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Marine Resources and Fishing Royalty

Marine Resources and Fishing Royalty


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By Marcel Claude

The Short Fishing Law granted an average of 80% of the catch quotas to the fishing industry, where two main economic groups predominate. How important is territorial sovereignty if it is not clearly expressed in the economic and political sphere?

A topic that always generates a lot of discussion in Chile is related to the exercise of sovereignty over the sea contained within Chilean territory. In this regard, it should be mentioned that the sovereignty that can be exercised is not only territorial, but also economic and political. Furthermore, how important is territorial sovereignty if it is not clearly expressed in the economic and political sphere? The Short Fishing Law granted an average of 80% of the catch quotas to the fishing industry, where two main economic groups predominate.


This has meant, in a few words, that Chilean citizens can no longer exercise economic sovereignty over our coasts, since the usufruct of the wealth that lies in the Chilean seas has been handed over to economic groups that are organized around their private interests that, naturally, are opposed to the public interest. We Chileans no longer own our sea, we lost it with the current fisheries legislation that gives marine resources to the sovereign dominance of two economic groups, without the country receiving any compensation for this.

In our opinion, the foregoing is one of the most serious shortcomings of the current Fisheries Law, since it has turned the country's hydrobiological resources into a generous gift from the Chilean State to these private economic "fiefdoms" that operate both in the sector fishing as in other economic sectors that exploit natural resources. According to our estimates, the transfer of assets, considering only pelagic resources, amounts to at least 1,000 million dollars. This patrimonial transfer is equivalent to the economic value of the fishing resources, which corresponds to the contribution that natural resources make to the production process.

These resources, like capital and labor, constitute a factor of production and, just as work is remunerated with wages for its contribution to the production process and capital is compensated with a certain profitability, natural resources should be remunerated for his contribution to production. This contribution is not minor, since it is obvious that without fishing resources or without vegetation cover or without geological reserves, neither the fishing industry nor the forestry activity nor the mining exploitation would be possible. The compensatory payment for the contribution of natural resources to production is called "economic rent" and should be paid to the owners of the natural resources, in this case, the country represented in the State. However, this compensatory payment does not exist in Chile and is appropriated by those who exploit the resource, turning into extraordinary profits.

The preceding discussion thus introduces us to the topic of the famous Royalty mechanism, which is far from being just another tax that would punish the industry, since its application is strictly part of the financial compensation for the contribution of natural resources to the production process. In addition to this, there are solid arguments to defend its application in our country.

In the first place, it is the fair price or remuneration that the sovereign owner of natural resources should receive, as a counterpart of the contribution that he makes by investing his resources in the production process. Just as the worker who owns his workforce receives a salary as compensation for his participation in production and the capitalist a profitability for his capital contributions, the owners of natural resources must receive a fair and consistent compensation with the real contribution that these resources make to production. It must be borne in mind that, in the case of fishing, for example, the contribution of marine resources to the fishing industry is not less, since ships on the high seas or facilities on land would not have a significant value if they were not out of the existence of the fishing resource.


It is no excuse to argue the payment of patents, since it would be absurd for the footwear industry, for example, to demand not to pay for the leather used in the production of shoes, due to the industrial patent that pays to the State to obtain authorization. to operate.

Another characteristic of royalty inherent in its nature is that of honest production costs, correcting distortions in the market, and inducing efficiency behaviors. Economics teaches us that the role of costs and prices is to promote an efficient allocation of resources, that is, to ensure that investments are made where they are truly profitable, after paying production costs.

If these are artificially reduced, for example thanks to the powerful influence of economic groups that achieve free access to natural resources, investment volumes will remain in the activity higher than those recommended by the efficiency criterion, since there will be artificially positive profits. By imposing a royalty on the use of natural resources, production costs actually rise, but it is an increase in line with the real cost of using a natural resource, that is, it would allow the real costs of said activity to be recognized.

Investment in this sector will probably be reduced, but it would be nothing more than inefficient investment that should be reallocated to another productive sector where it is capable of obtaining real and not artificial returns.

A third characteristic of the royalty is related to sustainability, which is closely linked to efficiency, since they are not conflicting criteria. By sincere production costs, not only efficiency behaviors are induced in the actors, but also sustainable uses of natural resources.

This is due to the fact that by reducing artificially profitable investments, overexploitation and levels of resource extraction are reduced, adjusting production levels towards production capable of paying real costs, among which is the economic value of depreciation of natural capital.

Finally, the fourth characteristic of the royalty is related to the goal of progress and development in Chile. Much has been argued that the application of the royalty to natural resources would threaten the country's development possibilities. Quite the contrary, the way to generate development from natural resources is precisely by investing them in the production process, but, of course, it must be, receiving financial compensation for it.

Just as a worker receives a salary with which he provides food, health, housing, education and shelter to his family, a country must receive a payment for contributing its natural resources to production, with which it can provide education, health, infrastructure , research and development to its inhabitants.

The royalty is, then, an effective, clear, consistent and efficient way of moving towards a more developed society that is capable of facing the challenge of poverty and inequality.

* Economist
Director Oceana, Office for South America and Antarctica


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Comments:

  1. Didier

    I apologize for interfering ... I have a similar situation. You can discuss. Write here or in PM.

  2. Mazumuro

    a very useful question

  3. Bobby

    Hooray! Our winners :)

  4. Kadeen

    It is the lie.

  5. Larnell

    Now all became clear, many thanks for an explanation.



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