[stop-imf] Cashew industry sacrificed for debt relief says Chissano

[Robert Weissman]

More evidence that the cashew nut disaster in Mozambique was simply forced
on the country by the IMF/World Bank; plus other useful information on the
issue from Joe Hanlon.

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Robert Weissman=09<rob@essential.org>
Essential Information
P.O. Box 19405, Washington, DC 20036, USA
Tel: 1-202-387-8030
Fax: 1-202-234-5176
www.essential.org


PRESIDENT SAYS
CASHEW INDUSTRY SACRIFICED
TO GAIN HIPC DEBT RELIEF

also:
+ Mozambican Planning and Finance Minister Luisa Diogo held out no hope
that any of Mozambique's large scale cashew processing factories could
survive.
+ Business Report, Johannesburg: "World Bank crushes Mozambique's cashew
industry"
+ Mozambique hopes to double cashew production
+ Letter from members of Congress to Secretary Paul O'Neil of the US
Treasury regarding the IMF/World Bank's intervention in the Mozambique
cashew nut industry.

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         Cashew clippings round-up,
          compiled by Joseph Hanlon, 8 July 2001
           j.hanlon@open.ac.uk

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105601E   POVERTY FORCED ACCEPTANCE
OF CASHEW DIKTAT - CHISSANO

Maputo, 25 Jun (AIM) - It was Mozambique's poverty that forced
the government to accept the demand from the World Bank to
liberalise the trade in cashew nuts, President Joaquim Chissano
said on Monday, in a television interview marking the 26th
anniversary of Mozambican independence.
     Stripping the Mozambican cashew processing industry of
protection was a demand raised by the World Bank as a condition
for loans in 1995. The result of the liberalisation has been to
stimulate the export of raw nuts to India, and to close down
most of Mozambique's own cashew factories.
     "We couldn't say no", Chissano told the interviewers. "We
had to measure the consequences. We had to liberalise the export
of raw cashews in order to obtain other benefits from the Bretton
Woods institutions".
     Liberalisation "was prejudicial", he admitted. "It caused
factories to close down and made their workers unemployed. But
matters would have been much worse if we had not achieved debt
relief of around three billion dollars. Many more factories would
have closed then".
     Thus, in Chissano's view, the cashew industry was sacrificed
to ensure World Bank and IMF backing for Mozambique's access to
the HIPC (Heavily Indebted Poor Countries) debt relief
initiative.
     Mozambique could have rejected the World Bank diktat "if we
had been richer", said the President. A richer country might also
have been able to subsidise its cashew processing industry, in
order to compete with India.
     "But we have no resources with which to offer subsidies",
said Chissano.
     Chissano hoped that a meeting of all the players involved in
cashew, scheduled for next month in the northern city of Nampula,
would draw up a viable strategy for the future of the sector.
     Mozambique reached the HIPC "completion point" in June 1999,
when a debt relief package of 1.7 billion dollars in net present
value terms (and 3.7 billion dollars in nominal terms) took
effect. This brought the country's total debt stock down to about
a billion dollars.
     Since then, the country has become eligible for "enhanced
HIPC", or "HIPC-2", under which the debt stock will fall to
around 750 million dollars.
     The "completion point" for HIPC-2 was expected earlier this
year, but has been delayed. Chissano confirmed that the delay was
due to the crisis in the country's third largest commercial bank,
the Austral Bank.
     This privatised bank fell back into state hands in April,
when the private investors, headed by the Malaysian Southern Bank
Berhard, pulled out, after refusing to participate in
recapitalising the bank. Austral had made losses of some 63
million dollars in 2000, and 34 per cent of its credit portfolio
consisted of non-performing loans.
     But Chissano was confident that the delay to HIPC-2 would
not last much longer, since the World Bank and the IMF now
accepted that the Austral Bank should be made a viable concern,
rather than liquidating it.
     "The process is on the right track", said Chissano. "The IMF
and the World Bank agree with trying to rescue the Austral Bank,
and with re-privatising it".
     He added that nine foreign banks have expressed an interest
in buying Austral.
     Asked whether the bank would be sold at a knock-down price,
Chissano replied "We're not giving it away. We will sell it for
the real value of the bank".
     He said that the state has guaranteed that depositors in
Austral will not lose their money. There was "no reason for
alarm".

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86401E   MINISTER OFFERS NO HOPE TO CASHEW INDUSTRY

Maputo, 19 Apr (AIM) - Mozambican Planning and Finance Minister
Luisa Diogo on Thursday held out no hope that any of Mozambique's
large scale cashew processing factories could survive.
     Speaking to reporters of the government's plans for 2001,
she argued that the cashew industry needed a different kind of
factory with lower costs.
     The most modern of the large factories, Mocita, in the
southern city of Xai-Xai, closed its doors earlier this year. It
was the last of the major factories: the others had succumbed
much earlier to the withering impact of the World Bank's diktats
on liberalisation of the trade in cashew nuts.
     The practical result of liberalisation has been to encourage
the export of raw nuts to India, where they can be hand shelled,
often by child labour. Starved of their raw material, the
Mozambican factories have closed down, and thousands of cashew
workers are now unemployed.
     Diogo did not envisage the large factories reopening. "The
situation has already happened", she said fatalistically.
     The future lay in "reconversion" to other types of
processing units, while the money from the 18 per cent surcharge
levied on raw nut exports should be ploughed into planting more
trees to rejuvenate the cashew orchard.
     When AIM pointed out that small, supposedly more efficient
cashew plants, were closing along with the large ones, the
minister could only answer "We have to continue to work. We have
to believe in ourselves, and that Mozambique has a comparative
advantage in cashew production".
     Diogo wanted "rational use" of the money from the surtax, so
that "planting can happen as rapidly as possible".
     She did not say how many trees are currently being planted.
Certainly planting needs to be on a mass scale if it is to
reverse the long term trend of decline. Mozambique's cashew
orchard is ageing and diseased: according to one estimate a
million cashew trees are dying every year. To make a significant
difference, many more than a million would have to planted every
year.
     Diogo stressed such measures as fumigating cashew trees (to
deal with insect pests and fungal diseases), and assessing "the
true customs value" of raw nut exports.
     To the dismay of all supporters of liberalisation, the FOB
prices quoted by exporters of raw nuts have collapsed (to prices
of around 415 dollars a tonne, compared to 700 dollars a tonne
Indian companies were paying in 1999).
     The government is investigating these prices in an attempt
to see whether under-invoicing is happening (to avoid paying the
surtax), or whether the quality of Mozambican nuts is so poor as
to justify such low prices.
     From Diogo's words it would be difficult for anyone involved
in the cashew sector - the cashew industrialists, their
workforce, or the peasant harvesters of the nuts - to take any
comfort.
(AIM)
pf/ (467)

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WORLD BANK CRUSHES
MOZAMBIQUE'S CASHEW INDUSTRY
      by Paul Fauvet
Business Report, Johannesburg, May 23 2001

In the early 1970s, Mozambique was the largest producer of processed
cashew kernels. But today the industry has collapsed: out of 16 large
cashew processing factories, only two, both in the northern province of
Nampula, are still functioning.

Ninety percent of the industry's 11 000 workers are unemployed and last
month southern Mozambique's last cashew factory, Mocita in the city of
Xai-Xai, closed its doors.

The company, owned by Anglo American, would rather pay out the equivalent
of about R7,5 million in redundancy payments to its 1 200 workers than
continue to run at a loss.

The closure of the factories has had a devastating effect on small towns
where the cashew industry was a major employer, such as Manjacaze in the
south, or Angoche and Monapo in the north.

The employers, organised in the cashew industry association Aicaju, and
the cashew workers' union, Sintic, blame the crisis on blundering
intervention by the World Bank in the 1990s.

The bank and the International Monetary Fund demanded that the Mozambican
government strip the processing industry of protection.

Schemes whereby peasants were obliged to sell their nuts to the local
factories did not please the World Bank. Nor did the alternative, reached
by consensus in 1995 between Aicaju and the exporters of raw nuts, whereby
there would be a 25 percent surtax on all exports of unprocessed nuts.

The bank, in its 1995 country assistance programme, laid down the law:
liberalising the trade in cashews was one of the "necessary conditions"
for about $400 million worth of loans.

The government yielded, and gradually protection was removed, which was a
direct stimulus to exporting the raw nuts to the only significant
purchaser, India, where the nuts are shelled by hand, often by child
labour.

Aicaju members felt cheated: several of them had recently bought cashew
factories when State company Caju de Mocambique was broken up and sold
off. They had bought in the belief that the industry was protected, and
now the rules of the game had suddenly changed.

The surtax on raw nut exports was cut year by year, falling to 14 percent
in 1997. By then factories were already closing, starved of raw material
because they were unable to compete with the traders buying up raw nuts
and exporting them to India.

The World Bank's demand was that by 2000 there should be no surtax at all,
but in February last year president James Wolfensohn visited Maputo and
reversed the policy of his more ideologically minded subordinates.

He agreed that the surtax could stay at 14 percent and declared that he
was in favour of a healthy processing industry, in sharp contrast to the
1995 World Bank documents, which attacked the industry as cosseted and
implied it would be no great loss if all the factories closed down.

Wolfensohn believed it was possible to satisfy both the peasant producers
of nuts and the industry. He wanted "a world-class processing industry and
world-class cashew cultivation that can compete with India".

But the industry regarded the bank's change of heart as too little too
late, and warned that a 14 percent surtax would make little difference.
The industrialists demanded a ban on raw nut exports.

Left-wing parliamentarians in the ruling Frelimo Party supported them and
produced a Bill that would have imposed such a ban. But the government
leaned heavily on the Frelimo parliamentary group to water down the Bill.

When it was passed in 1999, it merely increased the surtax to 18 percent,
a measure dismissed with contempt by the industry.

The World Bank always justified its free trade arguments with the claim
that liberalisation would ensure a fairer price for the peasant producers.

However, the peasants have no organisation of their own.

Cashew is not a plantation crop, and no farmers rely exclusively on
cashew. Cashew is a supplementary crop, often picked by the children of
peasant households.

Hundreds of thousands of unorganised peasant households are in no
condition to take advantage of liberalisation to push prices up. They do
not have marketing mechanisms of their own and are entirely at the mercy
of the traders.

Far from the peasants earning more, the price of raw nuts collapsed as the
factories closed.

According to the government's cashew institute, in 1999 Mozambique could
sell raw nuts to Indian companies for $700 a ton. By late last year, the
price had slumped to $415 a ton.

So whereas in 1999 peasants could expect to be paid up to the equivalent
of 60 US cents a kilogram for their nuts, a year later they were receiving
less than 30c a kilogram.

The government is resigned to the disappearance of the large,
capital-intensive processing factories. Asked whether they were going to
reopen, finance minister Luisa Diogo told reporters in April: "The
situation has already happened."

The government is relying on smaller, supposedly more efficient and more
labour-intensive plants to revive the industry. But it would take dozens
of these small units to process the same amount of nuts once handled by
the now closed factories.

And the best-known of the small units, CaboCaju in the northern city of
Pemba, owned by Swiss businessman Jurg Reiser, is already in deep trouble,
producing only 20 tons a month.

Kekobad Patel, the chairman of Aicaju, recalls that in 1995, when the
World Bank imposed liberalisation, "we warned that this would be the death
of the cashew industry in Mozambique and that it would bring disastrous
results, including for the peasants. But nobody wanted to listen to us.

"Today, thanks to the World Bank and those in the government who followed
its policy, Mozambique has practically vanished from the world map of
cashew kernel producers.

"We have become exporters of raw nuts, and that trade is in the hands of
the only country in the world that uses raw nuts, India."

On the May 1 march in Maputo, one of the saddest sights was a handful of
cashew workers, out of the thousands once employed in the two huge
factories in the capital.

Bitter and betrayed, they carried placards declaring: "Down with the
bureaucrats of Washington and Maputo!"

http://www.busrep.co.za/html/busrep/br_frame_decider.php?click_id=3D343&art=
_id=3Dct20010522181012112P200704&set_id=3D60

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23701E     NATIONAL CASHEW MEETING

Maputo, 5 Jul (AIM) - A national meeting on the cashew sector
began in the northern Mozambican city of Nampula on Thursday,
aimed at looking at aspects of the marketing and export of
cashews, and the crisis-stricken cashew-processing industry.
     No fewer than three ministers are attending the meeting,
Agriculture Minister Helder Muteia, Industry and Trade Minister
Carlos Morgado, and Labour Minister Mario Sevene.
     On the eve of the meeting, Muteia told AIM he wanted to see
the processing industry revived "so that the country can gain the
maximum profit from its cashew nuts".
     But currently 14 out of the country's 16 large processing
units are at a standstill, because of the World Bank imposed
liberalisation of the trade in raw cashews. This has effectively
promoted the export of raw nuts to India, starving the local
industry of its raw material.
     Muteia believed that reviving the cashew sector depended on
two major investments. The first was in the cashew orchard
itself, ensuring that many more trees are planted, so that there
is a dramatic increase in the amount of nuts harvested.
     The second is an improvement in the industries, so that the
nuts they produce are in a form ready to be eaten. This means not
just shelling the nuts, but adding further value in salting and
packaging them.
     Muteia argued that the government had to look at the
interests of all players on the cashew stage - notably the
peasant households who harvest the nuts and the processing
industries.
     "We shall go to Nampula to discuss cashew commercial and
industrial strategy with all the interested parties", he said.
"We shall look at the cashew master plan we are taking there, to
balance it from the industrial and commercial views".
     Muteia argued that the problem would disappear if Mozambique
were to produce 100,000 tonnes of cashew nuts a year. Then there
would be enough nuts for everyone - for the industries, and for
export to India.
     "With lots of nuts, the whole system would be balanced", he
said.
     But last year, the official statistics say that Mozambique
only produced about 50,000 tonnes of cashew nuts. This year
production is expected to rise to 60,000 tonnes.
     Muteia said that, in order to increase production, the
government has introduced a programme to expand and renew the
cashew orchard, budgeted at around five million US dollars, which
could raise production to more than 100,000 tonnes within three
years.
     Many of Mozambique's cashew trees are old and diseased. In
particularly, they are suffering from the fungal disease oidium,
which sharply reduces yields. Spraying against the fungus is
currently under way in Nampula, and will be extended to the
southern province of Inhambane in the near future.
(AIM)
ram/pf (449)


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Congress of the United States

DOCUMENT

April 26, 2001

Letter from members of Congress to Secretary Paul O'Neil of the US
Treasury regarding the IMF/World Bank's intervention in the Mozambique
cashew nut industry.

Dear Secretary O'Neill:

As you are no doubt aware, in the last several years Members of Congress
on both sides of the aisle have become increasingly dissatisfied with the
policies promoted and imposed by the International Monetary Fund and the
World Bank in developing countries, using U.S. tax dollars.

One particular case stands out: for the last several years, the IMF and
the World Bank have undermined Mozambique s efforts to rehabilitate its
cashew nut processing industry. As a result, thousands of workers have
lost their jobs in an industry that was once one of the largest private
sector employers. Production has shifted to India, which uses child labor
to shell the nuts. Ironically, the United States is a major market for
processed cashew, so that as a result of the IMF/World Bank intervention,
U.S. consumers are subsidizing child labor.

For years the World Bank persisted in pressuring Mozambique to remove
support for its cashew industry, despite opposition to the World Bank
policy by Mozambique's democratically elected parliament and despite the
fact that a study commissioned by the World Bank indicated that the World
Bank's policy was unsound.

Last year, the new head of the IMF, Horst K=F6hler, promised that IMF
policies would change, that the IMF would stop imposing policies on
developing countries that have nothing to do with the IMF's core mission.

Unfortunately, like so much rhetoric in the past concerning reform at the
international financial institutions, it is far from clear that the change
in rhetoric has been matched by a change in reality. Recent reports
indicate that the IMF is still pressuring Mozambique to remove support for
its cashew industry.

We regard the IMF's continued obstruction of Mozambique's democratically
determined economic development policies to be an abuse of the authority
and resources granted to the IMF by the United States.

We ask you to instruct the United States Executive Directors at the IMF
and the World Bank to communicate that it is the policy of the United
States that the IMF and the World Bank should cease obstructing
Mozambique's efforts to rehabilitate its cashew industry.

Please keep us apprised of your efforts in this regard.

Sincerely,

Cynthia McKinney Member of Congress
Bernie Sanders Member of Congress
Peter DeFazio Member of Congress
Lane Evans Member of Congress
Rob Andrews Member of Congress
Eleanor Holmes-Norton Member of Congress
Julia Carson Member of Congress
Dennis Kucinich Member of Congress
Barbara Lee Member of Congress
Danny K. Davis Member of Congress
Bob Filner Member of Congress
Albert Wynn Member of Congress
Maxine Waters Member of Congress
William Lacy Clay Member of Congress
David Bonior Member of Congress
Donald Payne Member of Congress
Earl Hillard Member of Congress
Jan Schakowsky Member of Congress
Bennie Thompson Member of Congress
Tammy Baldwin Member of Congress
Neil Abercrombie Member of Congress

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End of 8 July cashew clippings
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