US embassy cable - 04HARARE1660

UNCLAS HARARE 001660 
 
SIPDIS 
 
STATE FOR AF/S 
USDOC FOR AMANDA HILLIGAS 
TREASURY FOR OREN WYCHE-SHAW 
PASS USTR FLORIZELLE LISER 
STATE PASS USAID FOR MARJORIE COPSON 
 
SENSITIVE 
 
E. O. 12958: N/A 
TAGS: ECON, EAGR, ETRD, EINV, PGOV, ZI, Economic Policy 
SUBJECT: New Sources Drive Parallel Market 
 
1.  (U) Summary: Zimbabwe-bound remittances through 
Western Union have dropped by as much as 90 percent, 
since July 28 when the Reserve Bank (RBZ) decreed that 
transfer agencies must convert incoming foreign exchange 
into zimdollars at the official rate and may not disburse 
foreign exchange.  According to local interlocutors, new 
foreign exchange sources are filling some of the void. 
End summary. 
 
2. (SBU) At its peak early this year, Western Union's 
managing director said his firm disbursed US$ 3 million 
per week in Zimbabwe and was the country's top foreign 
exchange cash source.  By contrast, he expects transfers 
totaling just US$ 300,000 this week, a ninety percent 
reduction.  Many Zimbabweans working in the United 
Kingdom, South Africa or the U.S. relied on Western Union 
to send small monthly support payments (i.e., less than 
US$ 500) to family members.  Prior to July 28, recipients 
had the option to receive their money in zimdollars or in 
foreign exchange.  So-called "touts" used to gather 
outside Western Union branches and offer recipients 
competitive exchange rates, virtually always above the 
official exchange rate.  Since the July 28 RBZ ruling, 
Western Union had been required to convert all incoming 
remittances into zimdollars with the RBZ at the official 
rate, before releasing the funds.  The Z$5600:$US 
official rate is currently 25 percent below the 
Z$7600:US$ parallel rate. 
 
3. (SBU) With Western Union and other transfer agencies 
no longer providing forex cash for local parallel 
trading, we wondered how much was getting through - and 
from which sources.  Recent interlocutors offer telling 
insights.  The Western Union MD noted that transfers to 
the company's outlets in neighboring countries have grown 
rapidly.  He suggests that Zimbabweans are crossing the 
borders to retrieve remittances in hard currency and then 
smuggling the cash into Zimbabwe.  However, CZI Vice- 
President Florence Sachikonye cautions that GOZ 
enforcement against parallel trading has made most 
Zimbabweans too afraid to sell the U.S. dollars they are 
storing at home.  Neverthless, First Bank Executive 
Director Mberikwazvo Chitambo explained he is advising 
clients to apply for US$ 2,500 per family member for 
"foreign travel," the maximum the RBZ allows.  The RBZ 
pays US$ 1,000 of the 2,500 in cash (the rest in 
travelers checks), most of which - according to Chitambo 
- ends up in the domestic parallel market. 
 
4. (SBU) Comment: Each time the GOZ plugs up a forex 
leak, another one pops open.  The GOZ has yet to 
recognize that where there's a will, there's a way; as 
long as the official rate doesn't reflect the real value 
of the currency, its resourceful citizens will identify 
and find a way to exploit loopholes. 
 
Dell