US embassy cable - 05MAPUTO173

UNCLAS SECTION 01 OF 03 MAPUTO 000173 
 
SIPDIS 
STATE FOR AF/S TREGER 
STATE PASS TO USAID FOR AFR/SA - DMENDELSON 
USDA FOR SPECIAL ASSISTANT TO UNDER SECRETARY BOST - KPOOLE 
PRETORIA FOR AG ATTACHE - SREYNOLDS, RBICKFORD 
MBABANE FOR DSDORSEY 
USDOC FOR RTELCHIN 
SENSITIVE 
E.O. 12958: N/A 
TAGS: PREL, KHIV, ECON, ETRD, MZ, EAGR, Scenesetters 
SUBJECT: SCENE-SETTER FOR VISIT OF DEPUTY SECRETARY MOSELEY 
TO MOZAMBIQUE 
 
REF: A. 04 Maputo 1001 
B. 04 Maputo 1183 
C. 04 Maputo 1645 
Sensitive but Unclassified Handle Accordingly. Not for 
Internet Distribution. 
 
1. (SBU) Introduction and Summary: Your visit to Mozambique 
will provide an opportunity to gain a better understanding 
of IBFAN-funded Reencontro's activities on infant feeding 
feeding and nutrition in Mozambique, the U.S. contribution in the 
fight against HIV/AIDS under the President's Emergency Plan 
for AIDS Relief, food security, and agriculture. You are 
arriving just after a new government has been inaugurated. 
This message provides background on the political 
environment, trade and investment, HIV/AIDS, nutrition, and 
agriculture. End Introduction and Summary. 
 
------------------------ 
MOZAMBIQUE AND DEMOCRACY 
------------------------ 
2. (SBU) Mozambique is rightly considered a post-conflict 
success story. Since the signing of the 1992 Rome Peace 
Accord, which ended sixteen years of civil war, Mozambique 
has made significant progress on stabilization and 
democratic development. FRELIMO has been the ruling party 
in Mozambique since independence. FRELIMO's former military 
opponent, RENAMO, has been the main opposition party. In 
November 2003 Mozambique held municipal elections, which 
resulted in a major win for the ruling party, FRELIMO, and 
were generally regarded as free and fair. In December 
2004, Mozambique held its third multi-party presidential 
and legislative elections since independence. Armando 
Guebuza, the FRELIMO candidate, won the presidency by a 
wide margin, and FRELIMO candidates won most of the seats 
in the National Assembly. Although the elections were 
marred by irregularities, they were not significant enough 
to affect the outcome of the presidential election or 
control of the National Assembly (Ref A). Guebuza replaced 
Joaquim Chissano as President of Mozambique on February 2, 
2005. Guebuza announced his cabinet on February 3, 2005. 
 
----------------------------------------- 
A WORD ON NEWLY-ELECTED PRESIDENT GUEBUZA 
----------------------------------------- 
5. (SBU) Although Guebuza reportedly is more nationalistic 
and less flexible than Chissano, he has indicated recently 
that he is likely to continue current government policies. 
During his trip to the United States in July, where he 
attended the Democratic National Convention and met with 
U.S. officials, Guebuza repeatedly said he favored 
maintaining a strong Mozambique-U.S. relationship and 
stressed that he would honor commitments with donor 
communities and international financial institutions 
(IFIs). A businessman himself, as a result of his party 
and government positions, Guebuza has a good understanding 
of business and economic concerns and has close ties to the 
private sector community. Guebuza has, on occasion, called 
for the "Mozambicanization" of businesses (Ref B), which 
has sparked some concern among foreign investors both 
existing and potential. Guebuza acknowledges the extensive 
US commitment to helping Mozambique overcome the challenges 
of poverty and HIV/AIDS. He comes across as serious, 
intelligent, and disciplined. 
 
----------------------------- 
THE STATE OF ECONOMIC AFFAIRS 
----------------------------- 
6. (U) Mozambique's macroeconomic reforms and success in 
attracting large investment projects have given the country 
an average GDP growth rate of eight percent from 1992 (when 
a devastating civil war was ended) through 2004, the 
highest in Africa over this time period. This growth is 
from a very low base; per capita GNP for 2004 is projected 
at around USD 290. Foreign direct investment, exports, and 
revenue collections all have seen notable increases, and 
the government continues to privatize state firms, albeit 
at a slower pace than in the late 1990's. 
 
7. (U) Maintaining this high rate of growth hinges on 
several major foreign investment projects (aluminium, 
natural gas), continued economic reform, and the growth of 
the agriculture, transportation, and tourism sectors. 
The inflation rate for 2004 was around 11 percent, in line 
with the levels of recent years. 
 
8. (SBU) The Mozambican business climate needs improvement. 
Generally sound macroeconomic policies and high-level 
commitment to attracting business mask a bureaucracy that 
remains at times unresponsive to the needs of the private 
sector, especially small-to-medium-sized enterprises. 
Obtaining permits takes time, corruption is problematic, 
and the legal system is antiquated and cumbersome. 
Although revisions are being considered, the labor law 
remains extremely inflexible and an impediment to foreign 
investment. Land title is granted in the form of leases; 
private ownership of land is not allowed. Donors are 
working extensively with the GRM to modernize and improve 
the commercial code, labor law, business registration 
process, tax system, and land ownership policy. Although 
reform is moving in the right direction, it will take 
several years before significant impediments to investment 
are removed. Mozambique's road network is quite limited 
and in poor condition along many stretches, although major 
repair work is underway. 
 
------------------------------------------ 
COMMERCIAL OPPORTUNITIES AND MEGA-PROJECTS 
------------------------------------------ 
9. (U) Mozambique offers substantial investment and 
commercial opportunities in energy generation (hydropower, 
coal, and gas), transportation (road construction, rail and 
port services, airport construction, and air transport), 
resource extraction (natural gas, minerals, timber, and 
fishing), aquaculture, agriculture/horticulture (cereals, 
cashews, cotton, sugar, vegetables, flowers, and citrus; 
light industry), and tourism. In December 2004, the 
Government of Mozambique ratified the U.S.-Mozambique 
Bilateral Investment Treaty (BIT) that was signed in 1998 
and ratified by the U.S. in 2001. The Treaty enters into 
force on March 3, 2005. 
 
10. (U) Several mega-projects, funded by outside investors, 
are important contributors to Mozambique's rapid economic 
growth. These enterprises include the MOZAL aluminum 
smelter (an Australian investment), the newly inaugurated 
SASOL gas pipeline (South Africa), and soon-to-be 
operational mining and heavy sands projects in Gaza and 
Nampula Provinces (Australia and Ireland). The GRM works 
closely with large investors by creating government- 
investor task forces to address concerns about working in 
the Mozambican business environment. The GRM is very 
responsive to these investors and has created several 
"special economic zones" and "export processing zones," 
some located in poor and under-developed areas. 
Mozambique's mega-projects account for 2-3 percentage 
points of the country's GDP growth and a much larger share 
of its export growth. 
 
-------------------------- 
THE FIGHT AGAINST HIV/AIDS 
-------------------------- 
11. (U) HIV/AIDS prevalence in Mozambique has risen from 
3.3 percent in 1992 to almost 15 percent in 2004. The 
central region is worst affected, with an estimated 
prevalence of 35 percent in urban areas of Sofala province. 
1,400,000 adults (15-49) are currently living with 
HIV/AIDS, but only 5,600 are on ARVs. The estimated number 
of AIDS orphans in Mozambique is 273,000. Current rates of 
high-risk behavior low age of sexual debut, multiple 
partners, and low use of condoms in high-risk encounters 
suggest that HIV prevalence will not begin to decrease 
without stronger prevention programs. The interactions 
between nutrition, food security and HIV/AIDS are evident 
in Mozambique. Eleven million people live in poverty; a 
significant number of households are continuously at risk 
of food insecurity; and Mozambique is prone to natural 
disasters suffering severe drought and floods in recent 
years. HIV/AIDS is yet another shock that contributes 
directly to the vulnerability of households resulting in a 
breakdown in coping strategies and reducing resilience. The 
nutritional status of the population is precarious. 
Findings from the 2003 Demographic and Health Survey (DHS) 
indicate that 41 percent of children under the age of five 
are stunted. Stunting rates are particularly high among 
maternal orphans. While wasting rates overall have declined 
in recent years, prevalence of wasting is high in areas 
where HIV/AIDS prevalence is high (such as Sofala 
province). The proportion of severe wasting is 
significantly inflated in high prevalence areas reflecting 
the impact of pediatric AIDS. While the infant mortality 
rate has declined in the past six years, it remains high at 
101/1000. USAID's Health, HIV/AIDS and Agriculture Teams 
are working together to develop strategies and 
interventions that address the nutrition and food security 
problems facing individuals infected by HIV and families 
and communities affected by HIV/AIDS. In particular, the 
prevention of mother to child transmission (PMTCT) programs 
funded by the President's Emergency Plan for AIDS Relief 
are focusing on improving infant feeding and nutrition 
policies, strategies and interventions for HIV positive 
mothers. However, people living with HIV/AIDS and orphans 
face serious difficulties in securing adequate food 
supplies. 
 
------------------------- 
AGRICULTURE IN MOZAMBIQUE 
------------------------- 
12. (U) It would be impossible to address the problems of 
poverty and malnutrition in Mozambique without addressing 
agricultural development and growth, given that more than 
80 percnet of the population is engaged in agriculture. 
Small family farms using traditional farming methods 
produce the majority of agricultural output. Farming 
technology has changed very little over the past few 
decades, yet comparisons with neighboring countries show 
that there is substantial potential for improvement in 
yields and outputs, even within the bounds of traditional 
technologies. Very few Mozambican farmers have regular 
access to new improved varieties of major crops. Few 
smallholder farmers are using improved quality seeds of 
adapted varieties. Use of commercial fertilizers is one of 
the lowest in the world, and many farmers do not yet employ 
basic yield-enhancing cultural practices such as optimum 
spacing and plant density, crop rotation, or conservation 
tillage. Few farmers are using animal traction, labor- 
enhancing mechanical devices, small irrigation pumps, or 
more intensive land-using technologies of relay cropping or 
multiple-cropping with agro-forestry. 
 
13. (U) USAID has been working to change this situation 
through a range of interventions, including a PL 480 Title 
II monetization program that provides the resources for 
NGOs to introduce improved agriculture and nutrition 
practices to small farmers in four of Mozambique's 
provinces. Under its new Country Strategic Plan (2004- 
2010), the Mission has refocused food security and rural 
income activities to contribute meaningful results to the 
President's Initiative to End Hunger in Africa (IEHA). 
USAID's Rural Incomes team uses market forces to increase 
rural agricultural production and incomes. Northern 
Mozambique has benefited from several years of normal 
rainfall and is exporting surpluses of maize and other 
commodities to neighboring countries. FEWSNET continues to 
assist in mitigating against periodic natural disasters. 
The 2002-2003 Household Consumption Survey shows absolute 
poverty dropping nearly 16 percentage points, from 70 
percent to 54 percent, in the seven years since the last 
national survey. Our program's successes to date and 
lessons learned from direct distribution fully demonstrate 
that full monetization has been essential for Mozambique. 
USAID funded activities helped the most vulnerable families 
produce enough to move from dependency to surpluses that 
lead to higher family income. This is a much more 
sustainable approach than direct feeding and puts the 
responsibility for nutrition in the home. 
DUDLEY