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Cablegate: 2003 Bfif Close Out

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 MAPUTO 000070

SIPDIS
DEPT FOR
JOHANNESBURG FOR FCS - JVANRENSBURG, WCENTER
DURBAN ALSO FOR FCS - JKUEHNER, LKOHRS, AELLARY
E.O. 12958: N/A
TAGS: BEXP BTIO EINV ETRD ABUD MZ BFIF
SUBJECT: 2003 BFIF CLOSE OUT

REF: A. SECSTATE 346405 B. MAPUTO 02248 C. MAPUTO 01902

1. SUMMARY: Post wishes to thank the Department for providing
2003 BFIF funding in the amount of $7,000. Post was able to
travel to several provinces, visiting with various U.S.
businesses, commercial associations, and local entrepreneurs
to support U.S. commercial activities and encourage further
U.S. investment in Mozambique. We believe our programming has
been successful and would like to continue to have such
extensive commercial outreach and attract greater U.S.
investment in-country in 2004. END SUMMARY.

------------------------------------
COMMERCIAL VISITS TO THE PROVINCES
------------------------------------
2. Econ/Pol officer and Commercial FSN visited the provinces
of Sofala and Manica, starting in Mozambique's second largest
city of Beira. Beira is a significant port town for
Mozambique and the Beira Development Corridor, running
east-west from Harare to Beira, allows for a large amount of
trade to transit through Mozambique from Zimbabwe and Malawi.
Facilitating many of Mozambique's business ventures outside
of the capital city of Maputo, Beira is an important national
commercial center. On a visit to Mobeira, a flour-milling
factory privatized in 1996 and owned by the U.S. corporation
Seaboard, Director Antonio Lopes described the stiff
competition currently challenging the firm's operations.
Mobeira imports wheat from the U.S. and Europe and exports
primarily to Malawi and other regional markets. Although the
market for flour has doubled in the last seven years,
bringing further profits, Mobeira has faced numerous
difficulties with the GRM in receiving its entitled VAT
repayment. Non-payment of VAT reimbursement by the GRM is a
sensitive and critical issue facing several firms and donors
working in-country that are exempted from the tax. Post has
been working with the Ministry of Planning and Finance to see
that the VAT is repaid to U.S. businesses and donors. In
November and December of 2003, Mobeira did receive VAT
reimbursements from the GRM and follow-on payments seem
likely. Pushing such financial issues with the GRM to help
U.S. commercial interests in-country will ensure that U.S.
businesses stay in operation and can successfully compete
against other producers.

3. Also in Beira, Econ/Poloff and Commercial FSN visited the
Sofala Commercial and Industrial Association (ACIS), working
to represent the interests of 27 firms operating in the
province of Sofala. U.S. firms such as Coca-Cola and Mobeira
participate as members. The only garment and textile factory
in Mozambique currently exporting under AGOA, Belita
(Mauritian-owned), is also represented by ACIS. ACIS is a
very active and dynamic organization in Sofala, disseminating
critical commercial and labor news to members and
non-members, providing advice to prospective investors, and
establishing task forces to work with the GRM on commercial
issues. The organization is valuable in its analysis and
dissemination of information on current and considered GRM
commercial and labor law. By maintaining regular contact with
ACIS, Post is kept up-to-date on issues affecting the
business community in the provinces. Post looks to pursue
commercial programs with ACIS, such as investment-related
seminars that may attract further U.S. investment in the
central provinces or inform businesses how to take advantage
of incentive programs such as AGOA.

4. The same trip featured a visit to Chimoio and Manica,
cities located in the Manica Province. Due to its moderate
climate, Manica is a rich province for agriculture and the
American NGO, Technoserve, is very active in providing
training programs to local producers and finding export
markets for Mozambican fruit and vegetables. On this visit,
Econ/Poloff and Commercial FSN met with Technoserve
representatives to discuss the local agricultural sector and
markets for export. Also in Chimoio, Econ/Poloff and
Commercial FSN had the opportunity to discuss agricultural
export issues with Joao Ferrao, manager of a new agricultural
consulting firm and former director of the Chimoio
Agricultural Institute (the oldest and most prestigious
agricultural institution in Mozambique). Mr. Ferrao is keen
to AGOA issues and participated in Post's 2002 AGOA roadshows
(reftel C), well-attended in the Manica area. Each year, Mr.
Ferrao coordinates a Chimoio Agricultural Trade Fair,
showcasing agricultural equipment and supplies for a variety
of sources (primarily South African equipment). Post
discussed the plausibility of having U.S. firms showcase U.S.
products and equipment at the fair, and Mr. Ferrao was very
accepting of the idea. Although Manica is not the most
convenient location for U.S. sellers, Post may be able to
send product brochures and information to participate in this
event.

5. The trip to Manica concluded with a visit to the Coca-Cola
bottling factory, a Zimbabwean-owned flower plantation,
Vilmar, (the first in Mozambique), and tobacco and paprika
farms owned and managed by Zimbabwean farmers. Coca-Cola is
a very successful company in Mozambique and continues to
raise product output and revenue. They have instituted a new
system of management nationally, organizing into
mini-business revenue teams, responsible for activities such
as production, marketing, and distribution. This new method
of management has also been successful for Coca-Cola
Mozambique, raising efficiency and contributing to employee
morale through individual and group incentives/awards. There
is strong agreement that the flower sector in Mozambique
could take off soon in the Manica province. Vilmar has
recorded great success in growing and selling roses. Most
roses are driven to Harare and flown to the European market
for sale. More flower plantations are springing up in the
area, and the capacity of Mozambique to produce this product
will lead to more investors. Econ/Poloff and Commercial FSN
spoke with two Zimbabwean farmers about current land and loan
issues they face with the GRM. Many Zimbabweans in the area
are looking for a way to secure loans to increase tobacco
planting and production. They seek help from U.S. financial
institutions to tackle these issues.

6. Visits by Econ/poloff and Commercial FSN to several cities
in the Northern provinces of Nampula and Niassa provided an
opportunity to promote AGOA, describe post's commercial
programs in Mozambique, develop key contacts in the local
business community, and learn about opportunities for US
companies in these provinces. In Niassa, Mozambique's least
developed and most isolated province, Econ/poloff and
Commercial FSN held a multi-sectoral business roundtable with
local private sector leaders on Niassa's investment climate
and opportunities for investment. A number of potential
opportunities were identified in areas ranging from tourism
to agriculture. A meeting with Nakosso, the Niassa Business
Centre, a private organization that promotes and facilitates
foreign investment in the province, has resulted in a number
of new contacts and follow-up activities. Through this
initial contact with Nakosso, post is now working with the
local partner of a US company on a project to export
macadamia nuts to the United States. The US partners plan to
visit Mozambique in March 2004. Initial discussions have also
been held with Nakosso on a digital video conference to be
organized by post on promoting exports of Mozambican
handicrafts under AGOA. A visit to the port of Nacala in
Nampula province focused on export opportunities related to
the Nacala Corridor, which includes an integrated rail and
port system linking Malawi, Zambia and Mozambique. This
project is being undertaken by a US-led consortium and is
funded by OPIC. In the city of Nampula, meetings were held
with Technoserve and local producers of paprika and cashews.
Mozambique's once thriving cashew industry has only recently
begun to recover from years of decline following the 1995
liberalization of the sector. Principal export markets
include the Netherlands, South Africa and the United States.
Paprika producers were particularly interested in learning
about AGOA. As a result of one meeting, post has been working
with a paprika producer who is interested in exporting to the
US market.

------------------------------
Other BFIF-related activities
------------------------------
7. Post has continuous communication with FCS Johannesburg
and FCS Durban. Most recently, FCS has worked with post on
three issues: delivering Gold Key Services, planning U.S.
business participation in a March 2004 Water Africa
Exhibition, and an investigation into a U.S. business
delivering U.S. exports to Mozambican clients. In September
2004, Post actively communicated with FCS Durban to provide
Gold Key Service to a U.S. company located in Houston, Texas,
A-1 Rags. Post and FCS communicated with the Houston Export
Assistance Center to provide the client with contacts of
second-hand clothing buyers in Maputo and Nampula. In March
2004, Mozambique will host the Water Africa 2004 Sub-Sahara
International Exhibition. Post is working with FCS Durban and
USDOC Washington to bring U.S. participation to the event
through the production and distribution of informational
brochures. The Fair will be held at FACIM in Maputo (a trade
show location). Post's goal, along with FCS, is to achieve
participation of over thirty U.S. firms working in water
treatment, irrigation, ground and surface water development,
urban drainage, and consulting services by soliciting product
and service information and distributing it at this year's
Water trade show. This will open the Mozambican and South
African market to become familiar with and enlist the use of
U.S. products in this sector. Thirdly, Post handled a
commercial inquiry made by a Mozambican consulting firm,
Kianda by contacting FCS Johannesburg. Kianda is working with
a U.S. firm called "Caravans International", but there has
been some confusion as to product payment, delivery of
products, and communication. FCS Johannesburg assisted Post
by contacting the Export Assistance Center in Minneapolis,
that in turn, did much research related to the U.S. firm and
its international business operations. Post was able to
provide Kianda with information valuable to its business
operations and provided options for going forward in working
with Caravans International.

8. Kodak and the Bank of New York are examples of two U.S.
firms who visited Post with commercial inquiries in the fall
of 2003. Post, through use of it's new Commercial Library
(2003), was able to provide the firms with important country
information on economics, finance, investment, and politics.
Post also provides all clients with commercial inquires a
copy of the 2003 Country Commercial Guide. Econ/poloffs
attended KPMG's Annual "Top 100 Businesses in Mozambique" for
2003 and noted that six U.S. businesses were present on the
list: Coca-Cola, Mobil, Mobeira, Avis-Rent-a-Car, Colgate
Palmolive, and KPMG Mozambique. This annual study presents
the top revenue-earners in Mozambique, as identified by
survey. Econ/Poloff also attended the second annual
Commonwealth Mozambique Investment Conference. The conference
featured speakers from business and the GRM on aquaculture,
finance, tourism, transportation, agriculture, and
information technology. Very few U.S. investors attended the
conference, and Post would like to find new ways to get U.S
investors involved. Similarly, at this year's annual Maputo
trade fair, FACIM, there was not a U.S. business Pavilion and
U.S. participation will be more highly encouraged in 2004.

-------------
EXPENDITURES
-------------
9. Post was allocated $7,000 and financial expenditures
totaled $8,064.71. The entire budge was allocated to travel
and per diem. The internal cost of travel in Mozambique is
very high with plane tickets to the North of the country
costing the equivalent of full fare rates to Europe from
South Africa. Post made a concerted effort to remain fiscally
prudent and double-up programming where possible.

---------
COMMENT
---------
10. The BFIF funding for 2003 was very successful. Post was
able to provide considerable commercial outreach to U.S.
business operating in-country. Additionally, Post was able to
expand its knowledge of the local business community and
identify further areas for U.S. investment and export sales.
Valuable commercial and economic information was provided to
U.S. firms looking to enter the Mozambican market and
Mozambican firms looking to work with U.S. businesses in the
U.S. Several informative conferences were attended and
business contacts were expanded. Mozambique is a difficult
and remote market for U.S. businesses to penetrate, but with
continued expanded outreach and the ability to advertise U.S.
goods and incentive programs like AGOA, success is at hand.
Post appreciates this opportunity and looks forward to the
possibility of working with BFIF again in 2004.
LA LIME

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