US embassy cable - 04MAPUTO70

UNCLAS SECTION 01 OF 03 MAPUTO 000070 
 
SIPDIS 
DEPT FOR 
JOHANNESBURG FOR FCS - JVANRENSBURG, WCENTER 
DURBAN ALSO FOR FCS - JKUEHNER, LKOHRS, AELLARY 
E.O. 12958: N/A 
TAGS: BEXP, BTIO, EINV, ETRD, ABUD, MZ, Commerce, BFIF 
SUBJECT: 2003 BFIF CLOSE OUT 
 
REF: A. SECSTATE 346405 B. MAPUTO 02248 C. MAPUTO 01902 
 
1. SUMMARY: Post wishes to thank the Department for providing 
2003 BFIF funding in the amount of $7,000. Post was able to 
travel to several provinces, visiting with various U.S. 
businesses, commercial associations, and local entrepreneurs 
to support U.S. commercial activities and encourage further 
U.S. investment in Mozambique. We believe our programming has 
been successful and would like to continue to have such 
extensive commercial outreach and attract greater U.S. 
investment in-country in 2004. END SUMMARY. 
 
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COMMERCIAL VISITS TO THE PROVINCES 
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2. Econ/Pol officer and Commercial FSN visited the provinces 
of Sofala and Manica, starting in Mozambique's second largest 
city of Beira. Beira is a significant port town for 
Mozambique and the Beira Development Corridor, running 
east-west from Harare to Beira, allows for a large amount of 
trade to transit through Mozambique from Zimbabwe and Malawi. 
Facilitating many of Mozambique's business ventures outside 
of the capital city of Maputo, Beira is an important national 
commercial center. On a visit to Mobeira, a flour-milling 
factory privatized in 1996 and owned by the U.S. corporation 
Seaboard, Director Antonio Lopes described the stiff 
competition currently challenging the firm's operations. 
Mobeira imports wheat from the U.S. and Europe and exports 
primarily to Malawi and other regional markets. Although the 
market for flour has doubled in the last seven years, 
bringing further profits, Mobeira has faced numerous 
difficulties with the GRM in receiving its entitled VAT 
repayment. Non-payment of VAT reimbursement by the GRM is a 
sensitive and critical issue facing several firms and donors 
working in-country that are exempted from the tax. Post has 
been working with the Ministry of Planning and Finance to see 
that the VAT is repaid to U.S. businesses and donors. In 
November and December of 2003, Mobeira did receive VAT 
reimbursements from the GRM and follow-on payments seem 
likely. Pushing such financial issues with the GRM to help 
U.S. commercial interests in-country will ensure that U.S. 
businesses stay in operation and can successfully compete 
against other producers. 
 
3. Also in Beira, Econ/Poloff and Commercial FSN visited the 
Sofala Commercial and Industrial Association (ACIS), working 
to represent the interests of 27 firms operating in the 
province of Sofala. U.S. firms such as Coca-Cola and Mobeira 
participate as members. The only garment and textile factory 
in Mozambique currently exporting under AGOA, Belita 
(Mauritian-owned), is also represented by ACIS. ACIS is a 
very active and dynamic organization in Sofala, disseminating 
critical commercial and labor news to members and 
non-members, providing advice to prospective investors, and 
establishing task forces to work with the GRM on commercial 
issues. The organization is valuable in its analysis and 
dissemination of information on current and considered GRM 
commercial and labor law. By maintaining regular contact with 
ACIS, Post is kept up-to-date on issues affecting the 
business community in the provinces. Post looks to pursue 
commercial programs with ACIS, such as investment-related 
seminars that may attract further U.S. investment in the 
central provinces or inform businesses how to take advantage 
of incentive programs such as AGOA. 
 
4. The same trip featured a visit to Chimoio and Manica, 
cities located in the Manica Province. Due to its moderate 
climate, Manica is a rich province for agriculture and the 
American NGO, Technoserve, is very active in providing 
training programs to local producers and finding export 
markets for Mozambican fruit and vegetables. On this visit, 
Econ/Poloff and Commercial FSN met with Technoserve 
representatives to discuss the local agricultural sector and 
markets for export. Also in Chimoio, Econ/Poloff and 
Commercial FSN had the opportunity to discuss agricultural 
export issues with Joao Ferrao, manager of a new agricultural 
consulting firm and former director of the Chimoio 
Agricultural Institute (the oldest and most prestigious 
agricultural institution in Mozambique). Mr. Ferrao is keen 
to AGOA issues and participated in Post's 2002 AGOA roadshows 
(reftel C), well-attended in the Manica area. Each year, Mr. 
Ferrao coordinates a Chimoio Agricultural Trade Fair, 
showcasing agricultural equipment and supplies for a variety 
of sources (primarily South African equipment). Post 
discussed the plausibility of having U.S. firms showcase U.S. 
products and equipment at the fair, and Mr. Ferrao was very 
accepting of the idea. Although Manica is not the most 
convenient location for U.S. sellers, Post may be able to 
send product brochures and information to participate in this 
event. 
 
5. The trip to Manica concluded with a visit to the Coca-Cola 
bottling factory, a Zimbabwean-owned flower plantation, 
Vilmar, (the first in Mozambique), and tobacco and paprika 
farms owned and managed by Zimbabwean farmers. Coca-Cola is 
a very successful company in Mozambique and continues to 
raise product output and revenue. They have instituted a new 
system of management nationally, organizing into 
mini-business revenue teams, responsible for activities such 
as production, marketing, and distribution. This new method 
of management has also been successful for Coca-Cola 
Mozambique, raising efficiency and contributing to employee 
morale through individual and group incentives/awards. There 
is strong agreement that the flower sector in Mozambique 
could take off soon in the Manica province. Vilmar has 
recorded great success in growing and selling roses. Most 
roses are driven to Harare and flown to the European market 
for sale. More flower plantations are springing up in the 
area, and the capacity of Mozambique to produce this product 
will lead to more investors. Econ/Poloff and Commercial FSN 
spoke with two Zimbabwean farmers about current land and loan 
issues they face with the GRM. Many Zimbabweans in the area 
are looking for a way to secure loans to increase tobacco 
planting and production. They seek help from U.S. financial 
institutions to tackle these issues. 
 
6. Visits by Econ/poloff and Commercial FSN to several cities 
in the Northern provinces of Nampula and Niassa provided an 
opportunity to promote AGOA, describe post's commercial 
programs in Mozambique, develop key contacts in the local 
business community, and learn about opportunities for US 
companies in these provinces. In Niassa, Mozambique's least 
developed and most isolated province, Econ/poloff and 
Commercial FSN held a multi-sectoral business roundtable with 
local private sector leaders on Niassa's investment climate 
and opportunities for investment. A number of potential 
opportunities were identified in areas ranging from tourism 
to agriculture. A meeting with Nakosso, the Niassa Business 
Centre, a private organization that promotes and facilitates 
foreign investment in the province, has resulted in a number 
of new contacts and follow-up activities. Through this 
initial contact with Nakosso, post is now working with the 
local partner of a US company on a project to export 
macadamia nuts to the United States. The US partners plan to 
visit Mozambique in March 2004. Initial discussions have also 
been held with Nakosso on a digital video conference to be 
organized by post on promoting exports of Mozambican 
handicrafts under AGOA. A visit to the port of Nacala in 
Nampula province focused on export opportunities related to 
the Nacala Corridor, which includes an integrated rail and 
port system linking Malawi, Zambia and Mozambique. This 
project is being undertaken by a US-led consortium and is 
funded by OPIC. In the city of Nampula, meetings were held 
with Technoserve and local producers of paprika and cashews. 
Mozambique's once thriving cashew industry has only recently 
begun to recover from years of decline following the 1995 
liberalization of the sector. Principal export markets 
include the Netherlands, South Africa and the United States. 
Paprika producers were particularly interested in learning 
about AGOA. As a result of one meeting, post has been working 
with a paprika producer who is interested in exporting to the 
US market. 
 
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Other BFIF-related activities 
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7. Post has continuous communication with FCS Johannesburg 
and FCS Durban. Most recently, FCS has worked with post on 
three issues: delivering Gold Key Services, planning U.S. 
business participation in a March 2004 Water Africa 
Exhibition, and an investigation into a U.S. business 
delivering U.S. exports to Mozambican clients. In September 
2004, Post actively communicated with FCS Durban to provide 
Gold Key Service to a U.S. company located in Houston, Texas, 
A-1 Rags. Post and FCS communicated with the Houston Export 
Assistance Center to provide the client with contacts of 
second-hand clothing buyers in Maputo and Nampula. In March 
2004, Mozambique will host the Water Africa 2004 Sub-Sahara 
International Exhibition. Post is working with FCS Durban and 
USDOC Washington to bring U.S. participation to the event 
through the production and distribution of informational 
brochures. The Fair will be held at FACIM in Maputo (a trade 
show location). Post's goal, along with FCS, is to achieve 
participation of over thirty U.S. firms working in water 
treatment, irrigation, ground and surface water development, 
urban drainage, and consulting services by soliciting product 
and service information and distributing it at this year's 
Water trade show. This will open the Mozambican and South 
African market to become familiar with and enlist the use of 
U.S. products in this sector. Thirdly, Post handled a 
commercial inquiry made by a Mozambican consulting firm, 
Kianda by contacting FCS Johannesburg. Kianda is working with 
a U.S. firm called "Caravans International", but there has 
been some confusion as to product payment, delivery of 
products, and communication. FCS Johannesburg assisted Post 
by contacting the Export Assistance Center in Minneapolis, 
that in turn, did much research related to the U.S. firm and 
its international business operations. Post was able to 
provide Kianda with information valuable to its business 
operations and provided options for going forward in working 
with Caravans International. 
 
8. Kodak and the Bank of New York are examples of two U.S. 
firms who visited Post with commercial inquiries in the fall 
of 2003. Post, through use of it's new Commercial Library 
(2003), was able to provide the firms with important country 
information on economics, finance, investment, and politics. 
Post also provides all clients with commercial inquires a 
copy of the 2003 Country Commercial Guide. Econ/poloffs 
attended KPMG's Annual "Top 100 Businesses in Mozambique" for 
2003 and noted that six U.S. businesses were present on the 
list: Coca-Cola, Mobil, Mobeira, Avis-Rent-a-Car, Colgate 
Palmolive, and KPMG Mozambique. This annual study presents 
the top revenue-earners in Mozambique, as identified by 
survey. Econ/Poloff also attended the second annual 
Commonwealth Mozambique Investment Conference. The conference 
featured speakers from business and the GRM on aquaculture, 
finance, tourism, transportation, agriculture, and 
information technology. Very few U.S. investors attended the 
conference, and Post would like to find new ways to get U.S 
investors involved. Similarly, at this year's annual Maputo 
trade fair, FACIM, there was not a U.S. business Pavilion and 
U.S. participation will be more highly encouraged in 2004. 
 
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EXPENDITURES 
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9. Post was allocated $7,000 and financial expenditures 
totaled $8,064.71. The entire budge was allocated to travel 
and per diem. The internal cost of travel in Mozambique is 
very high with plane tickets to the North of the country 
costing the equivalent of full fare rates to Europe from 
South Africa. Post made a concerted effort to remain fiscally 
prudent and double-up programming where possible. 
 
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COMMENT 
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10. The BFIF funding for 2003 was very successful. Post was 
able to provide considerable commercial outreach to U.S. 
business operating in-country. Additionally, Post was able to 
expand its knowledge of the local business community and 
identify further areas for U.S. investment and export sales. 
Valuable commercial and economic information was provided to 
U.S. firms looking to enter the Mozambican market and 
Mozambican firms looking to work with U.S. businesses in the 
U.S. Several informative conferences were attended and 
business contacts were expanded. Mozambique is a difficult 
and remote market for U.S. businesses to penetrate, but with 
continued expanded outreach and the ability to advertise U.S. 
goods and incentive programs like AGOA, success is at hand. 
Post appreciates this opportunity and looks forward to the 
possibility of working with BFIF again in 2004. 
LA LIME