US embassy cable - 04HARARE1354

UNCLAS SECTION 01 OF 02 HARARE 001354 
 
SIPDIS 
 
E. O. 12958: N/A 
TAGS: ELAB, ETRD, PHUM, PREL, ZI, Economic Policy 
SUBJECT: Zimbabwe Unqualified for AGOA 
 
Ref: State 168472 
 
Zimbabwe still falls short of AGOA's qualifying criteria. 
Post's input for the upcoming interagency review follows: 
 
a. Market-Based Economy: In the late-1990s, the 
Government of Zimbabwe began an economic policy based on 
broad interventionism, with enforced pricing and 
parastatals serving as monopolistic middlemen for 
products such as tobacco and grain.  The economy has 
since shrunk by about 35 percent.  Over the past year, 
the GOZ has backed away from some of the more onerous 
controls, having relaxed or eliminated many restrictions 
and price freezes.  Most product shortages have come to 
an end.  Nonetheless, this modest tilt does not yet 
represent sufficient progress toward a market-based 
economy.  The Government still clings to a fixed exchange 
rate and large array of direct and indirect taxes.  Its 
first inclination is still to impose conditions on the 
private sector, as demonstrated by its April decision to 
compel private schools to reduce tuition fees.  Inflation 
is currently around 400 percent, while the savings rate 
has dropped from 12 to 4 percent since 2000.  There has 
been no recent progress privatizing inefficient 
parastatals.  The GOZ is paying only a small portion of 
its US$ 2 billion international arrears. 
 
b. Rule of Law/Political Pluralism/Right to 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 could carry 
the death penalty.  Over the past year, the GOZ has 
removed Harare's elected mayor and shut down the only non- 
government daily newspaper.  In the same period, the GOZ 
strengthened laws restricting freedom of assembly, 
freedom of speech, procedural due process, and private 
property rights.  In politically sensitive cases, the 
judiciary showed indications of being politically 
influenced or intimidated; political elites frequently 
ignore adverse court holdings. 
 
c. Elimination of Barriers to U.S. Trade and Investment: 
Since December 2003, foreign investors enjoy an important 
privilege not available to local firms - full access to 
export processing zones.  Foreign firms can also take 
advantage of the Reserve Bank's revolving loan facility 
at sub-market rates.  Still, Zimbabwe's poor 
macroeconomic conditions and high risk factor - a 
consequence of both the break-down of rule-of-law and the 
Government's de facto nullification of title-deeds 
belonging to white commercial farmers - scare most U.S. 
and other foreign investment away.  Zimbabwe has become a 
relatively high-cost player by regional standards, making 
potential exporters uncompetitive unless supported by the 
productive sector loans. 
 
d. Poverty Reduction:  While the GOZ maintains several 
programs that provide food or basic services to the poor, 
these have had minimal effect compared to the general 
thrust of GOZ economic policy.  Most Zimbabweans have 
grown progressively poorer over the past 6 years.  Many 
Zimbabweans take home only a fraction of their 1997 real 
wages.  As noted above, price controls have failed to 
keep prices in check.  Most Zimbabweans have little or no 
discretionary income, after paying food and 
transportation. 
 
e. Anti-Corruption Polices:  The Government of Zimbabwe 
has enacted numerous anti-corruption measures since 
December 2003.  However, most of these have targeted 
transfers of funds out of the country, which the 
Government objects to, rather than conventional forms of 
corruption.  The Government has recently jailed many 
officials for foreign exchange externalization, including 
the Finance Minister.  The Government's ongoing 
redistribution of white-owned farms has been 
untransparent and plagued by corruption.  Many top 
officials appear to have handpicked one or more farms for 
their families.  The Government has often expressed its 
desire to weed this corrupt aspect from land reform, but 
has not reported much detailed progress to date. 
 
e. 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. 
 
Sullivan