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Cablegate: Impact of Rising Food Prices in Cote D'ivoire.

VZCZCXRO4061
RR RUEHMA RUEHPA
DE RUEHAB #0279/01 1231402
ZNR UUUUU ZZH
R 021402Z MAY 08
FM AMEMBASSY ABIDJAN
TO RUEHC/SECSTATE WASHDC 4193
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUEHGV/USMISSION GENEVA 0614
RUEATRS/DEPT OF TREASURY WASHDC
RUEHRC/USDA FAS WASHDC 0132
RUEHRN/USMISSION UN ROME 0017

UNCLAS SECTION 01 OF 04 ABIDJAN 000279

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT FOR EEB/TPP/ABT/ATP JANET SPECK
TREASURY FOR R.HALL, D.PETERS
USMISSION ROME FOR US REPRESENTATIVE TO FAO
DAKAR FOR FAS R.HANSEN
ACCRA FOR USAID/WARP KMCCOWN

E.O. 12958: N/A
TAGS: EAGR EAID ETRD ECON PGOV PREL
SUBJECT: IMPACT OF RISING FOOD PRICES IN COTE D'IVOIRE.
RICE IS A MAJOR PREOCCUPATION

REF: A. SECSTATE 39410

B. ABIDJAN 00214

ABIDJAN 00000279 001.2 OF 004


1. (SBU) Summary. The global price rise in basic foodstuff
commodities is having a serious impact on Cote d'Ivoire,
particularly the rise in rice prices. Imported rice has
become substantially more expensive compared to its local
competition in the past 18 months. The government has
attempted to stem the impact on consumers, as well as mollify
demonstrators during an election year, by cutting consumption
taxes (reftel b). While there is a substantial supply of
substitute foodstuffs (cassava), considerable portions of the
populace are already in or face a situation of "food
insecurity." Rice remains far and away the most important
commodity consumed in Cote d'Ivoire that is affected by the
global economic situation, and is the subject of intense
efforts by the government and international community to
boost production in the coming two-three years. Embassy has
been asked to help facilitate the import of U.S. rice, if
feasible, to ease supply concerns. End Summary.

Ivoirians Pay More for Food Due to Global Market
-------
2. (U) The rise in global food prices and commodities has
had a definite impact on the price of basic foodstuffs and
consumer products in Cote d'Ivoire. Prices on basic consumer
products have risen - 50 kg sacks of locally grown rice are
now USD 39.50 versus USD 54.75 for imported (whereas in early
2007 locally grown rice was 30 percent more expensive,
according to a February USDA GAIN report on West African Rice
Production and Consumption). Consumers note that locally
grown potatoes have risen 43 percent in price since April
2007, while imported flour has seen a 28 percent price rise
in the past year.

Supply Substitute - Cassava
-------
3. (SBU) Cote d'Ivoire has a relatively plentiful,
locally-grown alternative to imported grains (cassava) which
can minimize the pressure on low and very low income families
in the case of continued high rice and flour prices. Cassava
prices in the past year and a half, according to a regional
internet-based commodities trading system sponsored by
USAID/WARP (www.tradenet.biz), have not varied. Cassava's
new importance is reflected in the heightened appeals from
Ministry officials, consumer groups and major donors to
reduce the impact of military, police and gendermerie
roadblocks and racketeering which add unnecessarily to the
cost of commodities. These roadblocks persist around the
country, nearly a year after the President publicly declared
the long civil strife and the division of the country to be
over. Indeed, the World Bank's local staff has stated in
recent months that the cost of road transport in Cote
d'Ivoire is the highest, per kilometer, in the world.

Domestic Political Impact, Impact on Food Security
-------
4. (SBU) The increase in food prices sparked demonstrations
in Abidjan in early April. In response, the government
quickly promised to cut import and VAT taxes on rice,
powdered milk, tomato paste, fish and cooking oil by 50
percent. This promise helped calm the situation but consumer
groups remain vigilant and are prepared to call for renewed
demonstrations. The IMF representative has expressed concern
about the implications for Cote d'Ivoire's budget due to the
anticipated reduction in tax revenue (reftel b).

5. (SBU) Econoff spoke to Mr. Comoe of the National
Consumers Union (reftel b) about his organization's
perspective on the efficiency of the government's promise to
reduce prices and his group's plans in the case the actions
are ineffective. Comoe said his group "shut down" small
traders in the greater Abidjan area for three days from April
22-24 as a warning to the government to fully implement its
planned tax holiday and to demonstrate its promised results.
Anecdotal evidence indicates his tactics (which he himself
described as "menacing") were partially successful in the
latest action. The demonstrations certainly captured public
and government attention but did not inspire vendors to

ABIDJAN 00000279 002.2 OF 004


change their prices. If prices do not decline as the
Consumer Union expects by May 9, the group says it will again
take to the streets, but this time "shut down the entire
commercial sector" including the major outlets and
supermarkets.

6. (SBU) Econoff spoke to the Ministry of Finance's Director
du Cabinet, Koffi Ahoutou, (effectively the Ministry's number
two official) about the political ramifications of the rise
in basic foodstuff prices. Ahoutou indicated the government
is prepared to implement the tax cuts for three months, and
that they will cost USD 20-25 million in foregone tax
revenues. Ahoutou said the government has asked the IMF to
send a team to help evaluate the full fiscal impact of these
emergency measures and to devise a politically acceptable
plan to recover the tax revenues from less
politically-painful sources. Ahoutou also asked Econoff for
USG help in facilitating the exports of what he believed to
be newly price competitive U.S. rice. Econoff is working
with the regional FAS attache in Dakar to identify potential
exporters and local partners.

Impact on Food Security
-------
7. (SBU) During an April 18 conference call including, inter
alia, the FAO, the Ministry of Economy and Finance, the
Ministry of Agriculture, the Ministry of Planning, the WFP,
UNDP and the World Bank, The WFP said some 9 percent of
Ivoirian households already live in conditions of "food
insecurity" while 20 percent live at risk of falling into
that condition. The 2006 FAO/WFP study on which these
estimates were based looked at 10 of the country's 18
departments, mostly located in the former rebel-held north,
center and west, and extrapolated to include such households
in the greater Abidjan areas and other regions in the south.
These derived estimates indicate some 1.6 million households
are either at risk of or actually live in conditions of "food
insecurity." In households already suffering from food
insecurity, some 60 percent of income is used to purchase
food. No studies have yet been done to measure the impact of
the recent price rise on these and other consumers.

Government, International Policy Response
-------
8. (SBU) The rapid and sustained rise in basic food costs
resulted in demonstrations as mentioned in paragraph 4, which
brought about a rapid political decision to reduce VAT and
import taxes on rice, powdered milk, cooking oil, fish and
tomato paste. According to Ministry of Finance sources,
while flour, a basic product that is entirely imported, was
considered for similar treatment, the government decided to
concentrate on rice and cooking oil and fish, along with the
relatively low volume powdered milk and tomato paste that are
consumed primarily by wealthier consumers (Note: By
contrast, petrol prices, perhaps just as if not more
politically sensitive than food prices, have not budged in
over four years from the government-subsidized price of USD
1.47 per litre, despite the fact that the national refinery
is operating now at a significant deficit. End Note)

9. (SBU) The rapid rise in international food commodity
prices is forcing the international donor community in Cote
d'Ivoire to take a new look at its programs. Activities have
been focused largely on helping Cote d'Ivoire resolve the
country's political crisis, not manage a potential economic
one. A prime example is a USD 120 million World Bank Post
Conflict Assistance Package (PCAP), approved in July 2007,
which was designed to support demobilization, health care,
infrastructure and educational goals, and support the
political steps needed to ensure credible elections and the
related task of identification of the citizenry. The PCAP
program has been delayed due to significant disagreements
between the Prime Minister's office and Bank staff and the
funds have not been tapped. Now that food prices have become
an urgent issue, the Bank is considering how to use some
portion of the USD 120 million to "mitigate the impact" on
those in or facing food insecurity. FAO, notably, opposes
consumer subsidies as a discouragement to farmers and is
actively advocating taking measures to expand local output,

ABIDJAN 00000279 003.2 OF 004


particularly of rice.

Impact on Post Programs
-------
10. (U) None.

Environmental Impact
-------
11. (U) None yet measured or described.

Rice - Supply, Demand, Policy Considerations
-----
12. (SBU) Rice is far and away the most politically
sensitive product affected in Cote d'Ivoire by the world-wide
rise in prices and export restrictions by major producing
countries. According to the 2008 GAIN rice report, Cote
d'Ivoire produced 728,000 metric tons of rice in 2007, and
imported 980,000 more for a total of 1,615 million metric
tons. Cote d'Ivoire has a relatively high rice consumption
rate of 66 kg per capita per annum, higher than all countries
in the region except Senegal (70) and Guinea (69). Ivoirian
consumption of rice rose by 7.5percent in the past five
years. At present, natonal rice stocks stand at 200,000
tons. The govrnment generally does not take steps to
"guard" o conserve the national stocks, but is considering
such measures given the international market sitution.

13. (SBU) The FAO is taking the lead amog local NGOs and
international organizations on ice. It is recruiting a team
of three internatioal experts to write an action plan by May
2. Tht plan includes elements of subsidized distributio of
seeds, fertilizer and some reorganization ofthe sector. FAO
notes that Cote d'Ivoire in yeas past used to be a
large-scale rice exporter, bu that poor national policies
skewed the country owards becoming a major importer. With
proper iplementation, the FAO believes that Ivoirian rice
production can rise to 2.3 million tons in 2010. The African
Development Bank, the World Bank and bilateral donors
(including the U.S.) are being asked to fund the effort. FAO
envisions the World Bank and other major donors using some
funds currently designated for post-conflict "reinsertion of
youth" to support this project, as many of these young men
and women being demobilized from the country's two armed
forces will return to rice-growing regions and need to be
engaged in a productive activity. FAO also reports that the
West African Regional Development Bank (BOAD) is planning to
invest approximately USD 238 million to boost regional
agricultural production, particularly of rice. No details of
this planned program were available at the time of the FAO
meeting, however.


Post Policy Proposals
-------
14. (SBU) Post plans to work closely with international
organizations, NGOs, bilateral donors and others through
multilateral coordination mechanisms to promote increased
agricultural output, particularly in rice, and reduce
barriers to internal trade, which should benefit cassava
trade. Post will recommend to the host government and
international partners a measured, modest approach to any
plans to subsidize consumption, and to target such efforts
through school feeding programs and other interventions that
will not counteract the domestic supply stimulus farmers are
receiving in the form of higher prices. Post also supports
the idea of reorienting multilateral economic, development
and demobilization support towards supporting expansion of
agricultural output.


15. (SBU) Comment. The spike in international food
commodity prices has had an important impact on Cote
d'Ivoire. With its relatively high per capita rice
consumption, which is concentrated in the affluent and
politically key capital city of Abidjan, the political
ramifications are serious. Medium and long-term efforts to
boost production are welcome, and have a good chance of
succeeding if prices remain relatively high for a sustained
period of time. However, the short-term impact has

ABIDJAN 00000279 004.2 OF 004


substantial potential to generate additional political
turbulence as well as cause fiscal dislocations. End Comment.
NESBITT

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