US embassy cable - 04MAPUTO84

UNCLAS SECTION 01 OF 04 MAPUTO 000084 
 
SIPDIS 
DEPT FOR EB/CBA, AF/EPS, AF/S 
JOHANNESBURG FOR FCS 
DURBAN FOR FCS 
E.O. 12958: N/A 
TAGS: BEXP, BTIO, EINV, ETRD, ABUD, MZ, BFIF, Commerce 
SUBJECT: FY O4 BFIF PROPOSAL 
 
REF: (A) 03 STATE 347748 (B) MAPUTO 70 
 
1. Post requests funding in the amount of $30,322 under the 
Business Facilitation Incentive Fund (BFIF) for FY 04. 
 
2. In order of priority, we propose the following projects 
for FY04: 
A. Commercial Outreach, Market Development, and Export 
Promotion. Proposed Funding Level: $15,322 
Twice the size of California, Mozambique has ten provinces 
and a capital city located in the southernmost province. 
Maputo is far-removed from commercial and political activity 
in a majority of the country, but dominates in attracting 
foreign investment, entrepreneurs, and relies heavily on 
access to the South African market. Because of its large 
size, poor infrastructure, remote location from U.S. and 
European markets, and commercial and labor codes that are 
slow to reform, Mozambique has a long road ahead in 
attracting significant foreign investment and achieving 
regional competitiveness. However, the business community is 
in constant communication with the GRM in order to reform 
the business environment by creating more investment- 
friendly policies and promoting competition. Firms currently 
operating in Mozambique are in need of home country support 
and outreach. Communication between firms, the GRM, and the 
diplomatic community is critical to improvement of the 
business climate and to ensure that fair treatment of firms 
is achieved. Additionally, Post outreach to commercial 
associations, entrepreneurs, agricultural institutes and 
organizations, fishing associations, and industry is 
critical to introducing U.S. products and programs to an 
audience generally uninformed about U.S. opportunities and 
the U.S. market. 
Post travel to the provinces will focus on visiting U.S. 
businesses in operation and offering continued support on 
GRM relations and financial repayment of the VAT. 
Additionally, econ/poloffs will take the opportunity to meet 
with farmers, businessmen, entrepreneurs, academics, and 
commercial associations to discuss U.S. export opportunities 
and incentive programs such as AGOA. Discussions will focus 
on how Mozambique can specifically benefit from AGOA in the 
textile/garment and handicraft sector and how specific 
sectors such as agriculture, construction, and aquaculture 
may benefit from U.S. technology and market offerings. 
Furthermore, Post would greatly benefit from consultations 
at the regional FCS office in Johannesburg and USAID's 
Southern Africa Global Competitiveness Hub in Gaborone. Post 
works closely with FCS on various issues out of Durban and 
Johannesburg such as joint research for commercial 
inquiries, Gold Key Service requests, and local trade shows 
and exhibitions. Additionally, Post works with Mozambique's 
USAID private sector development team in weekly meetings, 
focusing on issues such as labor, business registration, tax 
administration, and import/export regulations and tariffs. 
The opportunity to meet with officers in regional support 
offices, shadow their work, and establish greater contact is 
invaluable to Embassy Maputo and its operations, since it is 
not home to a FCS office. Post would gain greater insight 
on commercial resources and contacts, allowing for more 
effective U.S. product promotion and program efforts in 
Mozambique. 
Commercial outreach, market development, and export 
promotion is in line with Post's FY 2005 MPP Economic Growth 
and Development Goal. Communication and establishment of 
commercial contacts in-country will "promote trade openness 
and exports to the region, the US, and the world" (Strategy 
1). Additionally, Post's increased knowledge of U.S. 
commercial resources, physical and virtual, will lead to 
effective management of commercial inquiries, forging a 
valuable relationship with Post and the Regional FCS, TDA, 
and USAID Competitiveness Offices (Tactic 7). Key 
performance indicators will be the rise in AGOA and other 
U.S.-assisted exports to the U.S. and bilateral business-to- 
business contacts established by the econ/commercial 
section. 
Post recommends the following commercial outreach travel: 
Sofala/Manica/Tete Provincial Travel will include the 
following site visits: 
-Port of Beira, Mozambique's most active port 
-Commercial Association of Sofala (ACIS); represents 27 
businesses operating in Sofala, 2 of which are U.S. 
businesses 
-Mobeira - flour-producing mill owned by the U.S. 
corporation Seaboard 
-Belita - currently the only textile and garment factory 
operating under AGOA 
-Agricultural Institute of Chimoio 
-Coca-Cola Bottling Factory, Chimoio 
-Vilmar Rose Plantation 
-Pescamar Fishing Association 
-Moatize coal mines 
-Zambeze River Valley Authority 
-Cahora Bassa Hydroelectric Company 
-Technoserve - American agricultural NGO 
Total for Econ/Poloff and Commercial FSN - $3220 
Transportation: $1000 ($500/person) 
Per diem: $1320 ($110/day, 6 days) 
Conference Room Rental: $900 ($300/site) 
Zambezia/Nampula/Cabo Delgado/Niassa Provincial Travel will 
include the following site visits: 
-Nakosso Business Center 
- Tenga, Ltd - Mozambique's first macadamia nut farm; 
involves U.S. investors from CA 
-Port of Nacala 
-Technoserve - American agricultural NGO 
-Kenmare Resources (Moma Heavy Sands Project) 
-Business Centers Inc., Nampula (US-investor owned and 
managed) 
-Miranda Cashews - working successfully to produce and 
export cashews with help from Technoserve 
-Cuamba University 
-Indian Ocean Aquaculture - large shrimp farm project with 
U.S. investment 
Total for Econ/Poloff and Commercial FSN - $4980 
Transportation: $1800 ($900/person) 
Per diem: $1980 ($110/day, 9 days) 
Conference Room Rental: $1200 ($300/site) 
Inhambane/Gaza/Maputo Provincial Travel will include the 
following site visits: 
-Port of Maputo 
-MOZAL Aluminum Smelter - Mozambique's largest revenue- 
earning firm 
-SASOL natural gas pipeline 
-US-Mozambican Chamber of Commerce 
-Center for Investment Promotion (CPI) 
-Export Promotion Center (IPEX) 
-Association of Business Confederations (CTA) 
-Vilankulos Wildlife Sanctuary, Lighthouse Lodge (U.S. 
investment) 
-Eduardo Mondlane University 
-CITRUM - Mozambican citrus-producing company 
Total for Econ/Poloff and Commercial FSN - $2300 
Transportation: $300 ($150/person) 
Per diem: $1100 ($110/day, 5 days) 
Conference Room Rental: $900 ($300/site) 
Post recommends the following training/consultation travel: 
Consultations at FCS and TDA Johannesburg - $2976 
Bi-annual travel for two Econ/Poloffs and the Commercial FSN 
to Johannesburg: Round-trip airfare $1800 (six trips) and 
per diem $1176 (six two-day trips). 
Consultations at Southern Africa Global Competitiveness Hub 
in Gaborone, Botswana - $1,856 
Travel for one Econ/Poloff and the Commercial FSN to 
Gaborone: Round-trip airfare $1130 (two trips) and per diem 
$726 (two three-day trips) 
Post anticipates that this travel will produce critical 
results for U.S. investment in-country and commercial 
resource knowledge at Post. The rising number of commercial 
inquiries Post receives and the increase of U.S. business 
investment in Mozambique will measure commercial outreach. 
Similarly, a rise in U.S. exports to Mozambique will signify 
successful commercial work. An increase in the number of 
local firms exporting under AGOA to the U.S. will also be a 
quantifiable goal. Post travel to regional FCS, TDA, and 
USAID competitiveness offices will improve Econ/Poloff and 
Commercial FSN's knowledge of commercial resources, enabling 
Post to deal more effectively and efficiently with 
commercial inquiries. Performance metrics may include the 
increased number of coordinated activities between FCS, TDA, 
and Export Assistance Centers (EACs) and Post in FY04. 
B. Key Investment Issues Seminar in partnership with 
Mozambique-U.S. Chamber of Commerce. Proposed Funding 
Level: $7000 
A country in the midst of economic reform and development, 
Mozambique has several issues that it must face in order to 
increase foreign investment and increase regional economic 
competitiveness. The following issues must be addressed by 
the GRM: timeliness of business registration, tax 
administration and VAT repayments to exempted firms and 
donors, hiring of foreign labor, lack of available credit, 
and land ownership. The private sector, donor communities, 
and commercial associations engage in continuous dialogue 
with the GRM to encourage the GRM to adopt more investment- 
friendly policies and open up its markets to outside 
investment. The GRM is slowly taking steps to see that 
reform is made, but the current and prospective investment 
community must be kept informed on such key issues affecting 
business operations and market access. 
Post proposes that a "Key Investment Issues Seminar" be 
coordinated with the Mozambique-U.S. Chamber of Commerce to 
bring to light current business and investment issues. 
Currently, Post works closely with the Chamber of Commerce 
and is establishing joint programs with the Chamber on 
investment, health, and education. Members of the Chamber 
are influential players in the local business community and 
can bring their expertise in working in the Mozambique 
commercial and labor systems to the table. Participants 
would include potential and current investors, donors, 
commercial and labor associations, and government 
representatives. 
Exact figure costs are not yet available, but our best 
estimate for Post expenditure is $7000 for conference room 
facilities and promotional materials. The Chamber may have 
some funding available for this project, but is not able to 
carry the event alone without USG help. 
Post may measure project impact by progress achieved in 
lessening the time it takes to register a business in 
Mozambique and the increased willingness to liberalize labor 
and commercial regulations. However, since movement requires 
a dialogue between the GRM and the private sector, the GRM 
must be ready and willing to implement liberal reform 
changes. Due to the nature of such political processes 
(especially in third world countries), achieving success in 
this area will take time. Regardless, reform in these areas 
must be achieved for Mozambique to open its markets to U.S. 
investors who would be willing to come in and operate, 
promoting and selling U.S. products. 
Hosting a Key Investment Issues Seminar in coordination with 
the Mozambique-U.S. Chamber of Commerce is in line with 
Post's FY 2005 MPP Economic Growth and Development Goal. 
Specifically, it will encourage "improvement in the business 
and investment climates" (Strategy 2). A performance 
indicator would be the amount of "red tape" eradication 
achieved. 
C. USDOC Catalog Show in Beira - Proposed Funding Level: 
$8000 
In order to promote U.S. products and market opportunities 
in Mozambique's second largest commercial center, Post 
proposes a DOC catalog show in the central Province of 
Sofala, the city of Beira. Beira is home to Mozambique's 
most active port and sees significant transit trade with 
Zimbabwe and Malawi. The central provinces rely heavily on 
the Beira development corridor that consists of railway and 
road transportation from Harare to Beira. Commercial 
activity along the corridor is vital to the survival of the 
central provinces. 
Post believes that the business community, investors, 
producers, and suppliers would greatly benefit from a 
catalog show showcasing available U.S. agricultural, 
technical, and industrial products. Since most of the trade 
fairs and catalog events take place in the capital city of 
Maputo, often the Beira community is excluded from 
participation because of the distance and cost of travel to 
attend such events. An active commercial association, ACIS, 
is working in Sofala to support businesses operating in that 
area. Organizing in 2000, ACIS represents the interests of 
27 businesses working in Sofala and is keen to investment 
and commercial-related programming. Post can rely on the 
expertise and strong participation of ACIS in the catalog 
show, as they represent two U.S. firms already established 
and working in the Sofala Province. 
Exact figure costs are not yet available, but our best 
estimate for Post expenditure is $8000 for space rental, 
promotional materials, and Pol/econoff and Commercial FSN 
travel to Beira. 
Program success may be measured by the dollar increase of 
U.S. exports as a result of increased U.S. product awareness 
in Mozambique's second largest commercial hub. Additionally, 
Post will make valuable business contacts by administering 
the catalog show and will likely receive many more inquiries 
regarding contact with U.S. firms for U.S. equipment and 
business partnerships. 
Presenting a USDOC Catalog Show is in line with Post's FY 
2005 MPP Economic Growth and Development Goal. Such a 
program will "promote trade openness and exports to the 
region, the U.S., and the world" (Strategy 1). In 
particular, a catolog show would showcase U.S. companies 
looking to invest (Tactic 7). Performance indicators would 
be the dollar increase of U.S. investment in Mozambique. 
 
3. POC for the above-mentioned activities is Econ/Poloff 
Loren Dent. She may be reached at 258-1-492-797, ext. 3422 
and at dentln@state.gov 
La Lime