US embassy cable - 03HARARE1938

UNCLAS HARARE 001938 
 
SIPDIS 
 
DEPT FOR AF/EPS DKRZYWDA 
DEPT PLS PASS USTR C. HAMILTON 
COMMERCE/ITA FOR HVINEYARD 
TREASURY FOR OWHYCHSHAW 
 
E. O. 12958: N/A 
TAGS: ETRD, PREL, ELAB, PHUM, ZI 
SUBJECT: Zimbabwe not qualified for AGOA 
 
 
Post reaffirms Zimbabwe's unsuitability for Africa Growth 
and Opportunity Act (AGOA) trade preferences at this 
juncture.  The country falls short in each of the six key 
areas: 
 
- Market-Based Economy:  The GOZ approaches the economy 
through broad interventionism, with parastatals serving 
as monopolistic middlemen for products such as tobacco 
and grain.  The GOZ still controls private sector grain, 
fuel and transport prices, but it has relaxed limits for 
many other products and services.  At the same time, the 
GOZ still claims to keep extensive "price monitoring" in 
place, sometimes visiting firms and sporadically fining 
them for charging market rates.  Exporters must exchange 
half their revenues at an official rate only one-seventh 
the market rate.  Government, rather than the central 
bank, determines interest rates, currently about 350 
percent negative. 
 
- Political Pluralism, Rule-of-Law, 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 carries the 
death penalty.  Over the past year, the GOZ has removed 
Harare's elected mayor and shut down the only non- 
government daily newspaper.  During the country's high- 
profile land redistribution, the GOZ has ignored rule-of- 
law and due process. 
 
- Elimination of Barriers to U.S. Trade and Investment: 
The suspension of rule-of-law has scared away all but a 
trickle of foreign investment.  Due to their rapid 
impoverishment, Zimbabwean firms and consumers can no 
longer afford imported goods from the U.S.; although a 
number of Zimbabwean products continue to move to the 
U.S., indirect export taxes discourage this trade. 
 
- Economic Policies to Reduce Poverty:  While the GOZ 
maintains several programs that provide food or basic 
services to the poor, these run counter to the general 
thrust of GOZ economic policy, which has caused most 
Zimbabweans to grow progressively poorer over the past 6 
years.  Many Zimbabweans take home but a fraction of 
their 1997 wages.  Income taxes kick in at a monthly 
salary of US$3.  Electricity and fuel are heavily 
subsidized but difficult to come by.  Controls have 
failed to keep prices in check.  An acute cash shortage 
made it difficult for lower-income Zimbabweans to access 
money in their accounts during most of 2003. 
 
- System to Combat Corruption:  Favoritism in government 
contracting is rampant.  Many, if not most, senior 
officials have extrajudicially seized at least one large 
commercial farm during land redistribution. 
 
- 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. 
The most recent amendment to the Labor Relations Act 
severely restricts the ability of workers to strike, and 
increases the authority for the government to declare 
strikes illegal. 
 
Sullivan