By Gideon Long

SANTIAGO, June 19 (Reuters) - Chile is damaging its picturesque southern lakes by using them to raise young salmon, so it should nurture the fish in man-made ponds instead, the World Wildlife Fund said on Tuesday.

The group said Chile, the world's second-biggest producer of salmon behind Norway, could make the switch easily, quickly and relatively cheaply.

It would involve the construction of six farms at a cost of around $43 million -- just 2 percent of the money the country makes from salmon exports each year.

"There's no reason why this can't be done in the space of a few years," WWF Vice President for Markets Jason Clay told Reuters at the publication of the group's report on the Chilean salmon industry.

The Chilean association of salmon producers, SalmonChile, said the WWF report put too much emphasis on the impact of the salmon industry on the lakes and not enough on the effects of other sectors like agriculture and tourism.

"Our sector is the most regulated there is in the lakes," SalmonChile President Cesar Barros said in a statement.

Salmon producers use 16 lakes in southern Chile to nurture young salmon, known as smolt. When the fish are large enough, they are transferred to offshore farms in the nearby Pacific Ocean.

The WWF says a huge increase in smolt production is destroying the ecosystem of the lakes, many of which are ringed by green hills and snow-capped volcanoes and draw thousands of visitors each year.

Oxygen levels in some lakes have fallen sharply as the number of salmon has soared, curbing supplies to other fish species and sometimes killing them.

Chilean salmon production has increased more than 10-fold in the past 15 years, from 33,000 tonnes in 1991 to 387,000 tonnes in 2006, according to government figures.

Last year, Chile made $2.2 billion from exports of salmon, and has vowed to overtake Norway within a few years to become the world's biggest producer.

The WWF said there was no reason why the smolt could not be nurtured in man-made "recirculation plants" fed by a constant supply of fresh water.

Chile has one such plant, operated by Norway's Marine Harvest <MHG.OL>, the world's biggest salmon producer. The WWF said the construction of six more plants would be enough to meet industry needs.

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