Cablegate: Zimbabwe Unqualified for Agoa

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



E. O. 12958: N/A
SUBJECT: Zimbabwe Unqualified for AGOA

Ref: State 168472

Zimbabwe still falls short of AGOA's qualifying criteria.
Post's input for the upcoming interagency review follows:

a. Market-Based Economy: In the late-1990s, the
Government of Zimbabwe began an economic policy based on
broad interventionism, with enforced pricing and
parastatals serving as monopolistic middlemen for
products such as tobacco and grain. The economy has
since shrunk by about 35 percent. Over the past year,
the GOZ has backed away from some of the more onerous
controls, having relaxed or eliminated many restrictions
and price freezes. Most product shortages have come to
an end. Nonetheless, this modest tilt does not yet
represent sufficient progress toward a market-based
economy. The Government still clings to a fixed exchange
rate and large array of direct and indirect taxes. Its
first inclination is still to impose conditions on the
private sector, as demonstrated by its April decision to
compel private schools to reduce tuition fees. Inflation
is currently around 400 percent, while the savings rate
has dropped from 12 to 4 percent since 2000. There has
been no recent progress privatizing inefficient
parastatals. The GOZ is paying only a small portion of
its US$ 2 billion international arrears.

b. Rule of Law/Political Pluralism/Right to Due Process:
The opposition political party operates in a climate of
intimidation and repression. The GOZ is prosecuting the
opposition leader for treason, a crime that could carry
the death penalty. Over the past year, the GOZ has
removed Harare's elected mayor and shut down the only non-
government daily newspaper. In the same period, the GOZ
strengthened laws restricting freedom of assembly,
freedom of speech, procedural due process, and private
property rights. In politically sensitive cases, the
judiciary showed indications of being politically
influenced or intimidated; political elites frequently
ignore adverse court holdings.

c. Elimination of Barriers to U.S. Trade and Investment:
Since December 2003, foreign investors enjoy an important
privilege not available to local firms - full access to
export processing zones. Foreign firms can also take
advantage of the Reserve Bank's revolving loan facility
at sub-market rates. Still, Zimbabwe's poor
macroeconomic conditions and high risk factor - a
consequence of both the break-down of rule-of-law and the
Government's de facto nullification of title-deeds
belonging to white commercial farmers - scare most U.S.
and other foreign investment away. Zimbabwe has become a
relatively high-cost player by regional standards, making
potential exporters uncompetitive unless supported by the
productive sector loans.

d. Poverty Reduction: While the GOZ maintains several
programs that provide food or basic services to the poor,
these have had minimal effect compared to the general
thrust of GOZ economic policy. Most Zimbabweans have
grown progressively poorer over the past 6 years. Many
Zimbabweans take home only a fraction of their 1997 real
wages. As noted above, price controls have failed to
keep prices in check. Most Zimbabweans have little or no
discretionary income, after paying food and

e. Anti-Corruption Polices: The Government of Zimbabwe
has enacted numerous anti-corruption measures since
December 2003. However, most of these have targeted
transfers of funds out of the country, which the
Government objects to, rather than conventional forms of
corruption. The Government has recently jailed many
officials for foreign exchange externalization, including
the Finance Minister. The Government's ongoing
redistribution of white-owned farms has been
untransparent and plagued by corruption. Many top
officials appear to have handpicked one or more farms for
their families. The Government has often expressed its
desire to weed this corrupt aspect from land reform, but
has not reported much detailed progress to date.

e. Protection of Worker Rights: Despite official
recognition of worker rights, the Government continues to
exert heavy pressure on labor unions, limiting their
freedom of association and right to organize. Unions
have been denied routine meetings and necessary
consultations with constituents under the draconian
Protection of Order and Security Act (POSA). Senior
members of the Zimbabwe Congress of Trade Unions (ZCTU)
have been arrested on spurious charges, some of them
later reporting physical abuse while in police custody.


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