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Market Focus : Chile Swims Toward Salmon Supremacy : Battling rustlers, sea lions and legal threats, it has become the world's No. 2 exporter of the pink-fleshed fish.


PUERTO MONTT, Chile — As salmon farming grows in southern Chile, so does the legend of salmon rustlers and their low-down, sneaky ways. Gather 'round boys, and listen to the tale.

Small-time rustlers are sometimes clam divers, who work between the offshore salmon feeding pens and the beach. Teaming up with waiting fishermen, the divers cut a hole in the netting of a pen, then the anglers scoop up escaping salmon with gill nets, claiming their right to catch free fish.

Big-time rustlers leave little to chance. They cut a hole in a pen holding 50 tons of fat salmon; then a diver swims into the pen and herds 15 tons of fish out through the opening and into a net trap. Three hundred yards out to sea, a fishing ship with a tow line slowly pulls the netted salmon away. The fish farmers don't discover their loss until they notice that their salmon don't seem to be eating as much.

Since Chile first began farming salmon in the late 1970s, it has become the world's No. 2 exporter of the farmed salmon after Norway.

Last year, Chile earned nearly $300 million from salmon and salmonized trout, a big rainbow with pink flesh, most of which are sold to Japan and the United States.

But with success comes problems.

If it's not salmon rustlers, it's another kind of ornery critter--sea lions, which also break into pens and let valuable fish escape.

And now, another potential problem, perhaps more serious, has arisen: American salmon producers last December threatened to file a legal complaint against Chile for alleged dumping, or selling at prices below cost. As a slump in world salmon prices squeezed the American growers, they accused Chileans of unfair competition, which can be punished by countervailing duties.

The Chilean salmon industry argues that it can sell salmon profitably at low prices because of this country's cost advantages.

"The costs of production in Chile are very low, the lowest in the world," said Rodrigo Infante, general manager of the Assn. of Chilean Salmon and Trout Farmers.

From Puerto Montt south, the Chilean coast is fringed with coves and fiords that offer ideal sites for big netted pens, suspended from floating frames, that are used for salmon farming. The water is clean and cold, but not so cold that it retards growth in the winter.

As a result, a salmon matures here in about 24 months, compared to 28 to 30 months in Norway and the United States, Infante said. And because salmon are not native to Chile, neither are the diseases that plague them in northern seas.

About 20 companies in northern and central Chile produce fish meal, the main food for farmed salmon, so premium feed is available at competitive prices with low shipping costs.

And although salaries in salmon farming have increased by 20% in the last two years, Infante noted, labor costs are still far below those in North America and northern Europe.

Aggressive entrepreneurs, some of them foreigners, have rushed to capitalize on southern Chile's advantages. They grow Atlantic salmon, coho, chinook and salmonized trout. Production has leaped from 300 metric tons in 1985 to 25,000 tons in 1990 and about 60,000 tons in 1993. The 1994 tonnage is expected to approach 70,000.

Alaska, Japan and Canada account for the bulk of the wild salmon catch, while Norway, Chile and Scotland top the list in salmon farming. Chile's production of farmed salmon surpassed Scotland's in 1992 but is still only about one-third of Norway's.

As a result of an anti-dumping suit, Norwegian salmon is subject to U.S. countervailing duties averaging more than 20%. That tariff is keeping Norwegian producers out of the American market, so their salmon is glutting Europe, crowding out Chilean salmon.

"We've been displaced out of the European market by Norway, so we've sent everything to the States, and now some of the producers in the States are making noises about an anti-dumping suit against Chile," said Andrew Jackson, a Scottish biologist, who is technical manager of Marine Harvest Chile, a major multinational producer.

Wholesale prices for salmon dipped below $2 a pound late in 1993, alarming operators in Washington and Maine who produce about 13,000 tons of farmed salmon a year.

But prices edged up in January, and Jackson predicted that the United States would not file an anti-dumping suit against the Chileans if the recovery continued.

Many Chilean producers see increased salmon consumption as the best long-range solution to the problem of oversupply and low prices.

Infante, the Chilean association manager, says his group has invited producer groups in Maine and Washington to share the costs of a promotional advertising campaign in the United States.

Thomas Kehler, an American partner and manager of a salmon company in Puerto Montt, said Chilean producers can increase profitability by adding more value to the salmon they export.

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