US embassy cable - 05HARARE312

UNCLAS SECTION 01 OF 02 HARARE 000312 
 
SIPDIS 
 
STATE FOR AF/S 
 
USDOC FOR ROBERT TELCHIN 
 
TREASURY FOR OREN WYCHE-SHAW 
 
PASS USTR FLORIZELLE LISER 
 
DEPT PLEASE PASS TO ALL AFRICAN DIPLOMATIC POSTS COLLECTIVE 
 
ALSO PASS TO USAID FOR MARJORIE COPSON 
 
E.O. 12958: N/A 
TAGS: EFIN, ETRD, PGOV, ECON, EINV, ZI, Economic Policy, Land Reform, Trade 
SUBJECT: ZIMBABWE STILL AGOA INELIGIBLE 
 
REF: STATE 24616 
 
1. Zimbabwe remains ineligible for African Growth and 
Opportunity Act (AGOA) benefits.  We submit the following 
input for the President,s Section 106 report to Congress. 
 
2. Market Economy/Economic Reform/Elimination of Barriers to 
U.S. Trade: Since the late-1990s, the government has 
approached the economy through broad interventionism, with 
parastatals serving as monopolistic middlemen for products 
such as gold, tobacco and grain. In 2004, the government 
suggested that it also would create parastatals to supervise 
the production and export of platinum and cut flowers, 
although it has not yet taken action.  The government,s 
disastrous fast track land reform program has undercut 
productivity while failing to address the social justice 
concerns it was alleged to address.  Much of the 
redistributed land went to government insiders rather than 
small landholders or agricultural workers, and the latter 
were given virtually no assistance in making the farms 
productive. 
 
3. Market Economy/Economic Reform/Elimination of Barriers to 
U.S. Trade (continued): The Reserve Bank of Zimbabwe (RBZ) 
continues to maintain an artificially strong currency through 
enforcement of an official exchange rate including highly 
restrictive foreign currency laws.  This has had distorting 
effects on the economy, proving a disincentive for exporters 
while providing the government with a means to favor some 
importers over others.  It has also furthered corruption 
through rent-seeking activities on the part of insiders with 
access to hard currency.  It has also led to a vibrant 
parallel currency market.  There are many barriers to trade, 
including high duties for importers and exchange requirements 
for exporters.  The government is paying only a small portion 
of its international arrears, which now exceed $2 billion. 
Due to exchange rate management, annual inflation dropped 
from 623 to 133 percent, but indications in early 2005 are 
that inflation is increasing again.  The government made no 
progress privatizing inefficient parastatals in 2003.  Growth 
remains negative and an estimated two-thirds of the 
working-age population is unemployed. 
 
3. Rule of Law/Political Pluralism/Anti-Corruption: The 
ruling ZANU-PF party maintains its grip on power through 
fraud and repression, including violence.  The 2000 
parliamentary elections and 2002 presidential elections were 
neither free nor fair.  Freedom of association continues to 
be routinely abused.  Parliamentary elections are scheduled 
for March 31, 2005 and the government has crafted a legal 
framework for the elections which gives it unfair influence 
over the process.  The government has also used the court 
system to intimidate opponents, for instance unsuccessfully 
trying the opposition,s leader on treason charges for 
opposing the Mugabe regime.  Over the past year, the 
government has also removed Harare,s elected opposition 
party mayor and several opposition council members and 
appointed a commission to run the city.  Freedom of speech 
and press is also routinely abused.  In 2004, the government 
passed the Access to Information and Protection of Privacy 
Act (AIPPA), which tightly restricts the activities of the 
independent media.  Police continue to harass journalists, 
and the only non-government daily newspaper remains closed. 
The opposition is normally denied access to state-media. 
During the country,s high-profile land redistribution 
program, the government ignored rule-of- law and due process. 
 Continued harassment has also made it increasingly difficult 
for civil society groups to function and parliament recently 
passed a law that, if signed by President Mugabe, could 
deregister many non-governmental groups while making it 
illegal for NGOs to accept foreign donations. 
 
4. Poverty Reduction: The government maintains several 
programs that provide food or basic services to the poor. 
However, these have had minimal effect compared to the 
general thrust of the government,s economic policy, which 
has caused most Zimbabweans to grow progressively poorer over 
the past six years.  Though half the population faces serious 
food insecurity, the government has used its monopoly on 
grain importation to manipulate food availability for 
political ends.  Many Zimbabweans take home but a fraction of 
their 1997 real wages.  Income taxes kick in at a monthly 
salary of $20.  Electricity and fuel are heavily subsidized 
but often difficult to come by.  Controls have failed to keep 
prices in check. 
 
5. Labor/Child Labor/Human 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 Public 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.  The 
government,s human rights record remained poor, and it 
continued to commit serious abuses.    Security forces 
committed at least one extrajudicial killing.  Arbitrary 
arrest and detention and lengthy pre-trial detention remained 
problems.  As detailed above, the government frequently 
restricts fundamental freedoms. 
DELL