US embassy cable - 04MAPUTO923

UNCLAS SECTION 01 OF 02 MAPUTO 000923 
 
SIPDIS 
SENSITIVE 
STATE FOR AF/S, AF/EPS - TPEREZ 
USDOC FOR AHILIGAS 
E.O. 12958: N/A 
TAGS: ECON, EAID, EFIN, MZ, OPIC, Debt 
SUBJECT: MOZAMBIQUE RESPONSE: SOVEREIGN CREDIT RATING FOLLOW- 
UP 
 
REF: STATE 144531 
 
1. (SBU) Provided below is Post's response to Reftel request 
for input on Mozambique's Sovereign Credit Rating (SCR). 
I. LOCAL SUPPORT FOR SCRs: 
a. The Government of Mozambique (GRM) maintains a strong 
interest in retaining and updating its SCR. The Government, 
through the Ministry of Planning and Finance, cooperated 
fully with Fitch Ratings in providing all necessary 
information for the rating to be assigned (accomplished in 
July 2003). 
b. Enthusiasm for the rating can be described as average. In 
discussions with Domingos Lambo, Deputy Director, National 
Directorate of Planning and Budget, Ministry of Planning and 
Finance (MPF), it is clear the GRM perceives benefits to 
having an SCR. Most importantly, the rating allows foreign 
investors to easily obtain macroeconomic data on Mozambique 
and formulate investment decisions. Additionally, access to 
consolidated data allows the GRM to assess its own economic 
status and plan economic and financial reforms to make 
further progress. 
c. The GRM indicates that it would like to participate in 
the SCR annual maintenance program. Lambo stated the GRM's 
budget will support this, but fears Mozambique will not have 
the capacity to provide annual statistics to keep the rating 
current. Mozambique has not developed an efficient, 
comprehensive system for collecting data and suffers from an 
acute lack of information, especially from areas outside of 
the capital city of Maputo. Formerly, the Ministry of 
Planning and Finance used to collect economic and social 
data but this function moved to The National Institute of 
Statistics (INE), after its creation. 
d. Local private sector businesses are supportive of the SCR 
rating process because it sends a "macroeconomic message" on 
Mozambique's economic and financial standing relative to 
other countries in Sub-Saharan Africa. Additionally, a good 
rating, such as Mozambique received (B/B+) makes investors 
more confident of their investment decisions. 
II. IMPACT ON GOVERNMENT POLICY 
e. An African success story in terms of rapid political and 
economic achievement since the end of the civil war (1992), 
the GRM continues to shape policies that will lead toward 
further growth and development. The GRM has made improving 
the quantity and quality of its economic indicators an 
explicit goal. Lambo clearly stated that improving 
indicators, such as the SCR, is a GRM priority. In the early 
90's, Mozambique had no statistical economic data. In 1994, 
post-civil war, the Ministry of Planning and Finance 
formulated four economic indicators to help paint a picture 
of the Mozambican economy. Currently, Mozambique has over 70 
indicators/classifications that more accurately represent 
the economy on several levels. The World Bank and the IMF 
are working with INE to strengthen the institution's 
capacity to collect more detailed data across the 128 
national districts. Economic and social indicators translate 
directly into the GRM's number one policy priority, reducing 
absolute poverty in Mozambique. There is a push to improve 
economic and social ratings so the current government may 
prove effectiveness in raising Mozambican quality of life. 
National elections in Mozambique are scheduled for December 
2004. Economic, financial, and social improvements in 
international ratings provide wins for the current ruling 
party who will fight to remain in power post-2004. 
f. The GRM is cognizant that it is not as competitive 
regionally as some of its neighbors, such as South Africa 
and Botswana. However, Mozambique is competitive with 
nations such as Malawi and Zambia and seeks to improve 
international credit ratings, such as the SCR, to gain this 
edge. 
III. DEVELOPMENT IMPACT 
g. It is unclear if the SCR has been a factor in attracting 
FDI to specific investment projects in Mozambique. Large 
projects such as the MOZAL Aluminum Smelter and the SASOL 
natural gas pipeline choose to operate in Mozambique because 
of the large-scale availability of natural resources and the 
provision of "export processing zones" as granted by the 
GRM. 
IV. UNDP/S&P PROGRAM 
i. The GRM believes that having multiple ratings is 
beneficial to attracting further investment. It is the 
policy of the Minister of Planning and Finance (also acting 
Prime Minister), Luisa Diogo, to take measures that will 
"sell the image of Mozambique" to outsiders. Positive 
ratings will allow Mozambique to display its relative 
advantages to foreign investors. 
V. CURRENCY ZONE RATINGS 
k. Mozambique shows interest in currency zone ratings, but 
believes the most effective way to "sell the region" is 
through statistics published by SADC. 
LA LIME