TCI The global practitioners network for competitiveness, clusters and innovation. Monterrey, november 2014

1. SALMON INDUSTRY IN CHILE: AN
INDUSTRIAL RESILIENCE CASE?
JUAN PABLO ZANLUNGO MATSUHIRO
DEPARTAMENTO INGENIERÍA INDUSTRIAL, UNIVERSIDAD DE CHILE

2. Context
• Today the industry exports about U$3,5 billion
• Dominates the world market, along with
Norway
• It is known as the “third engine” of the national
economy
• After the ISAv crisis (2009 : 89 outbreaks), the
disease was reduced to isolated cases (2013 :
3 outbreaks), (2014: 2 outbreaks)
Servicio Nacional de Pesca y Acuicultura www.sernapesca.cl
6

3. What will we understand by Industrial Resilience?
Which elements allow would us to classify the evolution of
Chilean salmon industry crisis as a resilience case?
How can we explain the accelerated recovery?
2008
2010
2012
630.000
tons
450.000
tons
820.000
tons

4. How was the organization of the cluster altered?
Is the industry more sustainable today?
What role did the collective–share actions play on managing
the crisis?
What remains to be re-set?

5. INDUSTRIAL
RESILIENCE
Balanced View: a resilience
system, after undergoing a
disturbance is able to
resume its natural growth
path. (a) and (b)
Ecologist View: equilibria are
arbitrary, and any crisis
should force strong enough
effects for a system to
adopt a new pattern of
behavior (c) and (d)
Figure
1:
Stylised
Responses
of
a
Regional
Economy
to
a
Major
Shock.
Simmie
&
Mar6n,
2010

6. Normalized Recovery Paths post ISAv crisis
Chile Faroe Islands and Norway
T0 is the year in which production reached its lowest level as a result of the health crisis.

7. Differences between paths
• Norway has learned to live with the virus (fjords structure favors
them)
• Faroe Islands shut down all production and operation of sea
farms.
• Chile learned from these experience and also received support
from the Canada to design a way out of the crisis. Regulations
in place today are more stringent than in Norway.

8. THE EVOLUTION OF
THE CRISIS IN THE
CHILEAN SALMON
INTDheU crSisiTs Rin Y (2007-2010)
numbers
• 26.000 unemployed
• 50% decrease in
production
• US$ 5.000 million
estimated cost

9. For a year the
number of
operating sea
farms was less
than the maximum
"positive" infected
sea farms
(January 2009)
450
400
350
300
250
200
150
100
50
0
Jul-­‐07
Sep-­‐07
Nov-­‐07
Ene-­‐08
Jul-­‐08
Sep-­‐08
Mar-­‐08
May-­‐08
Nov-­‐08
Ene-­‐09
Jul-­‐09
Sep-­‐09
Mar-­‐09
May-­‐09
Nov-­‐09
Ene-­‐10
Jul-­‐10
Sep-­‐10
Mar-­‐10
May-­‐10
Nov-­‐10
Nº
de
centros
pos itivos /operativos
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Prevalencia
(%)
centros
operativos centros
pos itivos P revalencia

10. 900.000
800.000
700.000
600.000
500.000
400.000
300.000
200.000
100.000
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
Ton
Salmon
ProducCon
2005-­‐2013
Estadís6cas
Sernapesca
(Ton)
I
Trends
that
led
to
the
crisis
Actors, networks and institutions
• Trade Association dominated by
large companies
• Weak Regulations
• Increase in the granting of
concessions
Orientation to Production
• Catching up in production with Norway since
2001. A race to get to 100,000 tons per
producer, and become a global player
• Geographic concentration of Production
• Increasing outsourcing, deregulated, following
cost reduction criterion
Fuente:
Informe
sectorial
de
Pesca
y
Acuicultura,
enero
2014,
SERNAPESCA

11. EXPLANATIONS FOR
AN ACCELERATED
RECOVERY
RESPONSE MECHANISMS DYNAMICS ASSOCIATED
• Production Frontier Expansion
• Changes in the Value Chain
• New regulatory policy and
institutional framework
• Financial Rescue

12. New regulatory and
institutional framework
(2010)
• Forced breaks in system
organization: "salmon
neighborhoods.”
• New and more stringent
standards for production-logistics
and required
certification
• Greater supervisory authority

13. Financial "Rescue"
• Change in the legal conception of the public good in
concession to private property: Concessions
could
now
be
traded
between
private
actors,
and
used
as
a
collateral
to
get
credits
from
the
bank
industry
• US $ 450 million purchase of mortgage debt
concessions (US $ 2,000 million estimated total debt)
• Indexing health risk to financial risk (in addition to stock
trading companies)

14. Dynamic associated: Production Frontier Expansion

15. Associated dynamic:
Production Frontier Expansion was already available

16. Associated dynamic:
Production Frontier Expansion and changes in the production
distribution across regions

17. Associated dynamic: Production Frontier Expansion
Insufficient provision of Public Goods
• Enabling Infrastructure (linked to the operation and
installation of new families)
• Connectivity and Logistics
Gaps
• Employment and job quality
• Human Capital formation
• R&D + i

18. NEW CLUSTER
Changes in the Value Chain
– Automating processes
– Demand for workers is reduced in the core of the chain
(freshwater, seawater, process)
– Territorial Expansion of services
– Changing weights in relative powers (customer-supplier)

20. Changes in the Value System
– Complexity / Sophistication (Biosafety, Health, Environmental)
– Migration of talents to suppliers
– Emergence of Knowledge Intensive Business Services
– Financial industry oversight

21. A MORE SUSTAINABLE
INDUSTRY?
• Acknowledgement of environmental and sanitary limitations
(how far you could get)
• Consensus on what to ‘stop doing’ (industry measures)
• A clearer and better equipped public system. More clarity
what must the state require, inspect, subject to fines.
Export
(US$
billion)
Budget
(US$
million)
2,207
(2006)
19,68
(2007)
3,517
(2013)
45,3
(2014)
Export
(US$
billion)
Fines
(US$
million)
2,242
(2007)
0,74
(2007)
3,517
(2013)
1,4
(2013)
148%
local
funds
81%
local
funds
It is clear that we know better and are alarmed,
But have we passed the examination of resilience?

22. Health
Status
in
the
fronCer
zone
expanded
renew
commitments
and
acCons
geared
More %
production
losses
Fuente: Elaborado en base a datos Sernapesca 2010-2013
Less operating sites, but
Are there old more sea lice
practices that
must be
eliminated?
New challenges:
• Major changes to strengthen
enforcement at the individual firms
level
• New diseases of local expression

23. Concerns about sanitary status in the expansion zones
have produced a renewed commitment and has
provided guidance to new initiatives
A few years ago I made a similar presentation and called it “Health
crisis in the Salmon Cluster; learning lessons process” (6to
CLAC, 2011)… Today I would say … “Lessons in consolidation
process”
Start up (2014-15) of new health regulations
• Risk Score
• Density Regulation
• Reducing Seeding

24. Industrial resilience and sustainability are not only
related with sanitary issues. It also involves industrial
structure reconfigurations.
Sanitary crisis & financial crisis
Production Concentration by recent Merges and Acquisitions
Most visible cases:
• AquaChile bought Invermar
• Mitsubishi is in the final negotiation for Cermaq
• Marine Harvest is now taking control over Aquinova
In the near future, 80% of production will be concentrated in
12 actors. At ISAv climax (2009) they were 19.

25. COMMON-POOL RESOURCES,
INSTITUTIONS AND
COLLECTIVE ACTION
• The case of collective
use of resources:
'Tragedy of the
commons‘
• Self-governance of firms
ends collective crisis.
Freedom implies a 'commons'
eventually ruins all ¨ (G.Hardin,
Science, December 1968)
Institutions and Rules of the Game
• The institutions have been created
to reduce uncertainty in exchange
North (1991)
• The rules must include security,
portability, durability, divisibility,
flexibility and exclusivity of property
rights. Ostrom (1990) & Anderson (2007)

26. Generating Collective
Action
A major challenge in Chile
26
40
Trust Ranking OECD 2008
72
71
69
69
89
86
Legatum Prosperity Index (35 position Chile)
Denmark
Norway
Finland
Sweden
Netherlands
Switzerland
Estonia
Israel
New Zealand
United Kingdom
Belgium
Australia
Spain
Austria
Germany
Japan
OECD
France
Ireland
Czech Republic
Slovenia
United States
Poland
Slovak Republic
Hungary
Korea
Greece
Portugal
Mexico
Turkey
13 Chile
24
38
49
47
47
47
46
56
56
56
53
62
62
61
61
59
64
69
74
80
84
88
100 90 80 70 60 50 40 30 20 10 0

27. Nevertheless... A successful resilience path was based on
• Reaction at the industry level. Taking immediate
health regulations themselves (self regulation).
• Quick public legislative action(urgency given by the
political context -2009 presidential elections ad portas-,
and the international financial crisis)
• Head of the “Salmon Industry Roundtable” acted as de facto
delegate of the President, thus in practice by-passing the
formal institutional structure of the state.
• Changing status of concessions. Start up of Health
Regulations, Surveillance Plans.
• Rescue from financial world.

28. TASKS FOR THE
CONSOLIDATION OF THE
RE-SET Resilience as adaptive ability
Securing Health
Enforcement Standards and Monitoring
Better information to focus and prioritize the audit process
Sanctions (highest and largest)
Coordinated Work
Sea lice treatments and baths
Assess the implementation of the new regulations
Expect measurable results, while eliminating redundancies
R+D+i
Focus on local diseases e.g. Piscirickettsisis (SRS)

29. • Strengthen coordinated efforts at different levels
State-Industry-Academia. Strengthen social capital
• Na6onal
Level
(recovery
of
cluster
promo6on
policy)
• Meso-­‐Regional
• Regional
• Macro
zones
and
Neighborhoods
• Seize Windows of Opportunity
• Installation of shared value as a paradigm of the industry
• Improve
links
with
territories
• e.g.
joint
KIBS
export,
at
least
to
La6n
America
• Addressing
Gaps
to
regain
compe66veness

30. JUAN PABLO ZANLUNGO MATSUHIRO
DIRECTOR PROGRAMA CLUSTER Y TERRITORIO
zanlungo@dii.uchile.cl
17 TH TCI GLOBAL CONFERENCE | CREATING SHARED VALUE THROUGH CLUSTERS FOR A SUSTAINABLE
FUTURE
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