Cablegate: Input for 2005 President's Report On 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

REF: STATE 24616

1. AGOA Trade and Investment: Mozambique made limited
progress in expanding trade and investment under AGOA during
2004, but has potential to expand AGOA-related exports next
year, particularly in the agriculture and fisheries sectors.
There were AGOA success stories in 2004, such as Indian Ocean
Aquaculture (IOA), a shrimp aquaculture company based in the
northern province of Cabo Delgado, which exported shrimp to
the U.S. for the first time in late 2004. IOA, which employs
close to 500 employees, expects to dramatically increase
exports under AGOA in 2005. Agricultural exports remained
low in 2004, with $160,000 in tobacco exports and $90,000 in
cashew nut exports going to the U.S. under AGOA. Exports of
cashew nuts, paprika, tobacco and other agricultural products
may increase in 2005 due to technical assistance being given
to growers. Apparel/textile imports decreased slightly, from
$2.5 million in 2003 to $1.9 million in 2004. Key producers
such as BELITA, the only garment producer exporting to the
U.S., are expanding operations and expect to increase exports
next year. On March 3, 2005 a US-Mozambican Bilateral
Investment Treaty will enter into force, a step that augurs
positively for increased AGOA-related trade and investment in
the near future.

2. AGOA-related Outreach Efforts: USAID is currently
implementing a variety of trade capacity building efforts in
Mozambique. These initiatives focus on overcoming
constraints to investment and trade through technical
assistance and institutional support. In 2004 the Embassy
hosted a series of digital video conferences on expanding
exports under AGOA, with emphasis on making links to
small-scale handicraft and apparel producers who can benefit
from AGOA. Representatives from the Ministry of Industry and
Commerce, the Ministry of Culture, the Mozambique Export
Promotion Institute, and private sector businessmen in the
garment and handicraft sector participated in the discussions
on the Mozambican side. On the U.S. side, representatives of
the U.S. Department of Commerce, apparel/garment buyers and
handicraft buyers participated and discussed what products
U.S. buyers were looking to source from Mozambique.
Effective January 10, 2005 Mozambique is eligible for
Category 9 benefits under AGOA.

3. Economic Situation: Mozambique continues to make steady
progress toward establishing an investment-friendly,
market-based economy. Over the past ten years, the
government has privatized more than 1,200 enterprises. Some
large state-owned companies remain, however, including the
national airline, the national electricity company, the
national insurance company, port and rail companies, and
water fuel distribution companies. Foreign direct investment
and donor government contributions have fueled rapid economic
growth in recent years, and Mozambique's economy grew 7.1
percent in 2004. Mozambique has broadly met the targets
associated with its International Monetary Fund Heavily
Indebted Poor Country (HIPC) debt relief program, first
established in 1998. In recognition of the country's
performance on HIPC targets, Fitch Ratings gave Mozambique an
international credit rating of B/B in July 2004.

4. Trade Liberalization: Mozambique has carried out
significant tariff reform since 2001, reducing the average
nominal tariff to just under 10 percent by 2004, and closing
many collection loopholes. Mozambique has no trade barriers
that specifically target U.S. products. The government
remains cooperative on intellectual property rights
protection, but has little ability to investigate crimes or
enforce IPR laws. Foreign direct investment is welcome, but
there are still many obstacles to investment in Mozambique;
private ownership of land is not allowed, labor laws are
inflexible, and the World Bank has estimated that it takes
new businesses an average of 153 days to secure basic
licensing and registration.

5. Poverty Reduction: The Mozambican government, through its
Plan for the Reduction of Absolute Poverty (PARPA), has
placed the fight against poverty at the top of its agenda.
Mozambique has made tangible progress in this area, reducing
its poverty rate from 69 percent in 1996 to 54 percent in
2004. With donor support funding approximately 60 percent of
the national budget in 2004, Mozambique has been able to make
significant long-term investments in health, agriculture,
basic infrastructure, and education.

6. Political Pluralism: Mozambique has a democratically
elected government. In December 2004, President Armando
Guebuza of the Frelimo party was elected with 64 percent of
the vote, compared to 32 percent for his nearest competitor.
The election was generally considered free and fair, but was
marred by some irregularities that did not affect the outcome
of the presidential election or control of the legislature.
The political opposition retains 36 percent of seats in the
National Assembly and holds several mayorships, including
Beira, the nation's second-largest city.

7. Rule of Law/Anti-Corruption: Corruption continues to
undermine Mozambique's democratic consolidation and economic
growth. In recognition of this problem, the government
approved an Anti-Corruption Law in late 2003 and increased
the size and scope of the Attorney General's Anti-Corruption
Unit. Hope remains for the future, since newly elected
President Guebuza has repeatedly emphasized his desire to
wage a serious campaign against corrupt government practices.
Mozambique's judiciary continues to be under-trained,
understaffed and susceptible to pressure from high-ranking
government officials and bribery by private parties. In
recent years the number of trained attorneys and judges in
Mozambique has risen dramatically, giving hope for a more
professional judiciary in the future.

8. Human Rights/Labor/Child Labor: Mozambique does not engage
in gross violations of internationally recognized human
rights, though there remains room for improvement and abuses
do occur. The government generally respects labor rights;
the Constitution provides that all workers are free to join
independent trade unions, and workers enjoy this right in
practice. Membership in labor unions has been estimated at
nearly 200,000, concentrated in Maputo and a handful of
industries elsewhere. Mozambique has ratified ILO Convention
105 on Forced Labor, but has not ratified ILO Convention 29.
Child labor remains a problem in Mozambique, with about 33%
of children between ages 10 and 14 considered to be
economically active. This is more a function of children
working in the informal sector as a result of non-existent
educational opportunities than it is a problem of children
being used as laborers in the formal industrial sector (which
rarely happens). Mozambique has ratified ILO Convention 182
on the Worst Forms of Child Labor.

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