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Cablegate: Mcc Visit to Mozambique, 8-11 June 2004

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 000877

SIPDIS
FOR MCC
E.O. 12958: N/A
TAGS: EAID ECON PREL MZ MCC
SUBJECT: MCC VISIT TO MOZAMBIQUE, 8-11 JUNE 2004


1. SUMMARY. DURING A THREE DAY VISIT, THE THREE-
PERSON MCC TEAM MET WITH THE PRIME MINISTER, FIVE
MINISTERS, THE CENTRAL BANK GOVERNOR, MOZAMBIQUE'S
"TECHNICAL TEAM," AND REPRESENTATIVES FROM THE
PRIVATE SECTOR, CIVIL SOCIETY, THE FINANCIAL SECTOR,
FOREIGN INVESTORS, AND DONORS. IN EACH MEETING, THE
TEAM CONVEYED THE CORE MANDATE OF THE MCC -
INVESTING IN ECONOMIC GROWTH THROUGH PARTNERSHIPS
WITH DEVELOPING COUNTRIES - AND HEARD ABOUT
MOZAMBIQUE'S DEVELOPMENT AGENDA, OPPORTUNITIES FOR
AND CONSTRAINTS TO ECONOMIC GROWTH, AND SPECIFIC
PROJECT IDEAS THAT COULD BE INCLUDED IN AN MCA
COMPACT PROPOSAL. THE TEAM ENDED THEIR VISIT WITH A
VERY WELL-ATTENDED PRESS CONFERENCE AND A
DEBRIEF/LUNCH WITH AMBASSADOR LA LIME AND USAID
DIRECTOR KNOTT. END SUMMARY.

2. THE MCC COMES A-CALLING. THE MCC TEAM ARRIVED
IN MAPUTO ON THE AFTERNOON OF 8 JUNE 2004 AFTER
SIMILAR STOPS IN LESOTHO AND MADAGASCAR. CLAY
LOWERY LED THE TEAM WHICH INCLUDED TOM BRIGGS AND
WESLEY WILSON. THE FIRST STOP WAS A COUNTRY TEAM
BRIEFING DURING WHICH THE AMBASSADOR DELIVERED AN
OVERVIEW OF THE SITUATION IN-COUNTRY, POL/ECON CHIEF
HODGE PROVIDED A POLITICAL AND ECONOMIC OVERVIEW,
AND USAID DIRECTOR KNOTT GAVE A PRESENTATION ON
MOZAMBIQUE'S DEVELOPMENT ENVIRONMENT.

3. THE CORE MESSAGE. LOWERY DELIVERED TO THE
COUNTRY TEAM, AND IN EACH MEETING DURING THE TEAM'S
VISIT, AN EXPLANATION OF "WHAT WE'RE ALL ABOUT." THE
MAIN POINTS BEING:
-- THE MCC'S ONLY PURPOSE IS TO INVEST IN ECONOMIC
GROWTH. ELIGIBLE COUNTRIES SHOULD LOOK AT THE MCC
AS AN INVESTOR; NOT TRYING TO MAKE A PROFIT BUT
TRYING TO HAVE AN IMPACT ON ACCELERATING GROWTH AND
REDUCING POVERTY. IF A PARTICULAR COUNTRY'S COMPACT
PROPOSAL DOES NOT PRESENT A GOOD INVESTMENT
OPPORTUNITY, THEN THE MCC WILL NOT INVEST.
-- COMPACT PROPOSALS MUST HAVE MEASURABLE RESULTS.
IF THE IMPACT ON ECONOMIC GROWTH CANNOT BE MEASURED,
THEN THE PROPOSAL WILL NOT BE FUNDED. MONITORING
AND EVALUATION SYSTEMS, ALONG WITH SYSTEMS TO ENSURE
FINANCIAL ACCOUNTABILITY SHOULD BE ESTABLISHED UP
FRONT.
-- THE MCC IS INTERESTED IN FORMING PARTNERSHIPS
WITH THE ELIGIBLE COUNTRIES. LOWERY UNDERSCORED
THAT THE PARTNERSHIPS WERE TO BE BETWEEN THE MCC AND
"THE COUNTRY," I.E. THE PEOPLE (GOVERNMENT, PRIVATE
SECTOR, CIVIL SOCIETY, ETC.)

4. DAY 1. THE TEAM'S FIRST MET WITH PRIME MINISTER
LUISA DIOGO, WHO IS ALSO MINISTER OF FINANCE AND
PLANNING. (THE AMBASSADOR AND USAID DIRECTOR KNOTT
ACCOMPANIED THE TEAM FOR ALL OF THE MEETINGS/EVENTS
DURING THE VISIT.)
5. DIOGO OPENED BY CONGRATULATING THE MCC FOR THREE
REASONS: (1) FOR FULFILLING THE MONTERREY
COMMITMENT; (2) FOR TAKING INTO CONSIDERATION THE
PROGRESS MOZAMBIQUE HAS MADE SINCE THE END OF THE
CIVIL WAR AS EVIDENCED BY A NUMBER OF POSITIVE
TRENDS (AVERAGE GROWTH OF 7-8% FOR TEN YEARS;
REDUCTIONS IN POVERTY - FROM 70% IN 1997 TO 54% IN
2003; CREATION OF INSTITUTIONS TO FIGHT CORRUPTION;
MACROECONOMIC STABILITY); AND (3) THE STATED
APPROACH OF THE MCC WHICH FITS WELL WITH
MOZAMBIQUE'S PRESENT AND FUTURE PERSPECTIVE AND
AGENDA SINCE MOZAMBIQUE'S BEST HOPE FOR SUSTAINABLE
GROWTH IS TO RESOLVE THE COUNTRY'S MAJOR
INFRASTRUCTURE CONSTRAINTS AND TO STEADILY INCREASE
SMALL AND MEDIUM-SIZED ENTERPRISES' SHARE OF GROWTH.
IN SHORT, MOZAMBIQUE'S "PRESENT AND FUTURE CHALLENGE
IS TO HAVE THE PRIVATE SECTOR FLOURISH."

6. THE PRIME MINISTER WENT ON TO COVER THE
GOVERNMENT'S PRIORITIES AND DEVELOPMENT STRATEGY FOR
PROMOTING PRIVATE SECTOR-LED GROWTH AND REDUCING
POVERTY. AMONG THE POLICY AREAS THAT ARE BEING
ADDRESSED IN SOME MANNER TO IMPROVE THE PRIVATE
SECTOR ENABLING ENVIRONMENT (ALL REQUIRE
CONTINUED/ADDITIONAL EFFORT): LABOR REFORM, CUSTOMS
REFORM, CORRUPTION, BUSINESS REGISTRATION, AND
LEGAL/JUDICIAL REFORM. THE PRIME MINISTER ALSO
MENTIONED THE GOVERNMENT'S EFFORTS TO FIGHT HIV/AIDS
AND STRENGTHEN THE PUBLIC EDUCATION AND HEALTH
SYSTEMS.

7. IN ADDITION TO THE POLICY REFORMS NEEDED TO
STIMULATE THE PRIVATE SECTOR, DIOGO STATED THAT
VIRTUALLY ALL FACETS OF MOZAMBIQUE'S INFRASTRUCTURE
REQUIRED REHABILITATION AND, IN SOME CASES, KEY
POLICY REFORMS. AS SUCH, THE GOVERNMENT OF
MOZAMBIQUE (GRM) IS FOCUSED ON DEVELOPING LARGE
INFRASTRUCTURE COMPONENTS OF THE COUNTRY'S
TRADITIONAL TRANSPORT CORRIDORS TO SERVE AS "ANCHOR
PROJECTS," E.G. MAPUTO PORT IS AN "ANCHOR" IN THE
MAPUTO CORRIDOR, AND NACALA AIRPORT AND RAIL LINE
COULD BE "ANCHORS" IN THE NACALA CORRIDOR. DIOGO
REASONED THAT SUCCESSFUL COMPLETION OF THESE
PROJECTS COULD ALLOW MOZAMBIQUE'S AGRICULTURAL
POTENTIAL TO BE REALIZED THROUGH MORE AND GREATER
COMMERCIAL OPERATIONS. IN MANY INSTANCES, THE GRM'S
PREFERENCE IS TO IMPLEMENT MAJOR INFRASTRUCTURE
PROJECTS THROUGH PUBLIC-PRIVATE PARTNERSHIPS, A
THEME WHICH CAME UP REPEATEDLY THROUGHOUT THE DAY.

8. DIOGO DID OFFER SOME EXAMPLES OF PROJECTS THAT
MIGHT BE INCLUDED IN MOZAMBIQUE'S COMPACT PROPOSAL,
ADDING THAT THE TEAM WOULD HEAR MORE DETAILS FROM
THEIR MEETINGS WITH INDIVIDUAL MINISTERS. THESE
SAMPLE PROJECTS INCLUDED ALL FORMS OF TRANSPORT
INFRASTRUCTURE (TO IMPROVE ACCESS TO MARKETS AND TO
SOCIAL SERVICES), WATER/SANITATION PROJECTS IN URBAN
AND RURAL AREAS, AND REFORM AND CAPACITY BUILDING
WITHIN CUSTOMS.

9. THE TEAM HEARD MORE DETAILS ON THESE AND SEVERAL
OTHER RELATED PROJECTS THROUGHOUT THE COURSE OF THE
DAY. LOWERY TOOK EACH OPPORTUNITY TO RESPOND BY
SUGGESTING THAT MOZAMBIQUE TAKE A STEP BACK AND
CONSIDER THE RESULTS THAT ARE TO BE ACHIEVED BY
IMPLEMENTING A PARTICULAR PROJECT. A PARTICULAR
ROAD IS NEEDED, BUT WHAT IMPACT ON GROWTH WILL
BUILDING THAT ROAD HAVE?; AND BEYOND BUILDING AND
MAINTAINING THAT ROAD, WHAT ELSE MUST BE DONE TO
ALLOW ENTERPRISES TO TAKE ADVANTAGE OF THE NEW ROAD
AND GROW AS A RESULT? WHAT ROLE DOES CUSTOMS REFORM
PLAY AND WHAT NEEDS TO BE DONE? HOW CAN ACCESS TO
CAPITAL BE IMPROVED? ETC.

10. ON THE ISSUE OF BUDGET SUPPORT, DIOGO CONCEDED
THAT, SHOULD A COMPACT PROPOSAL BE APPROVED FOR
FUNDING, MOZAMBIQUE WOULD NOT WANT 100% OF ITS MCA
FUNDING AS BUDGET SUPPORT. 60-65% IN BUDGET SUPPORT
AND THE REMAINDER IN PROJECTS WOULD BE SUITABLE.
LOWERY RESPONDED THAT DECISIONS ON HOW THE FUNDING
FLOWED WOULD BE MADE IN THE CONTEXT OF THE COMPACT
PROPOSAL AND AFTER SUFFICIENT DUE DILIGENCE TO
ENSURE FINANCIAL ACCOUNTABILITY.

11. DIOGO CLOSED THE MEETING AND CAPTURED
MOZAMBIQUE'S OVERARCHING OBJECTIVE IN COMPETING FOR
MCA FUNDING BY STATING THAT "WHAT WE'D LIKE TO
ACHIEVE IS 8% GROWTH A YEAR TO REACH OUR POVERTY
REDUCTION TARGETS; AND THE GROWTH MUST BE
SUSTAINABLE." SHE ADDED THAT IN TERMS OF TIMING,
MOZAMBIQUE COULD CONTINUE THE DIALOGUE WITH THE MCC
BY SENDING A DRAFT COMPACT PROPOSAL TO WASHINGTON BY
THE END OF JULY WITH THE EXPECTATION OF RECEIVING
CONSTRUCTIVE CRITICISM AND ADVICE IN RESPONSE.

12. DURING THE REST OF THE DAY THE TEAM MET WITH
MINISTER OF TRANSPORT AND COMMUNICATIONS TOMAZ
SALOMAO, MINISTER OF INDUSTRY AND COMMERCE CARLOS
MORGADO, MINISTER OF PUBLIC WORKS AND HOUSING
ROBERTO COSTLEY-WHITE, MINISTER OF HEALTH FRANCISCO
SONGANE, MINISTER OF AGRICULTURE HELDER MUTEIA, AND
GOVERNOR OF THE BANK OF MOZAMBIQUE ADRIANO MALEIANE.
THESE DISCUSSIONS REITERATED THE POINTS EXPRESSED BY
THE PRIME MINISTER AND OFFERED SOME ADDITIONAL
DETAILS ON INDIVIDUAL PROJECTS. PERHAPS OF EQUAL
IMPORTANCE WAS THAT THE MCC TEAM HAD THE OPPORTUNITY
TO EXPLAIN THE MCC DIRECTLY TO THE MOST RELEVANT
MEMBERS OF THE CABINET AND DISCUSS ANY IDEAS OR
ISSUES.

13. THE LAST MEETING OF THE DAY WAS WITH
MOZAMBIQUE'S MCA TECHNICAL TEAM. THIS GROUP
CONSISTS OF SEVENTEEN MEMBERS: FIFTEEN FROM THE GRM,
MAINLY AT THE NATIONAL DIRECTOR LEVEL; ONE FROM
CIVIL SOCIETY (A UNIVERSITY PROFESSOR); AND ONE FROM
THE PRIVATE SECTOR (THE EXECUTIVE DIRECTOR OF THE
CONFEDERATION OF MOZAMBICAN BUSINESS ASSOCIATIONS).
IT REMAINS TO BE SEEN IF MOZAMBIQUE'S SOLID
EXPERIENCE WITH CONSULTATIVE PROCESSES INVOLVING
GOVERNMENT, CIVIL SOCIETY, AND THE PRIVATE SECTOR
WILL BE APPLIED FULLY IN THE COUNTRY'S COMPACT
PROPOSAL.

14. THE MCC TEAM CERTAINLY DROVE HOME THE NECESSITY
FOR BROAD HOST COUNTRY PARTICIPATION IN DEVELOPING
THE COMPACT HOME IN THEIR MEETINGS WITH THE GRM AND
IN DISCUSSIONS WITH REPRESENTATIVES OF MOZAMBIQUE'S
PRIVATE SECTOR, CIVIL SOCIETY, FINANCIAL SECTOR,
FOREIGN INVESTORS (INCLUDING A VISIT AND BRIEFING ON
THE MAPUTO PORT CONCESSION), AND DONOR COMMUNITY.
THESE MEETINGS ALSO PROVED USEFUL FOR INCREASING THE
MCC'S UNDERSTANDING AND APPRECIATION OF MOZAMBIQUE'S
DEVELOPMENT ENVIRONMENT.

15. DAY 2: USAID DIRECTOR KNOTT ACCOMPANIED THE
TEAM ON A TRIP TO THE TOWN OF CHOKWE IN GAZA
PROVINCE TO SEE THE RESULTS OF USAID-FUNDED ROAD AND
RAIL RECONSTRUCTION PROJECTS. THE TEAM SAW BOTH
WHAT CAN BE DONE WITH HOST-COUNTRY CONTRACTS
(CONTRACTS FINANCED BY USAID BUT LET BY THE GRM) AND
A VERY SMALL PIECE OF THE COUNTRY'S INFRASTRUCTURE
NEEDS.

16. GETTING THE WORD OUT. THE LAST ITEM ON THE
TEAM'S SCHEDULE WAS A PRESS CONFERENCE ORGANIZED BY
THE PUBLIC AFFAIRS OFFICE. THE EVENT WAS VERY WELL-
ATTENDED BY BOTH PRINT AND ELECTRONIC MEDIA. LOWERY
REPRESENTED THE MCC TO THE PRESS, KICKING THE
PROCESS OFF AS USUAL WITH HIS CORE MESSAGE. HE THEN
FIELDED QUESTIONS ON THE OBJECTIVES OF THE MCC,
FUNDING LEVELS, TIMING, AND THE RELATIONSHIP BETWEEN
THE MCC AND USAID - AMONG OTHERS. THE PRESS
COVERAGE HAS BEEN POSITIVE AND FAIRLY ACCURATE. MCC
RELATED PRESS ITEMS ARE BEING PACKAGED AND WILL BE
FORWARDED TO THE MCC.

17. ALL-IN-ALL, THE TRIP APPEARS TO HAVE BEEN
SUCCESSFUL. MOZAMBICANS FROM A VARIETY OF SECTORS
IN THE SOCIETY HAVE BEEN INFORMED ABOUT THE MCA (AS
HAVE FOREIGN INVESTORS AND DONORS), AND THE MCC IS
BETTER INFORMED ABOUT MOZAMBIQUE. THE NEXT STEP FOR
MOZAMBIQUE IS TO BEGIN PREPARATION OF THE COMPACT
PROPOSAL. POST WILL REPORT ON PROGRESS OVER THE
COURSE OF THE NEXT FEW MONTHS.
HANKINS

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