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Cablegate: Prices Rise in Mali: Bad, but Not yet Critical

VZCZCXRO6044
RR RUEHMA RUEHPA
DE RUEHBP #0391/01 1141702
ZNR UUUUU ZZH
R 231702Z APR 08
FM AMEMBASSY BAMAKO
TO RUEHC/SECSTATE WASHDC 9049
INFO RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 BAMAKO 000391

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD EFIN PGOV ML
SUBJECT: PRICES RISE IN MALI: BAD, BUT NOT YET CRITICAL


1. SUMMARY: Urban consumers are becoming increasingly
concerned as prices of basic commodities skyrocket in Bamako
while the government attempts to implement measures to reduce
pressure on the cost of living. An informal survey in the
local markets gives a picture of the extent of the price
hikes demonstrating the pressure put on urban consumers in a
country where most subsist on less than a dollar a day.
Despite interventions on the part of the government,
including a modest salary raise, lifting import taxes on
certain goods, and creating a new National Price Council,
labor unions and consumer advocacy groups warned of the
potential for civil unrest if further measures are not taken.
END SUMMARY.

-------------
PRICE SURVEY
-------------

2. During the past year, prices of major consumer staples
have increased from 20 - 50 percent. While the hike in most
prices is due to increased prices worldwide, Mali's 2007-2008
agricultural production season, which has not met local
demand, has also played a role. The overall food stock
picture is good, but with local production not meeting local
demand for certain products, and the rise in the price of
production factor, overall prices have risen with the impact
being passed on to consumers. The following approximate
prices illustrate the extent of the increases over the past
year.

-- Rice: .67 USD to .84 USD / kg
-- Millet: .43 USD to .60 USD / kg
-- Beef: 2.89 USD to 3.86 USD / kg
-- Cooking oil: 1.45 USD to 2.17 USD / liter
-- Powdered milk: 3.14 USD to 4.59 USD / kg
-- Sugar: 35.00 USD to 45.00 USD / 50kg bag
-- Bread: .60 USD to .72 USD / baguette (on
top of a reduction in size)
-- Charcoal: 8.45 USD to 16.90 USD / 100kg bag
-- Cement: 266.00 USD to 362.00 USD / ton
-- Laundry: .48 USD to .72 USD / three-piece
"ample" boubou

---------------------
LOCAL GROUPS PROTEST
---------------------

3. Both the major umbrella labor union (UNTM) and the
Association for the Defense of Consumers' Rights (REDECOMA)
had made public statements as early as July 2007 on the
deteriorating economic situation, requesting that the
government take immediate action so that even the poorest
Malians could afford basic necessities. At that time, the
GOM made several initiatives to help remedy the situation,
including raising salaries 5 percent, freezing taxes levied
on certain imported goods, and setting up a think tank to
address the issue of inflation. Despite these measures, UNTM
Secretary General Siaka Diakite complained that tax breaks

SIPDIS
and customs duty exonerations only benefited major importers
(and their civil service "accomplices") who did not pass the
savings on to the consumers in the form of lower prices.
Diakite warned the GOM during a press conference at the end
of March that if swift and effective measures were not taken
immediately, he "could not guarantee that Malians would not
riot violently" as experienced in neighboring countries.
(Note: Occasional protests to date have all been prearranged,
small-scale, and peaceful, and violence is unlikely at this
time. End note.) Following Diakite's outburst and increasing
criticism from several opposition parties, the GOM invited
UNTM for a meeting on April 2 to assuage union leaders' fears.

4. The consumers' advocacy group has also complained about
the lack of consistency in the GOM's policy, noting that a)
while the 2007-2008 rice production was insufficient for
local demand, high quality Malian rice was exported to
neighboring countries, reducing the quantities available on
the market and pushing prices upward; b) rice producers did
not have a healthy production yield due to ineffective
management of water resources by the Niger River Valley
Authority; and c) despite the abundance of livestock, the
price of beef is increasing due to the lack of a sound meat
industry policy.

-----------
GOM ACTIONS
-----------

5. The Prime Minister has called for a (perhaps overly)
ambitious 50 percent increase in rice production next year to
allow Mali to become a net exporter in that area. While
arguably difficult to realize, increasing productivity is a
sound policy response. Some measures, such as applying
fertilizer to each plant rather than covering the whole

BAMAKO 00000391 002 OF 002


field, and improved water usage, hold promise, but require an
active farm extension service to train farmers; such
technical outreach and assistance is currently beyond Malian
capacity.

6. The GOM has lifted the 28% import duty on imported rice
for the period of April 1 to September 30, 2008. This
measure offers the exoneration benefits to all interested
importers as opposed to a previous initiative which only
benefited the largest importers. Additionally, the Director
of Trade has imposed a ceiling on the price of the lowest
quality of rice, capping it at 0.75 USD/kg. Premium rice
will not benefit from import duty exonerations or have a
ceiling set on its price.

7. The GOM recently created a new inter-Ministerial Council
on Prices charged with the tasks of evaluating prices,
proposing measures to control prices, and presenting the GOM
an annual report on prices, inflation and the cost of living.

8. Another announcement coinciding with the uproar over
escalating prices was the replacement of the Minister of
Economy, Industry and Commerce Mrs. Ba Fatoumata Nene Sy with
one of her economic advisors, Mr. Ahmadou Abdoulaye Diallo.
While some accounts attribute her departure as a political
casualty caused by the rising cost of living, most indicate
it was for general incompetence; she had very poor
communication skills, and seemed completely lost managing a
ministry.

9. COMMENT: It is clear that Mali is suffering from the
world-wide increase in prices exacerbated by its dependence
on many imported goods, but violent protests are not likely
for the moment. Mali's recent focus reflected in the Prime
Minister's plan to increase production is a sound response.
The biggest pressure on food security is in the north, where
local production is insufficient to meet demand and Malian
sellers find it easier to meet orders from neighboring, and
food-strapped, Mauritania and Niger than sell to northern
Malian consumers. In addition, donors have made numerous
recommendations to Malian policy makers on medium and long
term solutions, including leveraging domestic resources by
processing meat locally instead of exporting live animals, or
processing milk locally rather than importing it from a
global market hit by skyrocketing prices. Assistance
agencies, including USAID, are also encouraging the GOM to
focus on revenue generating crops, promote improved
technologies and further improve access to all inputs to
better increase domestic production. In the short term, it
seems the GOM is doing just enough to keep consumer unrest at
bay.
MCCULLEY

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