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Peru's vanishing fish: Rampant cheating and lax controls plague industry

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CHIMBOTE, Peru -- This northern port reeks of rotten fish year-round, but when anchoveta season begins in late November, its long row of factories belch oily columns of nauseating smoke that impregnate everything within miles.

"That's the smell of money," a smiling cabbie tells visitors he sees wrinkling their noses as they approach the 27 de Octubre industrial zone, where more than 20 plants throb with activity.

Peru is the world's second largest fishing nation after China, and 85 percent of its catch is anchoveta. It tastes like anchovy yet is seldom salted; some people eat it like sardines. Almost all is boiled down to fishmeal, a feed for farmed fish and pigs. Peru exported more than a million tons in 2010, mostly to Asia, worth $1.6 billion.

Each year up to 6 million metric tons of anchoveta reach the docks of more than 100 fishmeal plants, along with others that can it and make byproducts. What happens inside these factories is known only to company personnel and contracted inspectors.

ICIJ, penetrating these plants, found that at least 630,000 metric tons have vanished over the past two and a half years between the holds of boats and factory scales. That is more than all the fish British fleets land in a year.

The Ministry of Production, which governs fisheries, denied access to the database that records the catches. But ICIJ, working with the Peruvian investigative reporting group IDL-Reporteros, obtained and analyzed records back to 2009 of more than 100,000 landings of anchoveta in northern and central ports, where 90 percent of fish arrives. Each landing is a separate vessel's catch.

The result is stunning: 52 percent of landings between 2009 and the first half of 2011 had discrepancies of more than 10 percent between fish declared by vessels and fish weighed in the plant.

Those 630,000 "missing" tons of anchoveta -- worth nearly $200 million as fishmeal -- were simply not counted. Phantom fish are not taxed and companies avoid a fishing-rights fee levied on each ton caught. They do not count against companies' fishing quota. Fishermen, paid by catch weight, are cheated out of earnings.

The database only records anchoveta. For jack mackerel, a severely overfished species in adjacent waters, there's hardly any control. ICIJ's investigation found that in the past four years, quotas were exceeded about half the time.  Vessels also landed high percentages of undersized fish.

These findings fit into a larger picture of overfishing and scant control in the southern Pacific. In two decades, jack mackerel has plummeted from a stock of about 30 million metric tons to less than 3 million metric tons. Asian and European fleets that have depleted other oceans now head south to waters off Peru and Chile.

Anchoveta, like jack mackerel, reflect a telling microcosm of this global crisis.

Cheating at the Scales

Indelesio Velásquez has fished anchoveta for 40 years, 25 of them as a fishing master. He can see at a glance how much he has caught. The hold is calibrated according to Coast Guard specifications.

"When the master looks into the hold, he knows how much fish he's bringing." Velásquez said. "You're not going to cheat him."

As a boat ties up at a plant's wharf, its master reports his calculation to an inspector. The anchoveta is then conveyed to a massive scale that weighs several tons at a time. Fish cannot escape en route, and yet ICIJ found that sometimes as much as 50 percent go missing.

A wide range of specialists consulted -- company executives, fishermen and inspectors -- said a master's estimate might be reasonably off by 10 percent. Beyond that, it is suspicious.

The government has been recording declared and weighed catches since 2004. Besides tracking fraud, these have a vital purpose: to prevent overfishing. Researchers at the Cayetano Heredia University calculated that if Peru's 100 fishmeal plants worked around the clock -- 9,000 tons an hour -- they could process 30 times more anchoveta than the annual quota set by the government.

But control has no point if scales show the wrong weight. In August 2009, a ministry audit analyzed scales at seven companies. It found 31 percent of those tested had evidence of serious manipulation. This included unauthorized password changes to control panels and altering the software that records the readings.

Rolando Urban, manager of Cerper, the inspection company that conducted the audit and also inspects weighing, said examiners found tampering with software that Cerper is not responsible for monitoring. The results were not published, and the government did not improve computer security.

Critics of the system say conflicts of interest put pressure on inspectors. Cerper and SGS, the other contracted company, are paid by the fishmeal plants they scrutinize. In Chimbote, and later in Lima, SGS officials declined to speak on the record. Privately, supervisors in both companies told ICIJ the system is flawed.

But some inspectors openly discuss irregularities they see.

In the northern town of Coishco, Úrsula Gutiérrez, a Cerper inspector, told ICIJ that her colleagues have seen security seals broken on control panels that track weight at the plants. This indicates weight could have been manipulated.

Gutiérrez showed the handwritten logbook where she records official weights. "The last boat declared 400 tons," she said, "and in here it says 303 tons. So there's a difference of 100 tons." But, she added, her job is only to record numbers and send them to the ministry.

Control is particularly scant in the south of Peru, in remote little ports like La Planchada. Its 300 families have electricity for only five hours a day. Often, fish arrive in darkness.

Three inspectors played soccer near the larger of two La Planchada fishmeal processors: China Fishery Group, a subsidiary of the Hong Kong-based marine products empire, Pacific Andes International Holdings. They said colleagues were inside, but there was no way to confirm this. A sturdy fence surrounds the plant.

ICIJ's analysis of catches found industry leaders among the worst offenders. Ten large companies own more than 60 percent of Peru's anchoveta rights. Of those ten, at least eight have repeated discrepancies between fish declared and fish weighed: four with Peruvian ownership, one from Hong Kong and three others with Norwegian investment.

Two Peruvian companies, Humacare and Exalmar, stood out among the numbers. For Humacare, 90 percent of landings had irregularities of more than 10 percent. For Exalmar, the figure was 88 percent. At, times, half of the reported catches vanished by the time they got to the scales.

Raúl Briceño, operations manager at Exalmar, the larger of the two, blamed miscalculations by fishing masters who had to rely on visual estimates. He said 45 percent of the fish Exalmar processes is from independent fishermen who would go elsewhere if they thought they were being cheated.

In a written response, the company also noted that fish lose liquid -- thus weight -- as they are transferred from the vessel to the factory. Humacare did not respond to requests for comment.

Richard Inurritegui, president of the National Fisheries Society, the leading industry group, played down the investigation's findings. He said that masters' estimates cannot be compared to what the scale says. None of the companies consulted acknowledged any irregularities.

Black Holes

Soon after President Ollanta Humala took power last July, the new fisheries deputy minister, Rocío Barrios, said some of her aides hid from her reports of discrepancies in anchoveta catches. She fired several civil servants and also filed legal procedures to bring some to justice.

Kurt Burneo, minister in charge of fisheries until December, publicly denounced what he said was complicity between some officials who supervise landings and the contracted inspection firms.

Beyond discrepancies in tonnage, he said, the government found repeated flaws in inspection reports, which prevented authorities from imposing fines. Also, he said, some officials removed files from the ministry. A series of irregularities allowed companies to appeal a large majority of fines.

In 2009, a new law assigned quotas directly to each vessel. This was announced as a measure to limit overfishing and corruption. Six of the companies that showed high irregularities in the ICIJ analysis financed consultants who helped the government draft the law.

ICIJ obtained records that suggest that the new system doesn't provide better controls than the past one. A sampling from 2008 found that half of the landings from six ports had discrepancies above ten percent. The situation did not appear to improve after the new law was passed. Cheating remains similar and in some seasons has possibly worsened.

A new minister took over last December. Deputy fisheries minister Jaime Reyes Miranda acknowledged in an interview with ICIJ that there are "serious problems" with scales at fishmeal plants and said the government is trying to find a solution to make sure anchoveta numbers are not manipulated.

Turning a blind eye

For jack mackerel, the system imposes almost no control at all. The government relies on vessel owners' catch declarations.

In 2002, Peru banned the use of jack mackerel for fishmeal, reserving it for human consumption. Yet with almost no oversight, this is difficult to enforce.

Jack mackerel landings were 26 percent above quotas in 2008, according to documents from Imarpe, Peru's government-financed marine research institute. The next two years, fish were so scarce that ship owners could not find enough to reach their share. In 2011, jack mackerel was abundant again and companies overfished the quotas by at least 2 percent and likely more.

In some cases, the Ministry of Production set quotas that were higher than Imarpe recommended. According to documents from the research institute obtained by ICIJ, in February 2008, then-minister Rafael Rey fixed a monthly quota of 38,000 tons for February and March -- 8,000 more than what scientists prescribed.

In 2011, the government wanted a higher catch because of a campaign, in conjunction with Peru's six largest jack mackerel enterprises, to sell the fish at reduced prices in low-income neighborhoods.

Jorge Villasante, then minister of production, said only a thousand tons of fish were sold at reduced price by mid-year. That was about half of one percent of the nearly 200,000 tons companies caught that year, including the six that participated in the government campaign. The rest were sold at market rates.

Government records also show that Peruvian nets now capture too many undersized fish, threatening reproduction.

"All we see now are little jack mackerel," Úrsula Amesquita said at her restaurant near China Fishery in La Planchada. Artisan fishermen confirm that most fish they see at the wharf are no more than 15 centimeters long.

The law declares that no more than 30 percent of a landing can include jack mackerel of less than 31 centimeters. But this is hard to monitor.

Imarpe does not make public its reports on juvenile jack mackerel catches, nor does it publish quota recommendations it sends to the ministry.

ICIJ obtained a report that shows that almost 60 percent of the more than 26,000 tons caught in 2009 were below minimum size. In January and February 2011, the months when fish have most recently spawned, 91 percent of jack mackerel were too small.

In the majority of cases, the ministry approved exceptional provisions to allow increased fishing of undersized jack mackerel. Almost always, this was for the industrial fleet rather than for artisanal fishermen.

Deputy fisheries minister Reyes Miranda, accompanied by Imarpe scientists, acknowledged in an interview with ICIJ that previous administrations allowed fishing of juvenile jack mackerel, putting the stock at risk.

"This is wrong," said biologist Gladys Cárdenas, Imarpe's chief scientist. She explained that juveniles are responsible for replenishing the stock. "If we catch them too young, they haven't had time to mature and reproduce. Minimum-size regulations must be respected at all times.

The reality suggested by the records ICIJ analyzed is that fisheries reform in Peru has been erratic, with short-term planning that does not eliminate cheating. Fish stocks cannot be accurately assessed because of weight fraud.

In La Planchada, fisheries engineer Wilfredo Lévano, an Imarpe agent, told ICIJ: "There is always robbery at the scales -- here less, there more. In the end, everyone does it."

Back in Chimbote, Javier Castro, a labor union leader, said that successive governments show little willingness to protect Peru's lucrative waters. "I've had no confidence for decades," he said. "Nothing changes."

Continue this story and read more investigations at iWatch News

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