US embassy cable - 04KINSHASA1742

UNCLAS SECTION 01 OF 03 KINSHASA 001742 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON, EAID, EFIN, EIND, ELAB, ELTN, EMIN, CG 
SUBJECT: ECONOMIC REPORT - SEPT 11 THROUGH SEPT 17 
 
1. Sensitive but unclassified.  Protect accordingly. 
 
2. (U) Summary.  Prices decreased slightly, bringing 
monthly inflation to -1.1 percent.  Exchange rates rose 
to rates above FC 400 to the USD.  Diamond exports 
decreased from 2.79 million carats in July to 1.92 
million carats in August.  Angola has resumed the 
forced repatriation of illegal Congolese diamond 
miners.  The central bank announced its plans to issue 
new larger denomination bank notes in 2005. 
Chanimetal, a metalworking firm based in Kinshasa, 
agreed to negotiate a labor dispute with union 
representatives.  DGI (tax authority) announced 
revenues of USD 110 million for the first seven months 
of 2004.  Belgium granted 20 million euros in aid to 
the DRC.  A measles outbreak due to low vaccination 
rates was reported in Equateur province.  End Summary. 
 
MONETARY AND PRICE UPDATE 
 
3. (U) Both food and non-food prices decreased 
slightly, partially due to the decrease in demand for 
school-related supplies now that classes have begun. 
Overall, prices decreased 1 percent, bringing monthly 
inflation to -1.1 percent. 
 
4. (U) The exchange rate has depreciated slightly over 
the past month.  A combination of low diamond prices in 
Antwerp and high international oil prices has increased 
hard currency demands in the DRC.  The IMF reported 
that delayed effects of speculation on political 
stability (post-Gatumba massacre) and seasonal demand 
for USD to pay school fees also contributed to the 
fluctuation.  However, the IMF noted that the 
fluctuations are minor considering that exchange rates 
were at FC 420 to the USD less than a year ago and was 
slightly overvalued at FC 380 to the USD.  The IMF 
expects rates to stabilize shortly. 
 
TRANSPORTATION 
 
PUBLIC TRANSPORTATION COSTS RISE IN MBUJI-MAYI 
 
5. (U) Local press reported that the cost of public 
transportation rose sharply in Mbuji-Mayi, from FC 100 
to FC 150.  Rising fuel costs due to market pressures 
and tax increases contributed to the increase in fare 
prices. 
 
MINING 
 
DIAMOND EXPORTS DECREASE IN AUGUST 
 
6. (U) The Ministry of Mines recorded diamond exports 
of 1.92 million carats for a value of USD 64 million 
for the month of August, 2004.  This is a significant 
decrease from July's exports of 2.79 million carats. 
(Comment: This is an indication that the DRC diamond 
dealers are holding their supply off the market until 
prices recover in Antwerp.  Prices have decreased 10 
percent over the past few months.  End Comment.) 
 
MORE EXPULSIONS FROM ANGOLA 
 
7. (U) Local press reports that the expulsion and 
forced repatriation of Congolese miners from Angolan 
diamond mining sites has resumed, with approximately 
600 Congolese being repatriated each week.  (Note: 
Angola had previously halted the politically sensitive 
expulsion of Congolese miners after ministerial-level 
dialogue between the two countries.  End Note.) 
 
BANKING 
 
BCC ANNOUNCES NEW BANK NOTES FOR 2005 
 
8. (SBU) The BCC (central bank) announced plans to 
issue new bank notes in denominations of FC 1,000 
(approximately USD 2.50), FC 5,000 (approximately USD 
12.50), FC 10,000 (approximately USD 25), FC 20,000 
(approximately USD 50), and FC 50,000 (approximately 
USD 125) beginning in 2005.  (Comment: This could also 
play a role in speculative activities.  The IMF is not 
in favor of releasing notes in the 10,000s range, as it 
feels the market is not yet prepared to handle such 
large denominations.  End Comment.) 
 
LABOR 
 
CHANIMETAL AGREES TO UNION NEGOTIATIONS 
 
9. (SBU) Local press reported that Chanimetal, a 
metalworking firm based in Kinshasa (note: Chanimetal 
is also the local representative of Motorola in the 
DRC), agreed to meet with union representatives to 
negotiate a labor dispute that has frozen the company's 
operations since September 8, 2004.  Workers allege 
that Chanimetal has not fully paid salaries and bonuses 
as prescribed by an inter-professional minimum salary 
agreement (SMIG).  (Comment: Chanimetal executives 
alleged that press accounts were misleading, and that 
the dispute arose from an illegal wildcat strike. 
Chanimetal executives agreed to meet with union heads, 
but had already threatened to terminate workers' 
contracts if the strike continued.  End Comment.) 
PUBLIC SECTOR 
DGI REVENUES TOP USD 110 MILLION FOR 2004 
 
10. (U) DGI (tax authority) reported revenues of over 
USD 110 million for the first seven months of 2004. 
This is compared to total revenues for 2003 of USD 124 
million.  DGI representatives credited strict 
application of IMF and GDRC structural reform 
initiatives as contributing to the revenue increase. 
 
GDRC ADOPTS PROPOSALS FOR PUBLIC SECTOR REFORM 
 
11. (U) International press reported that the cabinet 
of the GDRC has adopted Ministry of Public Affairs 
proposals for reform of the DRC's public sector.  The 
proposal calls for the reform of state procurement 
practices, establishment of a direct deposit payroll 
system for managers, payment of some salary arrears for 
state workers, and the creation of an inter-ministerial 
committee to monitor public administration. 
 
AID 
 
BELGIUM FUNDS 20 MILLION EUROS OF ASSISTANCE PROJECTS 
 
12. (U) Belgian Minister of Cooperation and Development 
Armand de Decker announced that Belgium has granted the 
DRC 20 million euros in aid to improve education, 
health, and food security in the DRC.  In addition, 8 
million euros of the aid will be used to rehabilitate 
rural roads linking important agricultural areas in Bas- 
Congo province. 
 
2 MILLION EUROS IN AID FROM FRANCE 
 
13. (U) OFIDA (customs and tax agency) Deputy Director 
Albert Kasongo Mukonzo reported that the French 
government has donated 2 million euros in aid for the 
construction of two food warehouses and the 
rehabilitation of part of the Kasumbalesa road in 
Katanga province. 
 
HEALTH 
 
4000 CASES OF MEASLES REPORTED IN EQUATEUR 
 
14. (U) Local health authorities and WHO 
representatives in Equateur province reported a sharp 
increase in cases of measles in children aged 6 months 
to 15 years.  Approximately 4000 cases have been 
registered since January 2004.  WHO representatives 
blame the outbreak on poor vaccine distribution, and 
plan to begin combining measles vaccinations with polio 
and tetanus vaccinations to increase coverage of the 
youth population. 
 
15. (U) INFLATION BY CATEGORY  (IN PERCENT) 
 
WEEK ENDING            8/20    8/27    9/03    9/10 
FOOD                   0       7       0      -3 
BEVERAGE               0       0       0       0 
NON-FOOD              -1       0      -1      -2 
CLOTHING               0       0       0       0 
RENT                   0       0       0       0 
TRANSPORT              0       0       0       0 
SCHOOL COSTS           0       0       0       0 
UTILITIES              0       0       0       0 
COMBINED FIGURES 
WEEKLY INFLATION       0.0     2.6     0      -1 
MONTHLY INFLATION     -0.8     1.7     0      -1.1 
16. (U) EXCHANGE RATE DEVELOPMENTS 
 
                   8/20     8/27     9/03     9/10 
CENTRAL BANK RATE  390.594  392.045  396.014  401.688 
PARALLEL MARKET 
-KINSHASA          385-390  390-395  390-395  400-405 
-LUBUMBASHI        380-390  380-390  380-385  400-405 
-MBUJI MAYI        385-390  385-395  385-390  400-405 
-KISANGANI         380-390  380-390  380-390  400-410 
-GOMA              400-410  400-410  400-410  410-415 
-BUKAVU            400-410  400-410  400-410  410-415 
 
 
MEECE