US embassy cable - 05MAPUTO275

UNCLAS SECTION 01 OF 02 MAPUTO 000275 
 
SIPDIS 
AF/EPS FOR CYNTHIA AKUETTEH AND MARY FLEMING 
E.O. 12958: N/A 
TAGS: ETRD, MZ, AGOA 
SUBJECT: INPUT FOR 2005 PRESIDENT'S REPORT ON AGOA 
 
REF: STATE 24616 
 
1. AGOA Trade and Investment: Mozambique made limited 
progress in expanding trade and investment under AGOA during 
2004, but has potential to expand AGOA-related exports next 
year, particularly in the agriculture and fisheries sectors. 
There were AGOA success stories in 2004, such as Indian Ocean 
Aquaculture (IOA), a shrimp aquaculture company based in the 
northern province of Cabo Delgado, which exported shrimp to 
the U.S. for the first time in late 2004. IOA, which employs 
close to 500 employees, expects to dramatically increase 
exports under AGOA in 2005. Agricultural exports remained 
low in 2004, with $160,000 in tobacco exports and $90,000 in 
cashew nut exports going to the U.S. under AGOA. Exports of 
cashew nuts, paprika, tobacco and other agricultural products 
may increase in 2005 due to technical assistance being given 
to growers. Apparel/textile imports decreased slightly, from 
$2.5 million in 2003 to $1.9 million in 2004. Key producers 
such as BELITA, the only garment producer exporting to the 
U.S., are expanding operations and expect to increase exports 
next year. On March 3, 2005 a US-Mozambican Bilateral 
Investment Treaty will enter into force, a step that augurs 
positively for increased AGOA-related trade and investment in 
the near future. 
 
2. AGOA-related Outreach Efforts: USAID is currently 
implementing a variety of trade capacity building efforts in 
Mozambique. These initiatives focus on overcoming 
constraints to investment and trade through technical 
assistance and institutional support. In 2004 the Embassy 
hosted a series of digital video conferences on expanding 
exports under AGOA, with emphasis on making links to 
small-scale handicraft and apparel producers who can benefit 
from AGOA. Representatives from the Ministry of Industry and 
Commerce, the Ministry of Culture, the Mozambique Export 
Promotion Institute, and private sector businessmen in the 
garment and handicraft sector participated in the discussions 
on the Mozambican side. On the U.S. side, representatives of 
the U.S. Department of Commerce, apparel/garment buyers and 
handicraft buyers participated and discussed what products 
U.S. buyers were looking to source from Mozambique. 
Effective January 10, 2005 Mozambique is eligible for 
Category 9 benefits under AGOA. 
 
3. Economic Situation: Mozambique continues to make steady 
progress toward establishing an investment-friendly, 
market-based economy. Over the past ten years, the 
government has privatized more than 1,200 enterprises. Some 
large state-owned companies remain, however, including the 
national airline, the national electricity company, the 
national insurance company, port and rail companies, and 
water fuel distribution companies. Foreign direct investment 
and donor government contributions have fueled rapid economic 
growth in recent years, and Mozambique's economy grew 7.1 
percent in 2004. Mozambique has broadly met the targets 
associated with its International Monetary Fund Heavily 
Indebted Poor Country (HIPC) debt relief program, first 
established in 1998. In recognition of the country's 
performance on HIPC targets, Fitch Ratings gave Mozambique an 
international credit rating of B/B in July 2004. 
 
4. Trade Liberalization: Mozambique has carried out 
significant tariff reform since 2001, reducing the average 
nominal tariff to just under 10 percent by 2004, and closing 
many collection loopholes. Mozambique has no trade barriers 
that specifically target U.S. products. The government 
remains cooperative on intellectual property rights 
protection, but has little ability to investigate crimes or 
enforce IPR laws. Foreign direct investment is welcome, but 
there are still many obstacles to investment in Mozambique; 
private ownership of land is not allowed, labor laws are 
inflexible, and the World Bank has estimated that it takes 
new businesses an average of 153 days to secure basic 
licensing and registration. 
 
5. Poverty Reduction: The Mozambican government, through its 
Plan for the Reduction of Absolute Poverty (PARPA), has 
placed the fight against poverty at the top of its agenda. 
Mozambique has made tangible progress in this area, reducing 
its poverty rate from 69 percent in 1996 to 54 percent in 
2004. With donor support funding approximately 60 percent of 
the national budget in 2004, Mozambique has been able to make 
significant long-term investments in health, agriculture, 
basic infrastructure, and education. 
 
6. Political Pluralism: Mozambique has a democratically 
elected government. In December 2004, President Armando 
Guebuza of the Frelimo party was elected with 64 percent of 
the vote, compared to 32 percent for his nearest competitor. 
The election was generally considered free and fair, but was 
marred by some irregularities that did not affect the outcome 
of the presidential election or control of the legislature. 
The political opposition retains 36 percent of seats in the 
National Assembly and holds several mayorships, including 
Beira, the nation's second-largest city. 
 
7. Rule of Law/Anti-Corruption: Corruption continues to 
undermine Mozambique's democratic consolidation and economic 
growth. In recognition of this problem, the government 
approved an Anti-Corruption Law in late 2003 and increased 
the size and scope of the Attorney General's Anti-Corruption 
Unit. Hope remains for the future, since newly elected 
President Guebuza has repeatedly emphasized his desire to 
wage a serious campaign against corrupt government practices. 
Mozambique's judiciary continues to be under-trained, 
understaffed and susceptible to pressure from high-ranking 
government officials and bribery by private parties. In 
recent years the number of trained attorneys and judges in 
Mozambique has risen dramatically, giving hope for a more 
professional judiciary in the future. 
 
8. Human Rights/Labor/Child Labor: Mozambique does not engage 
in gross violations of internationally recognized human 
rights, though there remains room for improvement and abuses 
do occur. The government generally respects labor rights; 
the Constitution provides that all workers are free to join 
independent trade unions, and workers enjoy this right in 
practice. Membership in labor unions has been estimated at 
nearly 200,000, concentrated in Maputo and a handful of 
industries elsewhere. Mozambique has ratified ILO Convention 
105 on Forced Labor, but has not ratified ILO Convention 29. 
Child labor remains a problem in Mozambique, with about 33% 
of children between ages 10 and 14 considered to be 
economically active. This is more a function of children 
working in the informal sector as a result of non-existent 
educational opportunities than it is a problem of children 
being used as laborers in the formal industrial sector (which 
rarely happens). Mozambique has ratified ILO Convention 182 
on the Worst Forms of Child Labor. 
LALIME