US embassy cable - 04MAPUTO877

UNCLAS SECTION 01 OF 03 MAPUTO 000877 
 
SIPDIS 
FOR MCC 
E.O. 12958: N/A 
TAGS: EAID, ECON, PREL, MZ, MCC 
SUBJECT: MCC VISIT TO MOZAMBIQUE, 8-11 JUNE 2004 
 
 
1. SUMMARY. DURING A THREE DAY VISIT, THE THREE- 
PERSON MCC TEAM MET WITH THE PRIME MINISTER, FIVE 
MINISTERS, THE CENTRAL BANK GOVERNOR, MOZAMBIQUE'S 
"TECHNICAL TEAM," AND REPRESENTATIVES FROM THE 
PRIVATE SECTOR, CIVIL SOCIETY, THE FINANCIAL SECTOR, 
FOREIGN INVESTORS, AND DONORS. IN EACH MEETING, THE 
TEAM CONVEYED THE CORE MANDATE OF THE MCC - 
INVESTING IN ECONOMIC GROWTH THROUGH PARTNERSHIPS 
WITH DEVELOPING COUNTRIES - AND HEARD ABOUT 
MOZAMBIQUE'S DEVELOPMENT AGENDA, OPPORTUNITIES FOR 
AND CONSTRAINTS TO ECONOMIC GROWTH, AND SPECIFIC 
PROJECT IDEAS THAT COULD BE INCLUDED IN AN MCA 
COMPACT PROPOSAL. THE TEAM ENDED THEIR VISIT WITH A 
VERY WELL-ATTENDED PRESS CONFERENCE AND A 
DEBRIEF/LUNCH WITH AMBASSADOR LA LIME AND USAID 
DIRECTOR KNOTT. END SUMMARY. 
 
2. THE MCC COMES A-CALLING. THE MCC TEAM ARRIVED 
IN MAPUTO ON THE AFTERNOON OF 8 JUNE 2004 AFTER 
SIMILAR STOPS IN LESOTHO AND MADAGASCAR. CLAY 
LOWERY LED THE TEAM WHICH INCLUDED TOM BRIGGS AND 
WESLEY WILSON. THE FIRST STOP WAS A COUNTRY TEAM 
BRIEFING DURING WHICH THE AMBASSADOR DELIVERED AN 
OVERVIEW OF THE SITUATION IN-COUNTRY, POL/ECON CHIEF 
HODGE PROVIDED A POLITICAL AND ECONOMIC OVERVIEW, 
AND USAID DIRECTOR KNOTT GAVE A PRESENTATION ON 
MOZAMBIQUE'S DEVELOPMENT ENVIRONMENT. 
 
3. THE CORE MESSAGE. LOWERY DELIVERED TO THE 
COUNTRY TEAM, AND IN EACH MEETING DURING THE TEAM'S 
VISIT, AN EXPLANATION OF "WHAT WE'RE ALL ABOUT." THE 
MAIN POINTS BEING: 
-- THE MCC'S ONLY PURPOSE IS TO INVEST IN ECONOMIC 
GROWTH. ELIGIBLE COUNTRIES SHOULD LOOK AT THE MCC 
AS AN INVESTOR; NOT TRYING TO MAKE A PROFIT BUT 
TRYING TO HAVE AN IMPACT ON ACCELERATING GROWTH AND 
REDUCING POVERTY. IF A PARTICULAR COUNTRY'S COMPACT 
PROPOSAL DOES NOT PRESENT A GOOD INVESTMENT 
OPPORTUNITY, THEN THE MCC WILL NOT INVEST. 
-- COMPACT PROPOSALS MUST HAVE MEASURABLE RESULTS. 
IF THE IMPACT ON ECONOMIC GROWTH CANNOT BE MEASURED, 
THEN THE PROPOSAL WILL NOT BE FUNDED. MONITORING 
AND EVALUATION SYSTEMS, ALONG WITH SYSTEMS TO ENSURE 
FINANCIAL ACCOUNTABILITY SHOULD BE ESTABLISHED UP 
FRONT. 
-- THE MCC IS INTERESTED IN FORMING PARTNERSHIPS 
WITH THE ELIGIBLE COUNTRIES. LOWERY UNDERSCORED 
THAT THE PARTNERSHIPS WERE TO BE BETWEEN THE MCC AND 
"THE COUNTRY," I.E. THE PEOPLE (GOVERNMENT, PRIVATE 
SECTOR, CIVIL SOCIETY, ETC.) 
 
4. DAY 1. THE TEAM'S FIRST MET WITH PRIME MINISTER 
LUISA DIOGO, WHO IS ALSO MINISTER OF FINANCE AND 
PLANNING. (THE AMBASSADOR AND USAID DIRECTOR KNOTT 
ACCOMPANIED THE TEAM FOR ALL OF THE MEETINGS/EVENTS 
DURING THE VISIT.) 
5. DIOGO OPENED BY CONGRATULATING THE MCC FOR THREE 
REASONS: (1) FOR FULFILLING THE MONTERREY 
COMMITMENT; (2) FOR TAKING INTO CONSIDERATION THE 
PROGRESS MOZAMBIQUE HAS MADE SINCE THE END OF THE 
CIVIL WAR AS EVIDENCED BY A NUMBER OF POSITIVE 
TRENDS (AVERAGE GROWTH OF 7-8% FOR TEN YEARS; 
REDUCTIONS IN POVERTY - FROM 70% IN 1997 TO 54% IN 
2003; CREATION OF INSTITUTIONS TO FIGHT CORRUPTION; 
MACROECONOMIC STABILITY); AND (3) THE STATED 
APPROACH OF THE MCC WHICH FITS WELL WITH 
MOZAMBIQUE'S PRESENT AND FUTURE PERSPECTIVE AND 
AGENDA SINCE MOZAMBIQUE'S BEST HOPE FOR SUSTAINABLE 
GROWTH IS TO RESOLVE THE COUNTRY'S MAJOR 
INFRASTRUCTURE CONSTRAINTS AND TO STEADILY INCREASE 
SMALL AND MEDIUM-SIZED ENTERPRISES' SHARE OF GROWTH. 
IN SHORT, MOZAMBIQUE'S "PRESENT AND FUTURE CHALLENGE 
IS TO HAVE THE PRIVATE SECTOR FLOURISH." 
 
6. THE PRIME MINISTER WENT ON TO COVER THE 
GOVERNMENT'S PRIORITIES AND DEVELOPMENT STRATEGY FOR 
PROMOTING PRIVATE SECTOR-LED GROWTH AND REDUCING 
POVERTY. AMONG THE POLICY AREAS THAT ARE BEING 
ADDRESSED IN SOME MANNER TO IMPROVE THE PRIVATE 
SECTOR ENABLING ENVIRONMENT (ALL REQUIRE 
CONTINUED/ADDITIONAL EFFORT): LABOR REFORM, CUSTOMS 
REFORM, CORRUPTION, BUSINESS REGISTRATION, AND 
LEGAL/JUDICIAL REFORM. THE PRIME MINISTER ALSO 
MENTIONED THE GOVERNMENT'S EFFORTS TO FIGHT HIV/AIDS 
AND STRENGTHEN THE PUBLIC EDUCATION AND HEALTH 
SYSTEMS. 
 
7. IN ADDITION TO THE POLICY REFORMS NEEDED TO 
STIMULATE THE PRIVATE SECTOR, DIOGO STATED THAT 
VIRTUALLY ALL FACETS OF MOZAMBIQUE'S INFRASTRUCTURE 
REQUIRED REHABILITATION AND, IN SOME CASES, KEY 
POLICY REFORMS. AS SUCH, THE GOVERNMENT OF 
MOZAMBIQUE (GRM) IS FOCUSED ON DEVELOPING LARGE 
INFRASTRUCTURE COMPONENTS OF THE COUNTRY'S 
TRADITIONAL TRANSPORT CORRIDORS TO SERVE AS "ANCHOR 
PROJECTS," E.G. MAPUTO PORT IS AN "ANCHOR" IN THE 
MAPUTO CORRIDOR, AND NACALA AIRPORT AND RAIL LINE 
COULD BE "ANCHORS" IN THE NACALA CORRIDOR. DIOGO 
REASONED THAT SUCCESSFUL COMPLETION OF THESE 
PROJECTS COULD ALLOW MOZAMBIQUE'S AGRICULTURAL 
POTENTIAL TO BE REALIZED THROUGH MORE AND GREATER 
COMMERCIAL OPERATIONS. IN MANY INSTANCES, THE GRM'S 
PREFERENCE IS TO IMPLEMENT MAJOR INFRASTRUCTURE 
PROJECTS THROUGH PUBLIC-PRIVATE PARTNERSHIPS, A 
THEME WHICH CAME UP REPEATEDLY THROUGHOUT THE DAY. 
 
8. DIOGO DID OFFER SOME EXAMPLES OF PROJECTS THAT 
MIGHT BE INCLUDED IN MOZAMBIQUE'S COMPACT PROPOSAL, 
ADDING THAT THE TEAM WOULD HEAR MORE DETAILS FROM 
THEIR MEETINGS WITH INDIVIDUAL MINISTERS. THESE 
SAMPLE PROJECTS INCLUDED ALL FORMS OF TRANSPORT 
INFRASTRUCTURE (TO IMPROVE ACCESS TO MARKETS AND TO 
SOCIAL SERVICES), WATER/SANITATION PROJECTS IN URBAN 
AND RURAL AREAS, AND REFORM AND CAPACITY BUILDING 
WITHIN CUSTOMS. 
 
9. THE TEAM HEARD MORE DETAILS ON THESE AND SEVERAL 
OTHER RELATED PROJECTS THROUGHOUT THE COURSE OF THE 
DAY. LOWERY TOOK EACH OPPORTUNITY TO RESPOND BY 
SUGGESTING THAT MOZAMBIQUE TAKE A STEP BACK AND 
CONSIDER THE RESULTS THAT ARE TO BE ACHIEVED BY 
IMPLEMENTING A PARTICULAR PROJECT. A PARTICULAR 
ROAD IS NEEDED, BUT WHAT IMPACT ON GROWTH WILL 
BUILDING THAT ROAD HAVE?; AND BEYOND BUILDING AND 
MAINTAINING THAT ROAD, WHAT ELSE MUST BE DONE TO 
ALLOW ENTERPRISES TO TAKE ADVANTAGE OF THE NEW ROAD 
AND GROW AS A RESULT? WHAT ROLE DOES CUSTOMS REFORM 
PLAY AND WHAT NEEDS TO BE DONE? HOW CAN ACCESS TO 
CAPITAL BE IMPROVED? ETC. 
 
10. ON THE ISSUE OF BUDGET SUPPORT, DIOGO CONCEDED 
THAT, SHOULD A COMPACT PROPOSAL BE APPROVED FOR 
FUNDING, MOZAMBIQUE WOULD NOT WANT 100% OF ITS MCA 
FUNDING AS BUDGET SUPPORT. 60-65% IN BUDGET SUPPORT 
AND THE REMAINDER IN PROJECTS WOULD BE SUITABLE. 
LOWERY RESPONDED THAT DECISIONS ON HOW THE FUNDING 
FLOWED WOULD BE MADE IN THE CONTEXT OF THE COMPACT 
PROPOSAL AND AFTER SUFFICIENT DUE DILIGENCE TO 
ENSURE FINANCIAL ACCOUNTABILITY. 
 
11. DIOGO CLOSED THE MEETING AND CAPTURED 
MOZAMBIQUE'S OVERARCHING OBJECTIVE IN COMPETING FOR 
MCA FUNDING BY STATING THAT "WHAT WE'D LIKE TO 
ACHIEVE IS 8% GROWTH A YEAR TO REACH OUR POVERTY 
REDUCTION TARGETS; AND THE GROWTH MUST BE 
SUSTAINABLE." SHE ADDED THAT IN TERMS OF TIMING, 
MOZAMBIQUE COULD CONTINUE THE DIALOGUE WITH THE MCC 
BY SENDING A DRAFT COMPACT PROPOSAL TO WASHINGTON BY 
THE END OF JULY WITH THE EXPECTATION OF RECEIVING 
CONSTRUCTIVE CRITICISM AND ADVICE IN RESPONSE. 
 
12. DURING THE REST OF THE DAY THE TEAM MET WITH 
MINISTER OF TRANSPORT AND COMMUNICATIONS TOMAZ 
SALOMAO, MINISTER OF INDUSTRY AND COMMERCE CARLOS 
MORGADO, MINISTER OF PUBLIC WORKS AND HOUSING 
ROBERTO COSTLEY-WHITE, MINISTER OF HEALTH FRANCISCO 
SONGANE, MINISTER OF AGRICULTURE HELDER MUTEIA, AND 
GOVERNOR OF THE BANK OF MOZAMBIQUE ADRIANO MALEIANE. 
THESE DISCUSSIONS REITERATED THE POINTS EXPRESSED BY 
THE PRIME MINISTER AND OFFERED SOME ADDITIONAL 
DETAILS ON INDIVIDUAL PROJECTS. PERHAPS OF EQUAL 
IMPORTANCE WAS THAT THE MCC TEAM HAD THE OPPORTUNITY 
TO EXPLAIN THE MCC DIRECTLY TO THE MOST RELEVANT 
MEMBERS OF THE CABINET AND DISCUSS ANY IDEAS OR 
ISSUES. 
 
13. THE LAST MEETING OF THE DAY WAS WITH 
MOZAMBIQUE'S MCA TECHNICAL TEAM. THIS GROUP 
CONSISTS OF SEVENTEEN MEMBERS: FIFTEEN FROM THE GRM, 
MAINLY AT THE NATIONAL DIRECTOR LEVEL; ONE FROM 
CIVIL SOCIETY (A UNIVERSITY PROFESSOR); AND ONE FROM 
THE PRIVATE SECTOR (THE EXECUTIVE DIRECTOR OF THE 
CONFEDERATION OF MOZAMBICAN BUSINESS ASSOCIATIONS). 
IT REMAINS TO BE SEEN IF MOZAMBIQUE'S SOLID 
EXPERIENCE WITH CONSULTATIVE PROCESSES INVOLVING 
GOVERNMENT, CIVIL SOCIETY, AND THE PRIVATE SECTOR 
WILL BE APPLIED FULLY IN THE COUNTRY'S COMPACT 
PROPOSAL. 
 
14. THE MCC TEAM CERTAINLY DROVE HOME THE NECESSITY 
FOR BROAD HOST COUNTRY PARTICIPATION IN DEVELOPING 
THE COMPACT HOME IN THEIR MEETINGS WITH THE GRM AND 
IN DISCUSSIONS WITH REPRESENTATIVES OF MOZAMBIQUE'S 
PRIVATE SECTOR, CIVIL SOCIETY, FINANCIAL SECTOR, 
FOREIGN INVESTORS (INCLUDING A VISIT AND BRIEFING ON 
THE MAPUTO PORT CONCESSION), AND DONOR COMMUNITY. 
THESE MEETINGS ALSO PROVED USEFUL FOR INCREASING THE 
MCC'S UNDERSTANDING AND APPRECIATION OF MOZAMBIQUE'S 
DEVELOPMENT ENVIRONMENT. 
 
15. DAY 2: USAID DIRECTOR KNOTT ACCOMPANIED THE 
TEAM ON A TRIP TO THE TOWN OF CHOKWE IN GAZA 
PROVINCE TO SEE THE RESULTS OF USAID-FUNDED ROAD AND 
RAIL RECONSTRUCTION PROJECTS. THE TEAM SAW BOTH 
WHAT CAN BE DONE WITH HOST-COUNTRY CONTRACTS 
(CONTRACTS FINANCED BY USAID BUT LET BY THE GRM) AND 
A VERY SMALL PIECE OF THE COUNTRY'S INFRASTRUCTURE 
NEEDS. 
 
16. GETTING THE WORD OUT. THE LAST ITEM ON THE 
TEAM'S SCHEDULE WAS A PRESS CONFERENCE ORGANIZED BY 
THE PUBLIC AFFAIRS OFFICE. THE EVENT WAS VERY WELL- 
ATTENDED BY BOTH PRINT AND ELECTRONIC MEDIA. LOWERY 
REPRESENTED THE MCC TO THE PRESS, KICKING THE 
PROCESS OFF AS USUAL WITH HIS CORE MESSAGE. HE THEN 
FIELDED QUESTIONS ON THE OBJECTIVES OF THE MCC, 
FUNDING LEVELS, TIMING, AND THE RELATIONSHIP BETWEEN 
THE MCC AND USAID - AMONG OTHERS. THE PRESS 
COVERAGE HAS BEEN POSITIVE AND FAIRLY ACCURATE. MCC 
RELATED PRESS ITEMS ARE BEING PACKAGED AND WILL BE 
FORWARDED TO THE MCC. 
 
17. ALL-IN-ALL, THE TRIP APPEARS TO HAVE BEEN 
SUCCESSFUL. MOZAMBICANS FROM A VARIETY OF SECTORS 
IN THE SOCIETY HAVE BEEN INFORMED ABOUT THE MCA (AS 
HAVE FOREIGN INVESTORS AND DONORS), AND THE MCC IS 
BETTER INFORMED ABOUT MOZAMBIQUE. THE NEXT STEP FOR 
MOZAMBIQUE IS TO BEGIN PREPARATION OF THE COMPACT 
PROPOSAL. POST WILL REPORT ON PROGRESS OVER THE 
COURSE OF THE NEXT FEW MONTHS. 
HANKINS