Juan David Vivas M1

1. Define the term "negative externality" in the context of the fishmeal industry
described in the article. Provide an example of a negative externality associated with
this industry. (4 marks)
Negative externality is defined as the action of a consumer or producer that have a negative impact
on third parties who are not part of the action and who’s interest is not involve. In the case of the
fishmeal industry, the producer of Chimbote is generating negative effects on third parties, by the
residents near to the industry are suffering from diseases such as pulmonary cancer, delivered by the
production of the industry. The negative externality is seen as the producer is not taking into account
the health of the neighbors.

2. Explain how the fishmeal industry in Chimbote, Peru, generates negative

externalities. Identify at least two negative externalities mentioned in the article
and discuss their impact on the local community and the environment. Use diagrams and
connect them to the text to support your explanation. (8 marks)
The fishmeal industries in Chimbote, Peru, are generating considerable negative externalities not
only on the neighbors near to the industries, but also on the environment of the zone. The two main
negative externalities that can be identify are the overexploitation of resources on the zone, such
fish, and the deaths due to the quarantine during of the COVID-19 and the bad quality of safety
restrictions inside the industries. These negative externalities are an effect of the lack of
consideration of the third parties during the process of production, also the purpose of the industries
that are only to maximize their profits and not respecting the natural resources and the quality of life
of their workers.

3. Describe the relationship between the fishmeal industry's production activities and the
concept of "smells like Chimbote." How has this slogan evolved, and why has it gained
negative connotations? (4 marks)
The slogan refers to the situation that the neighbors of Chimbote experience as being a fisher town.
As some of the negative externalities produced by the processing plants of fish, one of them is the
bad smell, so “smells like Chimbote” means something stinks.
4. Discuss the market failures that are evident in the fishmeal industry in Chimbote. How do
these market failures contribute to the overexploitation of resources, pollution, and poor
labour management described in the article? (4 marks)
The negative externality of the production of the fishmeal industries, leads to a bad quality of the
people who lives near to the industries, by causing on them diseases and pollution over their
environment. As well there is an evident over exploitation of resources, as the firms do not care
about scarcity of fish , and they only been focus on the increase of their profits. Also at the time of
quarantine during the pandemic of COVID-19, the workers has to continue going to work without
the industries reaching some health and quality standards of safe.
5. Evaluate the effectiveness of the measures taken by the fishmeal industry to address its
negative externalities. Identify and explain one specific action the sector brings to mitigate
negative externalities and assess whether it is sufficient to address the associated problems.
(6 marks)
The production and process of fishmeal on this industries generates negative externalities and they
are not evaluating or taken into account those third parties, the only purpose of this industries is to
invest and reinvest their gains in order to increase their profits and production. One way to repair the
third parties, could be that instead of reinvest some millions, they could give some subsidies or
support to the people that died from the COVID-19, while they were working in the industry.