TED Case Studies


Guano Trade


Go to All TED Cases




            CASE NUMBER:       112 
            CASE MNEMONIC:    GUANO
            CASE NAME:        Guano Trade

A.          Identification

1.          The Issue

      The historical case about guano and its impact on the trade
and the environment is an interesting one.  Guano, a natural
fertilizer made from bird droppings, was a prized commodity during
the 19th century and heavily traded by European and American
traders.  It helped build countries like Peru, expanded empires
such as the United States, made companies and individuals involved
rich, and exploited the local populations and the environment. 
Peru will be examined in detail because it was it's guano that was
most valuable to foreign traders.  Also guano and the environment
will be looked at some length and what other problems lie ahead for
the guano birds and their environment.

2.          Description

      Guano was widely used by the native populations of pre-Spanish
Latin America for centuries as a fertilizer to increase crop
yields.  However, it was not until the early 1800s that guano was
rediscovered by the Europeans to have valuable agricultural
benefits as a fertilizer.  The best source of guano was discovered
on a series of islands off the coast of Peru which are barren and
rocky with no vegetation due to lack of rain in the area.  Peru's
primary guano islands are the Chinchas, the Ballestras, the Lobos,
and the Macabi and Guanape islands.  Other islands around the
world, off Africa, the Caribbean, and the Pacific islands, also
contained abundant guano reserves, however, Peru's guano was
considered to be the best for farming.  

      Guano is made up of bird droppings amassed over hundreds of
years due to weather and ocean currents.  What distinguished Peru's
guano from guano found at other sources around the world was due to
the unique weather conditions found along Peru's coast.  Because of
the Humboldt or Peruvian Current, which flows cold water from
Antarctica to the equator along Peru's coast, this creates an
interesting weather pattern where the cold water and warm air
prevents the fall of rain in this part of the world.  Due to the
lack of rain on the islands along Peru's coast, the accumulated
bird droppings are baked in the dry atmosphere which preserves the
nitrates in those droppings from evaporating, thus maintaining its
effectiveness.  Another factor that made guano an effective
fertilizer was that its contents originated from fish-eating birds.

      The enormous fish reserves, consisting primarily of
anchovetas, have drawn a huge migration of birds and seals to these
islands.  Because of there relative isolation from natural
predators, the guano producing birds settled on these islands and
raised their young there.  Over the course of hundreds to thousands
of years and favorable weather conditions already explained, these
birds had accumulated guano reserves as 100 to 150 feet deep. 
Three types of birds are the primary producers of guano, they are
the white-breast cormorant, the gray pelican, and the white-head
gannet or piqueros.  It has been estimated that these birds,
around a million can reside on one island, to be able to create
over 11,000 tons of guano a year.  

      Guano has been an international commodity for almost 200
years.  Because of the improved crop yields that guano produced for
farmers, guano became a heavily sought after commodity.  Foreign
traders, especially the British, set up trading houses to ship
guano back to England and Europe for trade and distribution.  The
Americans also found guano to be valuable in increasing American
crop yields, and permitted American traders to help the U.S.
government acquire islands in the Pacific and the Caribbean to
ensure American reserves under the U.S. Guano Island Act of 1856. 
Due to the British monopoly of Peruvian guano, the U.S. Congress
passed the guano act to help American companies compete within the
guano market and to keep guano prices low for American farmers. 
Therefore, American entrepreneurs were given the power to claim
guano islands in the Pacific and the Caribbean in the name of the
U.S. government.  Around 60 islands were acquired or claimed under
the Guano Island Act like Pacific islands such as Howland, Baker,
and Jarvis islands, and Caribbean islands like Serranilla Keys,
Navassa, and Petrel islands were held and later released from U.S.
control when the need for guano had diminished during the 20th
century.  As the 19th century came to an end, and artificial
fertilizers were developed, guano became less important and
countries like Peru suffered from economic decline and acquired
deep debt from years of mismanaging and misusing of its guano
funds.

      During the height of Peru's golden age of guano, around 1840
to 1880, it has been estimated that the Peruvians excavated over
20,000,000 tons of guano for export, creating around $2 billion in
profits.  However, by 1909-10, Peru's guano reserves were severely
depleted and could only yield around 48,000 tons of guano a year. 
Therefore, since 1909, the Peruvian government has taken steps to
conserve its guano reserves by establishing the Guano
Administration to better manage their guano reserves by preserving
the guano birds and their environment.  Such conservation measures
include having the islands become off limits to guano companies for
half a year to allow the birds to reaccumulate their guano reserves
and allow the birds to safely raise their young without having much
disruptions from human activity.  Another measure has been
controlling the commercial fishing industry and setting fishing
quotas to preserve the fish reserves for the guano birds to feed on
and allow them to maintain their populations at a sufficient level. 
Lastly, a key measure has been to set up park preserves on the
mainland where some birds migrate and to give them safe haven from
predators.  These measures have allowed Peru to continue to use
guano for its own agricultural use in recent decades.

      Another emerging threat that could destroy the unique weather
conditions of Peru's guano islands is the warming of the earth's
oceans.  Due to the ocean warming and weather phenomenon in the
Pacific called El Nino, the warmer waters have disrupted the
ocean's eco-system within the Humboldt or Peruvian Current and
killing off the fish in that area.

      If fish reserves fall drastically, this could affect the bird
populations and ultimately lead to a sharp reduction in guano
accumulations, thus harming Peru's economy.  Furthermore, in
today's world, fish, bird, and seal populations are not the only
native life that may suffer because of guano.  Just like Peru, some
islands are still dependent on it for survival as a tradable
commodity.  Island governments in particular maybe willing to
sacrifice the animal populations for the well-being of the human
populations that have emerged or have grown over the decades. 
Therefore, while the importance of guano maybe in the past, its
impact may have a lasting effect on both the animal and human
populations that still depend on it for its survival.

3.          Related Cases

HUDSON Case
CEDARS Case
GALAPAG Case
PACTUNA Case

      Keyword Clusters

      (1): Trade Product                  = GUANO
      (2): Bio-geography                  = TROPical
      (3): Environmental Problem          = Species Loss Air [SPLA]

4.          Draft Author:     Casey Quan

B.          LEGAL Cluster

5.          Discourse and Status: AGReement and HISTorical

      In early 1996, Mr. Bill Warren of San Diego calimed Navassa
Island under the 1856 Guano Act.  Navassa is located 25 miles off
the west coast of Haiti and Warren's interested was in looking for
sunken treaure.  Navassa lies along a key route used by Caribbean
priates between the strongholds of Tortuga and Point Royal. 
Navassa also contains 1,156 acres or guano at least 20 feet deep
that can sell to ogranic citrus farms in Florida fro $400-600 per
ton.

      Claimed in 1856, Navassa was abandoned in 1889, when 150 black
miners revolted and killed the white managers of the oepration.  In
1916, the U.S. Coast constructed a light hosue.  At that time, the
island was home to 30 pound igaunas and goats "as big as ponies." 
The goats were left off by pirates in 1660s.  In 1929, the light
house was mechanized and humans left the island.  The State
Department has created an inter-agency committe to study the claim.
(Gugliotta, 1996)

6.          Forum and Scope: PERU and UNILATeral

7.          Decision Breadth: 3 (Peru, UK, and USA)

8.    Legal Standing: TREATY

      The guano trade was a commercial venture between the Peruvian
government and the interested foreign companies.

C.          GEOGRAPHIC Clusters

9.          Geographic Locations

      a.    Geographic Domain:      PACIFIC
      b.    Geographic Site:        Eastern Pacific [EPAC]        
      c.    Geographic Impact: PERU

10.         Sub-national Factors: NO

11.         Type of Habitat: OCEAN

D.          TRADE Clusters

12.         Type of Measure:        Export Ban [EXBAN]

13.         Direct vs. Indirect Impacts:        DIRect

      Because the regulations determine when a company can harvest
the guano and how much fish can be captured for market to preserve
bird populations.

14.         Relation of Measure to Environmental Impact:  DIRect

      A. Directly Related:          YES  GUANO
      B. Indirectly Related:        NO
      C. Not related:               NO
      D. Process Related :          YES  HABITat Loss

      Habitat loss is an issue because of the lack of measures to
regulate the guano trade, the guano birds' habitats were seriously
affected as their existence was at risk with the destruction of
their nesting areas.  However, by the 20th century, measures were
taken to preserve the guano birds and their habitats by limiting
the amount of guano that is exported and the amount of fish that is
caught to ensure a stable food supply for the guano birds.)

15.         Trade Product Identification:       Guano

16.         Economic Data

      Industry output in 1920 was 11,400 tons, equal to $500,000
(1920 dollars).

17.         Impact of Measure on Trade Competitiveness: MEDium 

            During the 19th century, the guano trade was extremely
competitive between the United States, and Peru had few
restrictions in trading of guano.  The United States claimed
islands in the Pacific and the Caribbean to keep guano prices down
for American farmers.  However, when Peru's guano ran out, Peru was
no longer seen as a significant economic power and put up
restrictions to excavating guano, therefore slowing down its trade
of guano, but still allowing the trade of guano.

18.         Industry Sector: MINEral

19.         Exporters and Importers: PERU and EURCOM

E.          Environment Clusters

20.         Environment Problem Type:  HABITat Loss

      Reckless digging up of guano could severely deplete the bird
population as nests would be destroyed and the birds unable to find 
a suitable and save place to nest and raise young.

21.         Name, Type, and Diversity of Species

      Name:             Birds
      Type:             Many
      Diversity:        18,246 higher plants per 10,000 km/sq (PERU)

      Three kinds of birds are primarily: white-breast cormorant,
big gray pelican, and white-head gannet.

22.         Impact and Effect: HIGH and REGUlatory

            If all of the guano was excavated at once, it would have
a serious impact on Peru's economy, and have a strong impact on the
bird populations.  Indirectly, the global warming is also effecting
the oceans and possibly destroying and depleting the fish supply
which would seriously hurt the bird populations since the guano
birds are dependent on fish as a food source.)

23.         Urgency and Lifetime: LOW and several years

      So far, the bird populations are healthy, but if the fish
supply goes down, then the birds would be at risk of starving to
death due to global warming of the oceans.

24.         Substitutes:  SYNTHetic

      Today, chemical processes are available to make more effective
fertilizers.

F.          Other Factors

25.         Culture:    NO (It was trade for income and development.)

26.         Trans-Boundary Issues:        NO

      The guano islands were within Peru's territorial waters, and
no known disputes over guano.

27.         Rights:  NO

28.            Relevant literature

Coker, R. E.  "Peru's Wealth-Producing Birds."  The National
      Geographic Magazine (June, 1920): 537-566.

Gottenberg, Paul.  Imagining Development.  Berkeley: University of
      California Press, 1993.

Green, Marilyn. "The Ballestas, Peru's Richest Islands."  Oceans
      (May-June, 1986): 48-51+.

Guy Gugliotta, "Dropping Anchor to Claim Fortune in Government
      Guano," Washington Post. 11/12/1996, A15. 

Murphy, Robert Cushman.  "Peru Profits from Sea Fowl."  The 
      National Geographic Magazine (March, 1959): 395-413.

Skaggs, Jimmy M.  The Great Guano Rush.  (New York: Saint
      Martin's Press, 1994).

                                  References





Go to Super Page

1/11/97