Cablegate: Mozambique's Agricultural Sector Ripe for U.S. Investment

VZCZCXRO7614
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHTO #0231/01 0780638
ZNR UUUUU ZZH
R 180638Z MAR 08
FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 8662
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHLO/AMEMBASSY LONDON 0132

UNCLAS SECTION 01 OF 02 MAPUTO 000231

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: EAGR SENV EINV ENRG PGOV TBIO MZ

SUBJECT: Mozambique's Agricultural Sector Ripe for U.S. Investment

REF: 07 MAPUTO 01341

1. SUMMARY: Only 12 percent of Mozambique's arable land is under
cultivation. Mozambique's agriculture minister is actively courting
international agricultural investment. U.S. agribusinesses are
ramping up operations in Mozambique. The GRM is reviewing a
national biofuels strategy, and the country's climate is conducive
to production of several biofuel crops. U.S. Department of
Agriculture assistance focuses on comprehensive rural health,
nutrition and education, including the creation of an agricultural
university. USAID programs address constraints to agricultural
productivity, rural enterprise development, and trade
competitiveness. Mozambique's untapped agricultural potential
offers interesting opportunities for U.S. investors. END SUMMARY.

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AG SECTOR STILL AT A NASCENT STAGE
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2. Mozambique, approximately twice the size of California, only has
12 percent of its arable land under cultivation. While agriculture
contributes about 22% of the country's GDP, close to 80 percent of
the country's population is involved in agricultural production.
Cotton, sugar, tobacco, cashews, and other cash crops, together with
fishing and aquaculture, are the backbone of the agricultural
economy. Currently, U.S.-Mozambique bilateral trade in agricultural
products is relatively small, totaling approximately $31 million in
2007.

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AG MINISTER: GRM PROMOTES FOREIGN INVESTMENT
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3. On December 11, 2007, Mozambican President Armando Guebuza swore
into office the country's new Agriculture Minister, Soares Nhaca.
The Minister of Agriculture was formerly governor of the central
province of Manica where Universal Company's Mozambique Tobacco Leaf
Company has operations. Nhaca has said publicly that the GRM is
committed to developing Mozambique's agriculture and is encouraging
further foreign investment in the sector.

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U.S. AG COMPANIES RAMPING UP INVESTMENT
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4. U.S. investors, led by Chiquita Banana, Dunavant Cotton, and the
Universal Company are ramping up operations in Mozambique. Chiquita
selected Mozambique as the headquarters for its Africa operations
last year. Chiquita has signed a services agreement with a local
investor to market production from 3,000 hectares under the Chiquita
label. Dunavant is engaged in cotton production through agreements
with more than 30,000 smallholder farmers in Central Mozambique and
yields currently average 520 kilograms per hectare. Universal,
working with 90,000 smallholders, has increased tobacco production
in the province of Tete from 15,000 tons of tobacco three years ago
to 28,000 tons today, and is now diversifying into foodstuff
production. These U.S. successes have not gone unnoticed, as other
major U.S. agricultural companies have told Emboffs they intend to
invest in Mozambique in the near future.

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MOZAMBIQUE AND BIOFUELS: U.S. TECHNOLOGIES HAVE AN
EDGE
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5. Mozambique has the potential to become a leading producer of
biofuels, due to its significant tracts of undeveloped land and
climate conducive to biofuel crops. This potential led a U.K.
company, Central African Mining & Exploration Company (CAMEC), to
sign a USD 510 million deal with the Government of Mozambique in
2007. In addition, Mozambique and Brazil signed a cooperation
agreement on biofuels in 2007, making Mozambique a strong candidate
for further USG-Brazil cooperation on biofuel production. Chinese,
Canadian, Italian, Portuguese, and Brazilian companies are already
active in the biofuel sector in Mozambique. A South African company
with a bio-diesel (jatropha) concession in Inhambane province is
using U.S.-technology and equipment exclusively in its production
facility.

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USG ASSISTANCE CREATES OPPORTUNITES: USDA EXAMPLE
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6. Agricultural projects funded by the USG in Mozambique are
improving the agricultural environment and enhancing the positive
bilateral relationship and the already welcoming environment for
U.S. investors. One striking example is the Humana People to People
Project, one of several Food for Progress programs funded by the
U.S. Department of Agriculture (USDA). This project consists of a
comprehensive rural health and education program that establishes
Farmer Clubs to increase rural income, reduce the transmission of

MAPUTO 00000231 002 OF 002

HIV/AIDS, train rural primary school teachers, and provide soy-based
meals to undernourished persons. These projects have benefited
approximately 7,500 people living with HIV/AIDS, 7,200 pregnant
women, and 19,800 orphans. Humana is currently constructing One
World
University, funded by USDA, which will train teachers to not only be
effective educators but leaders in their communities. The proposed
date for the dedication of One World University is May 30, 2008.

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USG ASSISTANCE CREATES OPPORTUNITIES: USAID LEADS WAY
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7. USAID is addressing constraints to agricultural productivity,
rural enterprise development, and trade competitiveness. USAID
programs provide leadership in sector planning and monitoring,
improving the investment climate, creating new job opportunities,
and developing high impact agricultural value chains (cashew,
horticulture, oilseeds, poultry, and forest products). USAID is
working through a range of public/private partnerships to leverage
additional funding, transfer technologies and management skills, and
develop markets. PL 480 Title II activities are well-integrated
into the overall program, promoting productivity-enhancing
technologies, deepening rural marketing networks, and addressing the
root causes of chronic malnutrition in Mozambique. Through
improvements in the trade and investment climate and agricultural
sector productivity, USAID is assisting the most vulnerable rural
families to mitigate environmental risks, produce enough food, and
make better decisions about food utilization enabling them to move
more rapidly from subsistence to surplus and marketable production
that leads to higher family income. In FY07, USAID's programs
resulted in over $12.2 million in agricultural sales from farmers
and enterprises receiving assistance: 137,677 rural households, 760
producer associations, and 160 agricultural firms benefited from
USAID assistance.

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COMMENT: UNTAPPED POTENTIAL OFFERS EXCITING
POSSIBILITIES
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8. COMMENT: There are many constraints to the promotion of
foreign direct investment in agriculture in Mozambique. These
restraints include the small size of the regional market, the
relatively high transport costs of getting products to lucrative
markets in the United States and Western Europe, and a
sometimes-difficult business environment. Nonetheless,
USG-supported development projects have helped create an atmosphere
of goodwill; and the interest by major U.S. companies is telling:
there are additional opportunities for growth including biofuels,
seed, fertilizer, storage facilities, low-cost projects, and staple
foods with long shelf lives. Investment and trade pportunities in
agriculture are worth further investigation by growth-oriented
agribusinesses, and the untapped potential in arable land suggest
that Mozambique's agricultural trade profile with the United States
and other trading partners could increase considerably.

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