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Cablegate: Cotton, Cashews, Timber: Mainstays of the Economy

VZCZCXRO7134
RR RUEHMA RUEHPA
DE RUEHAB #0925/01 2470720
ZNR UUUUU ZZH
R 040720Z SEP 07 ZDK
FM AMEMBASSY ABIDJAN
TO RUEHC/SECSTATE WASHDC 3479
INFO RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEPGDA/USEUCOM JIC VAIHINGEN GE

UNCLAS SECTION 01 OF 03 ABIDJAN 000925

SIPDIS

SIPDIS

DEPARTMENT PASS TO USTR FLISER, CHAMILTON
DEPARTMENT PASS TO ITC F.YINUG
COMMERCE FOR M.RIVERO
DAKAR FOR FCS S.MORRISON, FAS R.HANSEN
ACCRA FOR G.HUNT
USAID/WARP FOR KMCCOWAN

E.O. 12958: N/A
TAGS: ECON EAGR PGOV EAID ETRD SENV IV
SUBJECT: COTTON, CASHEWS, TIMBER: MAINSTAYS OF THE ECONOMY
IN FORCES NOUVELLES-HELD NORTH AND VOLATILE WEST REGIONS

REF: A. ABIDJAN 895

B. ABIDJAN 880

1. (SBU) Summary. Cotton, cashews and forest products are
the mainstays of the economy in the North and West, but each
sector is experiencing varying levels of difficulty. Cotton
production is down by 40 percent since the division of the
country in 2002, and both producers and ginning enterprises
have been hit hard by complex, overlapping problems. Cashew
production is the highest in Africa, but value-added
production is paltry and farmers suffer from very depressed
raw nut prices. Timber production in the West is currently
strong, but is threatened in the medium and long term by the
same ethnic struggles that make that region a troubling
tinderbox for the nation's political situation (reftel A).
Efforts to reactivate economic activity in the areas where
combatants will be demobilized will be complicated by the
weaknesses in these key sectors. End Summary

2. (SBU) Charge Vicki Huddleston and a small team of
Emboffs, including Econoff Massinga, traveled through the
Central, Central-North, North-West and West-Central parts of
Cote d'Ivoire August 16-21 (reftels), engaging interlocutors
on development and political questions. These regions,
particularly the North, have been largely isolated from the
larger world economy since the division of the country in
August 2002, but the Embassy team was able to discuss the
state of affairs affecting rural agricultural producers. The
World Bank estimates that perhaps 9 million Ivoirans are
dependent on cotton and cocoa, roughly half the population.
In the North, according to the Ministry of Agriculture and
the largest union of cotton cooperatives in the country, over
1 million people are directly involved in cotton farming and
the industry supports many more.

3. (SBU) Cote d'Ivoire is now the largest producer of
cashews in Africa, producing over 200,000 tons annually, with
the capacity to produce over 400,000. That industry employs
tens of thousands of farmers, supporting many rural families.
The forest products industry is also a top economic
producer, employing 50,000 nationwide and is especially
important in the Western region. These industries, along
with mango and sugar production (septels) form the backbone
of the North's economy. While not as dynamic and
remumerative as oil/gas and cocoa, they are vital to their
respective regions.

-----
Cotton
-----

4. (SBU) The Embassy team met with Benoit Soro, head of the
Korhogo-region NGO ARK, a group dedicated to aiding rural
communities and farmers. Soro reported that because the
rains are arriving late, farmers (most of whom have several
crops, both staples and cash crops, most typically cotton)
are approximately 4 weeks behind schedule in planting staples
rice and corn. This will probably prolong the period of food
insecurity between the next harvest and the time when stored
stocks of grain are exhausted from the typical three months
to a more dangerous four (June-Sept). Soro turned to cotton,
noting that while the Ministry of Agriculture (whose current
Minister is a member of the northern-based opposition RDR
party of Alassane Ouattara) is attempting to revive the
slumping sector (production is down over 40 percent since the
pre-2002 period to 267,000 tons in 2005-2006) the 2006-2007
harvest is expected to drop further.

5. (SBU) The Agriculture Ministry is providing USD 18
million to clear debts to farmers (much if not all of this
financing is provided by the Islamic Development Bank,
according to Soro), which is in addition to the Euro 25
million provided by the EU through a program that began in
November 2006. Under the terms of the assistance, the funds
are to be used to clear the debts of cotton ginning
enterprises, which are deeply in debt to farmers and whose
threat is causing considerable threat to the overall health
of the industry. According to numerous press reports, ARK's
Soro as well as Korhogo's mayor and other regional elected
officials, the region's cotton industry has weakened
substantially since the outbreak of hostilities in 2002.
Despite generally firmer world prices for cotton since 2001,

ABIDJAN 00000925 002 OF 003


production continues to fall. Soro and other knowledgeable
observers explain that cotton ginning firms fell into debt in
2002 when substantial cotton stocks were burned during the
opening act of hostilities (most notably at URECOS-CI, whose
management told Emboff during a previous Korhogo trip that it
remains deeply suspicious that allies of the President's camp
took advantage of the chaos 2002 to settle scores with an
organization it deemed to have close ties with the opposition
RDR). Since then, the gins, which typically lend to farmers
so the latter can purchase fertilizer and other inputs, thus
enabling the gins to recoup the loaned amount when cotton is
ginned and sold, have been unable to keep current with their
suppliers of raw material. LCCI, a large Malian-owned
ginning concern, has closed down altogether and the status of
its debts to farmers is not entirely clear.

6. (SBU) Dossongiu Diabete, the head of a small cooperative
of farmers and ginners (SICOSA), was publicly quotd recently
to say that of approximately 300,000 ons of cotton produced
in the 2005-2006 growing eason, perhaps only 82,000 were
delivered to Ivoian ginners, while the 218,000 that remained
was old to Burkinabe and Malian gins for markedly lessthan
the prevailing rate in Cote d'Ivoire (USD 20 vs. USD 360 per
ton) - but at least that way frmers are paid in cash, rather
than credit. Thi pattern has only exacerbated the
difficulties exerienced by the whole sector in the North -
ginners can't extend credit for inputs, so herbicide
producers have stopped extending credit, leading many
individual farmers to cut back on acreage under production;
according to ARK's Soro, this year's acreage is down
substantially. Moreover, Soro reports that as cooperatives
that had become ginners and commercial lenders take advantage
of new assistance to clear their debts, they are being forced
to liquidate a percentage of the debt themselves in cash.
Thus larger, more prosperous cooperative members report being
forced to sell capital equipment to make good on overall
cooperative debts, further depressing the overall cotton
economy. While some cotton farmers are reported to have
actually refused to borrow inputs to avoid falling into debt,
others continue to engage in cotton production, diverting a
portion of inputs into vegetable gardens, limiting their
loss-producing cotton crops while further impoverishing
ginners.

-----
Cashews
-----

7. (SBU) ARK Director Soro said that cashew farmers,
located throughout the far northern reaches of Cote d'Ivoire,
were hurting as well. Echoing complaints Emboff heard at an
informal June dinner with key cashew industry stakeholders
and visiting USAID tree crop experts, prices for raw nuts
have plummeted; some farmers complain of farmgate prices of
50 CFA/kg and below (USD .10), while consumer prices for
processed nuts available in Abidjan markets are at or above
international levels. For many cashew farmers, collecting
nuts has become an uneconomic activity. The phenomena of "le
racket," in which Forces Nouvelles as well as FANCI troops
exact payments on trucks passing through their territories
has worsened the situation markedly; estimates by industry
insiders of increased costs for a load of cashew nuts headed
to Abidjan are 30 percent and above.

8. (SBU) The Embassy team visited Ivorian-owned SITA's
cashew factory in Odienne, the first such facility in Cote
d'Ivoire but which has been closed since May 2007 when raw
nut supply dwindled due to late-arriving rains. The local
SITA manager said that cashews are a relatively new crop for
Cote d'Ivoire, and that the local market for processed nuts
(and also cashew fruit) is not yet well developed.
Introduced in the '70s through a World Bank-funded
anti-desertification program, cashew trees, along with mango
and teak stands, dominate the landscape and, according to
long-time observers, have expanded the region's tree coverage
considerably (cashew stands alone cover an estimated 35,000
hectares). Annual production stands at approximately 200,000
tons annually (making Cote d'Ivoire the largest producer in
Africa) and industry experts say that production could expand
to 400,000 easily, were market forces more favorable.

9. (SBU) SITA's production facility currently collects

ABIDJAN 00000925 003 OF 003


approximately 1000 tons of raw cashews annually and exports
the dried (but not roasted) product. When the facility is in
full operation, it roasts and packages 1200 tons annually in
addition to the separate exports of semi-finished nuts. SITA
has begun a new cooperative relationship with a Vietnamese
cashew producer, which has given the local company greater
technical expertise in identifying nut quality, bulk
packaging and distribution. SITA was keen to discuss with
Emboffs how international development assistance and modest
corporate engagement could be leveraged to disseminate simple
but effective techniques to improve raw nut quality and
improve farm field management (Note: Emboffs are in contact
with USAID/WARP in developing this approach, and are engaging
with the World Bank and other donors on the same. End Note)

-----
Forest Products in the "Greater West"
-----

10. (SBU) The Embassy team visited the Guiglo HQ of
French-owned forest products company Thanry, and received a
briefing on their operations. Engaged principally in the
harvesting of iroko (a tropical hardwood often used in rail
ties), Thanry employs over 600 and has operations throughout
the "Greater West," both in government-controlled zones as
well as around the Forces Nouvelles-controlled town of
Danane. Nationwide, the industry is the third-biggest
agricultural exporter after cocoa and coffee, generating over
USD 300 million in 2005 from 2 million (m3) of exports.
Company executives said that their operations were a benefit
to the region, in that they scrupulously adhere to
government-mandated reforestation and preservation of large
tree rules, and that their sawmill operations provide quality
jobs (Note: only teak can be legally exported as raw logs).

11. (SBU) Thanry executives said the main problem facing
the forest industry is the uncontrolled establishment of
cocoa and coffee farms by mainly Burkinabe and Malian farmers
in the strife-torn region (reftel A). Thanry or other lumber
companies will purchase land rights to parcels owned by
either villages in common or in the peripheral areas around
the "foret classee" (the equivalent of the U.S. National
Forest Service), only to find squatters having cleared land
and set up communities. This phenomena especially hampers
efforts to reforest; squatters routinely take advantage of
recently-cut areas by destroying new seedlings and setting up
farms.

12. (SBU) During a meeting with the Guiglo-based WFP
program, local WFP Director Kombe told Emboffs that locals,
recently displaced in ethnic clashes, have approached the
regional prefect to ask for permission to settle in the
"foret classee," following the prefect's request to the
central government to reclassify portions of the protected
forest suitable for agriculture as a means of addressing the
political concerns of long-term foreign residents (Burkinabe,
Malian) of the area (reftel A). Thanry executives, who
understand the political dynamics involved, see this option
as further undermining the long-term interests of the forest
products industry and yet a further blow to controlled
management of forest resources.


13. (SBU) Comment. While cocoa, coffee, oil and gas have
been the drivers of an economy that has produced modest
growth despite the ongoing economic crisis (1.2 percent in
2005, according to the IMF), these industries do not directly
benefit regions outside of the southern,
government-controlled belt. Cotton, and to a lesser extent,
cashews are the mainstays of the North's economy, and they
both are in deep trouble. Wood products, hard hit by over
logging, still generates respectable income (and probably
more than is reported officially, given the volume of teak
logs seen traversing the nation's highways) but its future is
intimately tied up with the conflict over land in the West.
The international community is trying to find ways to
strengthen the economy in the zones where combatants will
have to give up their weapons and return to civilian
activities. The state of affairs in these three industries
indicates the challenge is formidable. End Comment.
AKUETTEH

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