US embassy cable - 05HARARE1362

UNCLAS SECTION 01 OF 02 HARARE 001362 
 
SIPDIS 
 
AF/S BRUCE NEULING 
STATE PASS TO USTR FLORIZELLE LISER 
STATE PASS TO USAID FOR MARJORIE COPSON 
TREASURY FOR JOHN RALYEA AND BENJAMIN CUSHMAN 
NSC FOR SENIOR AFRICA DIRECTOR C.COURVILLE 
DOL FOR ROBERT YOUNG 
USDOC FOR ROBERT TELCHIN 
 
E.O. 12958: N/A 
TAGS: ECON, EFIN, EINT, ELAB, ETRD, PGOV, PHUM, PREL, ZI 
SUBJECT: ZIMBABWE NOT COMPLIANT WITH AGOA ELIGIBILITY 
CRITERIA 
 
REF: STATE 170577 
 
Zimbabwe continues to fall short of AGOA,s qualifying 
criteria. Post,s input for the upcoming interagency review 
follows: 
 
a. Market-Based Economy: As a result of government 
mismanagement of the economy the role of markets has weakened 
steadily and the country,s economic outlook is bleak.  The 
Global Competitiveness Report 2005-2006 cited Zimbabwe,s 
macroeconomic environment as the worst in the world.  A 
persistent and deepening budget deficit and an extremely 
loose monetary policy have led to triple digit inflation. 
The official exchange rate is heavily overvalued, depressing 
exports and further weakening the market value of the 
Zimbabwe dollar.  The Reserve Bank of Zimbabwe is also deeply 
engaged in loss-making quasi-fiscal activity that has 
distorted investment patterns.  The IMF has estimated that 
GDP will contract by a further 7 percent in 2005. 
Unemployment in the formal sector is estimated at 75 percent. 
 
 
b. Rule of Law/Political Pluralism/Right to Due Process: 
This year, with no notice and in the middle of the country's 
winter, the GOZ embarked upon Operation Restore Order, 
destroying the homes, businesses, or both, of over 700,000 
people. Police demolished or forced victims to destroy their 
own homes and businesses without providing alternative 
accommodation or means of reestablishing their livelihoods. 
The GOZ then blocked humanitarian organizations' attempts to 
provide emergency relief to the tens of thousands of 
displaced families. The GOZ,s lack of commitment to rule of 
law is also a major impediment to economic activity.  In 
2005, Parliament passed a new constitutional amendment 
granting title to the Government of all agricultural land 
acquired in the past under the GOZ,s controversial and 
violent land reform program.  Politically, the opposition 
party operates in a climate of intimidation and repression. 
Security forces harass, beat, and arbitrarily arrest 
perceived opposition supporters.  The GOZ held parliamentary 
elections this year that were neither free nor fair and used 
its subsequent 2/3 majority in Parliament to amend the 
constitution as noted above without a referendum or broad 
consultation.  Over the past year, the GOZ removed the city 
of Mutare's elected mayor, denied the citizens of Harare an 
election for a new mayor as required by law (the previous 
mayor had been removed by the GOZ), and ran the Harare city 
council through a government-appointed commission.  The GOZ 
kept the country's only non-government daily newspaper out of 
operation and shut down an independent weekly newspaper.  In 
the same period, the GOZ strengthened laws restricting 
freedom of assembly, freedom of speech, procedural due 
process, and private property rights.  In politically 
sensitive cases, the judiciary showed indications of being 
politically influenced or intimidated.  Political elites 
frequently ignore adverse court holdings. 
 
c. Elimination of Barriers to U.S. Trade and Investment:  The 
steeply deteriorating macroeconomic conditions, lack of rule 
of law, foreign exchange surrender requirements on exporters, 
sharply widening parallel exchange market premium, declining 
availability of foreign exchange in the tender system, and 
pervasive shortages of food, fuel, electricity and other 
basics render Zimbabwe,s investment climate highly 
unattractive.  Private investment fell dramatically from 18.8 
percent of GDP in 1995 to 5.3 percent of GDP in 2002; the 
downward trend has been unabated since then. 
 
d. Poverty Reduction:  While the GOZ maintains several 
programs that provide food or basic services to the poor, 
they have had minimal effect against the backdrop of sharply 
declining economic and social indicators.  Most Zimbabweans 
have grown progressively poorer over the past 6 years. The 
2004 Progress Report on Zimbabwe Millennium Development Goals 
estimates that the proportion of the population living below 
the Food Poverty Line rose from 57 percent in 1995 to 69 
percent in 2002.  In the same time period, the proportion of 
the population falling below the total consumption poverty 
line edged up from 74 percent to 80 percent. Current trends 
indicate that poverty is on the increase in both rural and 
urban areas. 
 
e.  Anti-Corruption Policies: Official corruption is 
widespread.  The Government of Zimbabwe prosecutes 
individuals selectively if at all, focusing on those who have 
fallen out of favor with the ruling party.  In January, the 
Government enacted an Anti-Corruption Act, which established 
an eight-member Anti-Corruption Commission.  However, the 
Government-appointed Commission fails to include 
representatives from the private sector or civil society. 
The Government also established a separate ministry to deal 
with corruption - the Ministry of State Enterprises, 
Anti-Monopolies, and Anti-Corruption, which has conducted an 
awareness campaign on the destructiveness of corruption.  At 
the same time, the Government's campaign to provide housing 
plots and vending sites for those who lost homes or 
businesses in the Government's slum clearance operation 
appears to be benefiting first and foremost civil servants, 
members of the security forces, and ruling party supporters. 
In addition, the ongoing redistribution of white-owned 
commercial farms has been nontransparent and driven by 
patronage. 
 
f. Protection of Worker 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 draconian Protection of 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. 
 
DELL