous knowledge about fisheries, thus many of the fisheries management concepts, purposes and understandings are not easy to introduce to them given their lack of prior experience.

4.2 Political issues to be addressed concerning the introduction of ITQs

Fisheries management is not easy to understand for people outside the fishery, and this includes politicians and government officials outside of INAPE. The introduction of a “property-rights” concept in fisheries is complicated for lawyers also, and the “quotas management system” and/or ITQ is difficult for fishermen too. A major issue is whether the present legal system is strong enough to enable the introduction of new management strategies.

In Uruguay natural resources belong to the State, and the licencee acquires the ownership-right (the property) when the fishing vessel catches the fish. It is not clear if ITQs would be a real option for fisheries management in Uruguay, but it is obvious that the country needs a specific objective to manage the fisheries for the future because we should have a profitable fisheries activity in accordance with the points of view of the conservation, economics, social and national politics: Uruguay, as a coastal developing country, needs developed and well-managed artisanal and commercial fisheries to export, and to feed people.

The initial allocation of quota-shares is one of the most controversial aspects of the implementation phase of ITQ programmes, as it focuses on who could be eligible and under which conditions. This should be as wide as possible. For example:

i. who should receive an initial allocation?

ii. how should the shares be allocated (by fishing vessel, by catch history, by number of crew, by company performance (sales, exports, etc.))?

iii. how many shares should a stakeholder receive?

iv. what should be required in payment of the share?

v. how much share-payment should be required for each fishery? (probably not the same rate for croaker or seatrout compared to red crab or toothfish).

vi. how much should the government be required to pay for the not-shared licences remaining?

To base the initial quota-share on ownership, perhaps main figure should be the historical catch during a specific qualifying period according to the history of the vessel’s participation in the fishery, and adjusting this criterion by considering the capital-value involved in the older and newer fishing-vessels and/or licences.

4.3 Individual Quota Transfers

At present the licences are transferable under Government permission by two ways:

i. Selling the licence to another operator; the selling rates are outside Government control as sellers and buyers are free to negotiate a mutually acceptable agreement; or

ii. The using transfer (rent-a-licence) for a period of time.

Table 5: Main recent fishery-shares in Uruguay
(Regulatory, 1998)

Fishery	Whiting	Croaker	Swordfish
Share (t/year)	100 000	22 500	694.5 (4.75% of the South Atlantic Stocks)
Regulation	Regulation 2/79 from the Common Fishing Zone Commission (Argentine & Uruguay)	Regulation from the Common Fishing Zone Commission	ICCAT, Swordfish TAC 1998-2000. 13 June 1998

Source: INAPE.

INAPE is at present part of the Ministry of Livestock, Agriculture and Fisheries. It has many bureaucratic and administrative costs for management, which must be reconsidered, including the management of the natural resources and the costs of industry challenges in international markets which are happening quickly because of globalization.

Perhaps INAPE´s mandate should be addressed by another institutional body with more autonomy and dynamic administrative structure, as an autonomous service probably to be called National Fisheries Administration (Dirección Nacional de Pesca, DINAPE). This will be a political option for decision by the new government to be established 1 March 2000. Nevertheless, as a coastal developing country and for a true fishery sector, Uruguay should have a strong effective national fisheries institute.

4.5 The main controversies

What are the concerns with an ITQ system?

i. The fishery concentration, which would permit processors or dockside wholesalers to obtain effective monopoly control over the landings, so that individuals, or companies, could influence the market obtaining a disproportionate allocation of benefits.

ii. The participation of the share stakeholders and the share allocation will be, at the start, a major controversy.

iii. An ITQ programme will need an accurate landings-information system without false catch-reports and, more difficult, will need to introduce true reports of fish catches and bycatch: the problem of control and enforcement must be discussed and resolved, and finally, it is not clear yet if fisheries-resource conservation will result from an ITQ programme. Industry profitability and competitive recovery on export sales will depend on the political and macro-economic environment and financial steps followed by the new Government awaited in year 2000.

A number of actions will be necessary for implementation of an ITQ system. These are:

i. Identification of the financial resources for the implementation costs. Repayment schemes for those who may wish to leave the fishery.

ii. The challenge for INAPE in relation to the new fisheries-control measures will be enormous, and scientists, technicians and administrative personnel should be trained and salaries should be commensurate with new responsibilities and duties received.

iii. Training needs for vessel’s owners, fisherman, industry and technicians, including materials, such as brochures, papers, videos, tele-conferences, e-mailing lists, web-editions, local and regional meetings, etc.

iv. International financial assistance and technical cooperation to implement new fisheries management strategies, education and enforcement.

Buck, E.H. 1995. Individual transferable quotas in fishery management. Report for Congress. Congressional Research Service. Washington, D.C. 17p.

FAO 1995. Code of Conduct for Responsible Fisheries. Rome.

FAO 1997. Individual quota management in fisheries. FAO Fish.Tech.Paper 371. Rome, 41p.

FAO 1999. Declaración de Roma sobre la Aplicación del Código de Conducta para la pesca Responsable. Reunión de Ministros de Pesca. Roma, 10-11 de Marzo de 1999.

INAPE 1999. Personal Communications and Internal Reports. Biology Department; Vice-Director and Attorney Adviser. Montevideo.

Nión, H. & G. Arena (1992). Criterios para un equitativo reparto de los recursos pesqueros compartidos. INAPE, Inf. Téc. N°41, ISSN 0797-3306, Montevideo.

OPP (Oficina de Planeamiento y Presupuesto) 1998. Presidencia de la República Oriental del Uruguay. La Reforma Administrativa del Estado. Dep.Legal N° 313143/98. 497:501. Montevideo.

Shotton, R. (1998). Considerations in the Introduction of Property Rights in Management of Fisheries in Uruguay. A Report to the Instituto Nacional de Pesca. FAO-FIMLAP project, 47 p. Rome.