US embassy cable - 04MAPUTO1519

UNCLAS SECTION 01 OF 03 MAPUTO 001519 
 
SIPDIS 
STATE FOR AF/S - HTREGER, EB/TRA, EB/CBA - DWINSTEAD, 
AND AF/PD - RSEVER, JBARNES 
STATE PASS TO OVERSEAS PRIVATE INVESTMENT CORPORATION 
JOHANNESBURG FOR FCS - RDONOVAN, JVANRENSBURG 
USDOC FOR RTELCHIN 
MCC FOR SGAULL AND TBRIGGS 
PASS USAID FOR AA/AFR AND AFR/SA 
PASS USTR FOR PCOLEMAN 
E.O. 12958: N/A 
TAGS: ECON, EAID, EINV, ETRD, MZ, Commerce 
SUBJECT: MOZAMBIQUE - VISITING CORPORATE COUNCIL ON 
AFRICA (CCA) PRESIDENT PLEDGES TO PROMOTE U.S. TRADE 
AND INVESTMENT 
 
 
1. SUMMARY. On November 10-11, a high-level Corporate 
Council on Africa (CCA) delegation visited Mozambique 
to learn about possibilities for U.S. investment. The 
delegation met with a senior GRM official and several 
local businesspeople to get a flavor for the most 
promising investment areas. CCA and the U.S. Mission 
plan to work closely together to encourage more U.S. 
trade and investment in Mozambique. CCA will begin this 
effort by raising Mozambique's profile in the U.S. as 
an investment destination and by leveraging an expected 
early visit to the U.S. by the winner of Mozambique's 
December 2004 presidential election. The Mission and 
CCA have set as a goal attracting one or two new U.S. 
firms to invest and succeed in Mozambique in 2005. END 
SUMMARY. 
 
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A TASTE OF DOING BUSINESS IN MOZAMBIQUE 
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2. On November 10 and 11, Stephen Hayes, President of 
CCA, and Tim McCoy, Director of Overseas Programs, CCA, 
visited Mozambique on a fact-finding mission to learn 
about investment opportunities and meet key contacts in 
the government and business community. This was CCA's 
first visit to Mozambique since the mid-1990's. 
 
3. On November 10, the CCA delegation, accompanied by 
the Ambassador, USAID Deputy Director, USAID enabling 
environment team leader and econ/poloff visited the 
city of Beira, the country's second largest. The 
delegation sounded out several private sector leaders 
on investment opportunities and obstacles, and how the 
GRM and the business community are working together to 
improve the current business climate. The business 
leaders represented included the heads of two central 
region business associations as well as the presidents 
of several local companies: Mobeira - a flour mill 
owned by the U.S. firm Seaboard Corporation, Belita - a 
Mauritian-owned and operated garment factory exporting 
to the U.S. under AGOA, Delta Trading, and TCT 
Forestry. The businessmen identified as areas of 
opportunity for U.S. investment tourism, agriculture 
and agro-processing, seafood (primarily prawns and 
lobster), energy, and timber processing. Asked about 
the lack of participation by Mozambican firms in the 
U.S. market, they replied that firms are afraid to 
participate in the U.S. market due to its enormous 
market size and consequent large-scale demand for goods 
(COMMENT: Mozambique faces serious supply constraints 
when operating in the global economy, including limited 
production capacity, lack of skilled labor, poor 
infrastructure, and lack of access to finance. END 
COMMENT). 
 
4. While in Beira, the delegation visited Belita, the 
only garment factory in Mozambique exporting to the 
U.S. under AGOA. Belita exports sweatshirts, t-shirts, 
and polo shirts to Vanity Fair, Chaps, FUBU, and Lee. 
Sales from January to October 2004 totaled 
approximately USD 1.4 million, and are expected to 
reach USD 2.2 million by the end of the year. Belita 
buys almost all of its primary material (fabric, 
labels, zippers) outside of Mozambique. Belita's parent 
company, the Palmar Group, located in Mauritius, 
handles all marketing, communication, and logistics for 
the sale of Mozambican-produced garments. In January 
2005, Belita expects to open a jeans-production plant 
in Maputo. Belita will source all denim from Southern 
Africa. Over 1,000 staff will be employed and AGOA 
sales to the U.S. are expected to increase. 
 
5. The CCA delegation took the occasion to visit Beira 
port, one of the three busiest ports in the country. 
The port director of operations noted that port 
activity has decreased 20 percent due to the Zimbabwean 
economic crisis (COMMENT: The Beira Corridor is an 
important trade route for goods moving in and out of 
Zimbabwe. END COMMENT). Mozambique's principal exports 
through Beira are sugar, cotton, timber, and prawns. 
 
6. On November 11, in Maputo, the delegation met with 
the Minister of Industry and Commerce, Carlos Morgado. 
Morgado told them that he would like to see one 
American firm invest successfully in Mozambique in the 
near future, paving the way for others to follow suit. 
(COMMENT: In 2003 Morgado explored an opportunity for 
American Axle to buy Mozambican-made axles. This would 
mean a purchase commitment with Mozambique's largest 
revenue-producing firm, Mozal, which has been extremely 
successful in smelting aluminum for aluminum ignot 
export. However, following Morgado's 2003 visit to 
Detroit, American Axle's management changed and since 
then nothing substantive has arisen from the idea. END 
COMMENT). Morgado suggested that if CCA were to adopt 
Mozambique as a "focal point" and sell Mozambique as an 
attractive investment destination, he would guarantee a 
strong GRM commitment to a creating a successful 
business relationship between U.S. companies and 
Mozambican partners. CCA President Hayes expressed his 
view that the key is to get one or two carefully 
identified small businesses interested in Mozambique, 
establish partnerships accordingly, and create small 
wins in the trade relationship. 
 
7. Morgado advocated partnerships involving timber 
and/or sugar processing and processing of jams or 
concentrates. He said he strongly believed that U.S. 
companies can bring value and innovation to Mozambican 
products. Hayes committed to sending a follow-up CCA 
team to Mozambique in 2005. He added that CCA would be 
looking for ways to market Mozambique in the U.S., and 
that he hoped CCA could identify and send one or two 
U.S. businesses to Mozambique to explore specific 
opportunities. Longer term, he hoped CCA would be able 
to produce an investment guide on Mozambique. As part 
of the discussion, Hayes asked Morgado the status of 
the U.S. - Mozambique Bilateral Investment Treaty 
(BIT). Morgado stated that he would request that the 
PM allow the treaty to circulate through the Council of 
Ministers on November 15 (COMMENT: Post understands 
that the treaty has circulated through the Council of 
Ministers and will be sent to the PM for signature and 
approval on November 23. This date is critical, as 
Mozambican general elections are scheduled for December 
1-2. END COMMENT). 
 
8. Also noteworthy, the CCA delegation met with 
officials and members of the Confederation of 
Mozambican Business Associations (CTA), a group 
working to improve the business climate in Mozambique. 
CTA representatives emphasized that the time is right 
to create linkages and business relationships between 
Mozambique and the U.S. They acknowledged that 
Mozambique would need more outside advice and training 
to take better advantage of AGOA. In the afternoon, the 
delegation met with U.S. firms operating in Mozambique 
- including Coca-Cola, KPMG, PriceWaterhouseCoopers, 
Caterpillar, Mobil, and Colgate-Palmolive. 
 
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PRESS COVERAGE 
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9. The CCA visit generated substantial and positive 
press coverage. A press conference given by Hayes 
prompted stories on STV Mozambique (a private 
television station, which interviewed Hayes), Radio 
Mozambique (the official radio network with nationwide 
reach), and several daily and weekly publications. The 
stories stressed Hayes' commitment to bringing more 
U.S. investment to Mozambique - especially in the areas 
of tourism, seafood, agriculture/agro processing, and 
transportation. Local press noted that trade between 
the U.S. and Mozambique is very small; only USD 8 
million in Mozambican exports went to the U.S. in 2003. 
Hayes admitted that businesspeople in the U.S. remain 
uninformed about investing in Mozambique, but made a 
commitment to increasing awareness of Mozambique's 
investment potential among the U.S. business community 
(CCA members particularly). 
 
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ANTICIPATED OUTCOMES 
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10. Following a productive visit, the Ambassador and 
CCA President Hayes agreed on ways to strengthen the 
U.S. - Mozambican trade relationship. To raise 
Mozambique's profile in the U.S. as an investment 
destination, the CCA will feature Mozambique in an 
upcoming issue of its publication, The Africa Journal. 
With a new Mozambican president in place after the 
December general elections, the Mission will encourage 
an early visit to the United States, where he will be 
able to meet with key CCA members and a business 
audience regarding specific opportunities for 
investment in Mozambique. This visit may coincide with 
the annual CCA summit that will take place in June 
2005. Another possibility would be a planned Millennium 
Challenge Corporation (MCC) dinner. Hayes promised the 
CCA would reach out to its membership and beyond 
regarding opportunities uncovered in the Mozambique 
visit (sugar, irrigation, and construction, in 
particular). Finally, a follow-up CCA team will visit 
Mozambique on a thorough fact-finding mission in 2005. 
As stated by Hayes to the Minister of Industry and 
Commerce, CCA's goal is to "attract one or two 
investors to Mozambique in 2005". All sides agreed 
that building the trade relationship should begin with 
small steps. One or two American successful investors 
in Mozambique in the next year would set a positive 
precedent for future cooperation. 
LA LIME