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Cablegate: Moroccan Remittances Balance Trade Deficit

VZCZCXRO4165
RR RUEHBC RUEHDE RUEHKUK RUEHROV
DE RUEHRB #1624/01 2921205
ZNR UUUUU ZZH
R 191205Z OCT 07
FM AMEMBASSY RABAT
TO RUEHC/SECSTATE WASHDC 7608
INFO RUEHCL/AMCONSUL CASABLANCA 3591
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHEE/ARAB LEAGUE COLLECTIVE
RUEHLO/AMEMBASSY LONDON 3421
RUEHFR/AMEMBASSY PARIS 4803
RUEHNK/AMEMBASSY NOUAKCHOTT 3591

UNCLAS SECTION 01 OF 02 RABAT 001624

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR NEA/MAG
TREASURY FOR OASIA
USDOC FOR ITA/MAC/ONE ROTH
STATE PLEASE PASS TO USTR BURKHEAD

E.O. 12958: N/A
TAGS: ECON EFIN SMIG MO
SUBJECT: MOROCCAN REMITTANCES BALANCE TRADE DEFICIT

REF: RABAT 01541

Sensitive but unclassified. Please protect accordingly.

1. (U) Summary: Remittances from Moroccans living abroad (MRE) have
doubled since 2000, and dwarf the sum total of all foreign aid. MRE
and tourism receipts match the value of all Moroccan exports at
approximately USD 11.4 billion, and serve as a critical
counter-weight to a spiraling trade deficit. Despite recent
economic prosperity and cooperation with the EU, the number of
Moroccans migrating abroad continues to increase, reflecting a
culture of migration that is accepted by the government. End
Summary.

-----------------------------
1 In 10 Moroccans Live Abroad
-----------------------------

2. (SBU) The latest World Bank figures estimate that over 2.7
million Moroccans live abroad, primarily in Western Europe.
Officials at the Ministry of Expatriate Affairs (whose existence
highlights the importance of emigration to the Moroccan economy)
concede that the GOM does not have an accurate estimate of Moroccan
migration, but instead uses immigration figures from foreign
consulates. These figures show that 50,000 Moroccans legally
emigrate each year, but Ministry officials concede the actual figure
for both legal and illegal migration is much higher. The EU
estimates that perhaps 100,000 Moroccans emigrate each year, while
the Office des Changes revised their official 2006 estimate of
Moroccans living abroad from 2.8 to 3.5 million.

------------------------
Positive Economic Impact
------------------------

3. (U) Remittances are a key element in Morocco's international
balance sheet. Between 2000 and 2006, they increased 150 percent to
USD 5.4 billion, or approximately 9 percent of GDP. Our contacts at
the Office des Changes admit the true value of remittances could be
much greater, as government MRE figures only represent financial
transfers reported by Morocco's commercial banks. Recent
international studies suggest that informal remittances, which are
delivered via courier or community networks, could double this
total.

4. (U) Official Moroccan figures show the vast majority of
remittances originate from France, comprising 43 percent of the
total. In the past ten years, Spain has increased substantially
from 4 to 14 percent, while the U.S. has increased from 4 to 6
percent.

5. (U) Fueled by rising consumer demand, the Moroccan trade deficit
continues to grow. In 2006, Moroccan exports were valued at USD
12.6 billion, while imports were USD 23.4 billion, creating a USD
10.8 billion deficit. Nonetheless, according to the International
Monetary Fund (IMF), Morocco's current account is expected to record
its seventh consecutive surplus in 2007, thanks to MRE and tourism
receipts, which together are expected to total USD 11.3 billion.

6. (U) Tourism receipts are linked to MRE remittances, as increasing
numbers of Moroccans return home for visits each year. According to
official figures, Moroccans comprised 2.1 million of the 4.6 million
tourists in 2001. This figure jumped to 3.5 million of 7.6 million
tourists in 2006. External Affairs Ministry Chief of Staff Hamdi
told us in a recent meeting that the local impact of returning MREs
is enormous, particularly in high-migration areas such as the
mountain districts along the Mediterranean coast, where local
populations double during the summer months. In 2006, the number of
visiting (returning) Moroccans was approximately equal to the number
of European tourists, with total tourism receipts reaching USD 5.9
billion. In addition, remittances play a not insignificant role in
providing liquidity to the Moroccan financial sector, as they total
over a quarter of deposits in Moroccan banks.

7. (U) Economists and sociologists are divided as to the macro
economic effect of remittances. Some view remittances positively,
noting their role in balancing the current account and providing
Morocco its principal source of foreign currency. Others consider
remittances to be linked with Morocco's brain-drain, incompatible
with economic growth, and masking the economic consequences of

RABAT 00001624 002 OF 002


de-industrialization. Hamdi spoke matter of factly about Moroccan
college graduates seeking foreign employment, remarking that the
private economy could not absorb them all. According to the latest
Moroccan census, college graduates represent the largest unemployed
sector at 20 percent. Hamdi added that biologists, chemists,
mathematicians, IT specialists, and health professionals were the
most affected, noting that 98 percent of the graduates this year
from a Rabat science and technology university were employed outside
Morocco.

8. (U) If this migration has acted as a safety valve, offering
talented graduates opportunities that are not available to them in
Morocco, critics see other significant downsides. Some
industrialists suggest that Morocco's ability to run a current
account surplus, even in the face of a burgeoning trade deficit, has
encouraged complaisance and lack of attention to Moroccan industry's
lack of competitiveness. De-industrialization was a significant
issue to emerge from a summer 2007 conference of leading Moroccan
economists and business leaders. Critics noted that dependence on
remittances leaves Morocco vulnerable to economic fluctuations
elsewhere in the world. Additional concerns related to whether
remittances are being invested in productive activity or are playing
a role in further overheating Morocco's real estate sector, which is
already out of reach for many middle class Moroccans.

---------------------------
Public Embrace of Migration
---------------------------

9. (SBU) Besides helping to relieve unemployment pressure, migration
has become a legitimate and accepted vehicle to success. A recent
World Bank study concludes international migrants have become role
models, creating a culture in which migration is a status symbol.
One recent poll by a French migration NGO found that over 54 percent
of Moroccan high school students openly aspire to live in Europe,
Canada, or the U.S.

10. (SBU) Faced with unabated migration (and given the benefits it
accrues from migration), the GOM is resolved to make things as easy
as possible for Moroccans to return. Hamdi explained that 1989
marked a turning point in the GOM's approach, symbolized by the name
change from "Moroccan Workers Abroad (TME)" to "Moroccan Residents
Abroad (MRE)." Along with the name change came a policy that
encouraged dual citizenship and integration as a means of increasing
remittances. Today, Hamdi said his Ministry is helping to build
Moroccan mosques and install moderate Moroccan Imams in expat
communities, not only to counter radical Muslim ideology, but also
to strengthen expat ties and desires to return home.

11. (SBU) Comment: The GOM's response to migration has been mixed,
with a distinct difference between the level of effort devoted
towards controlling Sub-Saharan migration, compared to that spent
controlling Moroccan migration. Harrowing images of thousands of
young Africans arriving ashore in the Canary Islands have resulted
in closer cooperation with Spain and a crack-down on Sub-Saharan
illegal migration attempts. However, Moroccan migration, both legal
and illegal, continues unabated, supported by a culture that
embraces it. Real change in the dynamics of Moroccan migration is
doubtful, as the government appears to have become dependent on the
economic benefits of increasing remittances. END COMMENT.

RILEY

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