Socioeconomic impacts of Covid-19 on the aquaculture sector: contributions from Chile EfD researchers

The economics and social impacts of the Covid-19 pandemic have risen a big alert among all industrial sectors worldwide. This is also the case for the Chilean aquaculture industry, which has been highly affected by price fluctuations, restrictions on exports, and workforce mobility. Aquaculture is a strategic industry in the Chilean economy and plays a key role for national and international food security. Besides, the industry is a source of employment for local communities. Thus, an exogenous shock like Covid-19 may generate transformations in the aquaculture sector, with potential effects and responses over the whole production chain.

Covid-19 pandemic has affected the salmon industry’s value chain globally. Using information available through internet open sources, EfD researchers found short-run effects in the commercialization phase of the aquaculture industry in the main markets around the world. Some effects include increased transport costs, reduction of purchase orders, and, consequently, lower benefits. The industry has taken actions on this matter, mainly oriented to increase the participation of domestic local markets and link actors in the value chain through the development of digital platforms. Direct effects were also observed in the processing, and farming stages. The pandemic reduced the availability of productive inputs, constrained workforce mobility, and extended transportation times, reducing production levels. Public sectors reacted by a series of instruments and measures such as credits, subsidies, and the protection of labor supply. Besides, some governments made a short run temporal decision of relaxing production and environmental standards. From the processing sector perspective, responses took the form of changes in storage strategies and type of products, for example, by increasing the production of frozen seafood products.

The effects of Covid-19 on prices and exporting volumes were also analyzed. By using time series models, researchers forecasted salmon prices with and without a Covid-19 scenario until December 2021, with data from the Atlantic salmon market in Miami, USA. The main results show a decline in Chilean salmon prices during the pandemic, reduction that is more pronounced than Norwegian salmon prices. Estimations suggest that Covid-19 price effects will vanish by the end of 2021. Thus, results suggest that effects on Chilean prices are transitory and increase the historical price gap between Chilean and Norwegian prices.

Finally, researchers studied the effects of Covid-19 on employment in the Chilean aquaculture sector. Based on formal occupation data, the study shows an increasing number of temporal suspended workers during the pandemic. Nevertheless, the aggregated impact is small, accounting only for 1% of total labor force employed in the sector. The effect is mainly explained by temporal suspended workers in large firms (67%). The negative effect on employment is more evident during the first months of the pandemic, with an increasing number of suspended workers coming from small and medium-sized enterprises in later months. The basic reasons for the small impact on employment seem to be related to the industry’s capability to reorganize and redirect its exports to final markets and the fact that the aquaculture industry, as part of the food industry, was declared an essential industry by the Chilean government, which allowed it to operate during the pandemic.

This work was carried out by researchers affiliated to the Socioeconomic Sustainability research line of the Interdisciplinary Center for Aquaculture Research (INCAR). A subgroup of this team are EfD Chile researchers. Results were presented at the INCAR 2020 plenary meeting, where other contributions of the INCAR center to Covid-19 research were also discussed.

 

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News | 30 November 2020