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May, 2010

Making Good out of the Earthquake

By Ruth Bradley
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Can disaster be transformed into opportunity? That is what one Chilean seafood exporter would like to prove by helping artisan fishermen make a better living out of their catch.


New fishing boats in Tubul.

In April, Javier Donoso, a Chilean entrepreneur, spent three weeks visiting clients in four Asian countries and, after a brief home stop, was off again to Europe. On both continents, he was explaining why the seafood export company he founded in 1993 has had to reschedule its shipments for this year.

The company, Geomar, has its canning plant and distribution center in Coronel, just south of the city of Concepción, one of the areas of southern Chile that suffered the worst devastation in the earthquake of February 27. But it wasn’t the earthquake that interrupted Geomar’s shipments.

It did some damage but nothing very serious, says Donoso, and, sheltered by a peninsula, its installations escaped the ensuing tsunami that ravaged so many coastal towns. The real problem for Geomar which exports to some 20 countries worldwide, including incipiently the United States, was the looting that followed the earthquake.

In two days of pillaging, it lost some US$2 million in stock or, in other words, around a fifth of its annual sales. “We’re not talking about basic necessities,” points out Donoso, “because what we lost were expensive, gourmet products like king crab and abalone.”

Insurance will cover most of Geomar’s losses and, by mid-April, it was processing again, albeit at 50% of its capacity. But it has another problem - the artisan fishermen around Coronel, who provide it with raw materials, were hit by the tsunami and it washed away many of their boats. 

Geomar can source some of its raw materials from other parts of the country - its king crab, for example, comes from Punta Arenas in the far south, which was not affected by the earthquake. But, rather than just waiting for its local suppliers to recover, it is helping them to do so and believes that, in the process, it can pluck a silver lining from the earthquake.

It has joined forces with Endeavor, a U.S.-based organization that promotes entrepreneurship, to raise money from private companies - principally AFP Habitat, Chile’s second largest private pension fund administrator - to buy them new boats, outboard motors and diving equipment. But better ones than they had before.

The new boats aren’t made out of wood like the old ones, but fiberglass - “it’s easier to keep clean and means better health standards,” notes Donoso - and their motors will pollute less than the old ones. They will, in addition, be equipped with GPS, making it easier to be sure they are fishing only in permitted areas.

“We’re putting up some money but Geomar’s main contribution is to use our local knowledge to select the recipients,” says Donoso. By the end of May, the project’s partners hope to have delivered 30 boats but it won’t be easy. The motors have to be imported and local distributors are struggling to keep up with demand.

Getting the boats to their destination is also a challenge. They are going to Tubul, a fishing village across the Gulf of Arauco from Coronel, but earthquake damage means that trailers can’t get there by road and the new boats have to be unloaded further up the coast and sailed across.

However, as well as getting its suppliers back out to sea as soon as possible, Geomar also aims to use the crisis as a way to foster a longer-term transformation of artisan fishing. “Ours is a finite project that we expect to complete within a couple of months, but we hope it will serve as a model for others, including the government,” says Donoso.

The underlying aim, he explains, is to help artisan fishermen to become “better businesspeople”. One of their current problems is that, for reasons often as simple as lacking the means to transport their catch to processing plants or the nearest large town, they fall into the hands of intermediaries.

As well as biting into their earnings, this helps to perpetuate the informal nature of the business. “Intermediaries often don’t pay taxes and don’t add value,” points out Donoso.

That is also a problem for processors like Geomar. Buying from an intermediary means that it is difficult to know where a catch really came from, interrupting the chain of traceability that is increasingly demanded by clients in ever more sophisticated export markets.

In a bid to break this vicious circle, the new boats will not initially go to individual fishermen, but to the Tubul Fishermen’s Association. The idea, says Donoso, is to get the association to work as a cooperative, offering it an opportunity to develop the latent negotiating power that could eventually allow its members to dispense with intermediaries.

Two years on, ownership of the new boats would be transferred to individual fishermen, but only on one condition. They will in the meantime have had to reinvest part of their earnings in social projects in their community.

That is partly for humanitarian reasons - many of Tubul’s 2,000 inhabitants were left homeless by the earthquake - but also in order to encourage local initiative. “The attitude of just sitting back and waiting for help to arrive is less prevalent than it was, but it’s still a bad habit,” says Donoso.

But he also envisages a future in which today’s artisan fishermen and, eventually, their children could make a better and more sustainable living out of the resources at their disposal. If that future were to emerge from the earthquake,  it would, indeed, be a silver lining - not only for the fishermen themselves, but also for the exporters, like Geomar, that they supply.

Ruth Bradley is the Santiago correspondent of The Economist.