SalmonChile's Cesar Barros acknowledged a difficult road ahead for the hard-hit salmon farming industry. (Photo: SalmonChile/Stock File)

Govt dismisses special provisions system for salmon firms

CHILE
Thursday, April 16, 2009, 02:00 (GMT + 9)

The Chilean Government has rejected the possibility of establishing a special system of provisions for the salmon farming industry despite the banks having reached a ‘reasonable understanding’ earlier this month with sector firms on debt refinancing.

Governmental bank authorities and executives of Chilean salmon farming companies have been long trying to reach an agreement that allows the sector to overcome its problems caused by a devastating outbreak of viral infectious salmon anaemia (ISA).

At the beginning of year, the Association of Banks and Financial Institutions (ABIF) made several requests in favour of additional sector development to the Ministries of Housing and Economy. One of the proposals centred on defining "a special system of provisions that allows the bank to support companies without affecting their minimum level of regulatory patrimony."

According to ABIF: "The lack of an incentive of this kind favours an accelerated execution and liquidation of the industry. [Moreover,] a policy of specific sector provisions is required for the transitional period." 

The Government rejected the proposal however, stating it does not allow for the establishment of special provisions geared to a specific sector.

The authorities argue that the norms of the Supervisory Bank Authority on the matter are general, meaning it is up to each bank to draft provisions or punishments according to its own evaluations of each client, Diario Financiero reports.

Likewise, the government discarded the proposal of sector debt capitalisation by part of the bank.

"As is the situation, I believe that [capitalisation] is not necessary, except in the salmon farming sector because it requires a complete reconstructing, and it would be very positive if we could do it quickly," said Lionel Olavarria, the general manager of Bank Credit Investments (BCI).

The president of the Salmon Industry Association AG (SalmonChile), Cesar Barros, in turn recognised that "the indebtedness of the salmon farming firms is not going to be solved from one day to the next," and estimates the capitalisation process might begin once production becomes normal again.

"We are in permanent contact with [ABIF Technical Advisor] Jorge Claro and I hope that we will move forward. It is a long road ahead, and not a simple subject either for them or for us, but the will is good," said the head of the association.

Barros also trusts the Chilean salmon farming industry will recover its competitiveness in the post-ISA era and overcome a recent spate of red tide.

"We have the know-how, good overseas demand exists for the product, Chilean executives know how to produce, and we have the natural resources. In addition, the sanitary norms that will come out with the [Fisheries] Law will allow us to start afresh. Lowering production has given us a respite in terms of taking our time and being able to do things right," said the SalmonChile President.

Related article:

- Salmon sector refinancing deals underway

By Analia Murias
editorial@fis.com
www.fis.com