MOZAMBIQUE - VISITING CORPORATE COUNCIL ON

UNCLAS SECTION 01 OF 03 MAPUTO 001519

SIPDIS
STATE FOR AF/S - HTREGER, EB/TRA, EB/CBA - DWINSTEAD,
AND AF/PD - RSEVER, JBARNES
STATE PASS TO OVERSEAS PRIVATE INVESTMENT CORPORATION
JOHANNESBURG FOR FCS - RDONOVAN, JVANRENSBURG
USDOC FOR RTELCHIN
MCC FOR SGAULL AND TBRIGGS
PASS USAID FOR AA/AFR AND AFR/SA
PASS USTR FOR PCOLEMAN
E.O. 12958: N/A
TAGS: ECON EAID EINV ETRD MZ
SUBJECT: MOZAMBIQUE - VISITING CORPORATE COUNCIL ON
AFRICA (CCA) PRESIDENT PLEDGES TO PROMOTE U.S. TRADE
AND INVESTMENT



1. SUMMARY. On November 10-11, a high-level Corporate
Council on Africa (CCA) delegation visited Mozambique
to learn about possibilities for U.S. investment. The
delegation met with a senior GRM official and several
local businesspeople to get a flavor for the most
promising investment areas. CCA and the U.S. Mission
plan to work closely together to encourage more U.S.
trade and investment in Mozambique. CCA will begin this
effort by raising Mozambique's profile in the U.S. as
an investment destination and by leveraging an expected
early visit to the U.S. by the winner of Mozambique's
December 2004 presidential election. The Mission and
CCA have set as a goal attracting one or two new U.S.
firms to invest and succeed in Mozambique in 2005. END
SUMMARY.

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A TASTE OF DOING BUSINESS IN MOZAMBIQUE
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2. On November 10 and 11, Stephen Hayes, President of
CCA, and Tim McCoy, Director of Overseas Programs, CCA,
visited Mozambique on a fact-finding mission to learn
about investment opportunities and meet key contacts in
the government and business community. This was CCA's
first visit to Mozambique since the mid-1990's.


3. On November 10, the CCA delegation, accompanied by
the Ambassador, USAID Deputy Director, USAID enabling
environment team leader and econ/poloff visited the
city of Beira, the country's second largest. The
delegation sounded out several private sector leaders
on investment opportunities and obstacles, and how the
GRM and the business community are working together to
improve the current business climate. The business
leaders represented included the heads of two central
region business associations as well as the presidents
of several local companies: Mobeira - a flour mill
owned by the U.S. firm Seaboard Corporation, Belita - a
Mauritian-owned and operated garment factory exporting
to the U.S. under AGOA, Delta Trading, and TCT
Forestry. The businessmen identified as areas of
opportunity for U.S. investment tourism, agriculture
and agro-processing, seafood (primarily prawns and
lobster),energy, and timber processing. Asked about
the lack of participation by Mozambican firms in the
U.S. market, they replied that firms are afraid to
participate in the U.S. market due to its enormous
market size and consequent large-scale demand for goods
(COMMENT: Mozambique faces serious supply constraints
when operating in the global economy, including limited
production capacity, lack of skilled labor, poor
infrastructure, and lack of access to finance. END
COMMENT).


4. While in Beira, the delegation visited Belita, the
only garment factory in Mozambique exporting to the
U.S. under AGOA. Belita exports sweatshirts, t-shirts,
and polo shirts to Vanity Fair, Chaps, FUBU, and Lee.
Sales from January to October 2004 totaled
approximately USD 1.4 million, and are expected to
reach USD 2.2 million by the end of the year. Belita
buys almost all of its primary material (fabric,
labels, zippers) outside of Mozambique. Belita's parent
company, the Palmar Group, located in Mauritius,
handles all marketing, communication, and logistics for
the sale of Mozambican-produced garments. In January
2005, Belita expects to open a jeans-production plant
in Maputo. Belita will source all denim from Southern
Africa. Over 1,000 staff will be employed and AGOA
sales to the U.S. are expected to increase.


5. The CCA delegation took the occasion to visit Beira
port, one of the three busiest ports in the country.
The port director of operations noted that port
activity has decreased 20 percent due to the Zimbabwean
economic crisis (COMMENT: The Beira Corridor is an
important trade route for goods moving in and out of
Zimbabwe. END COMMENT). Mozambique's principal exports
through Beira are sugar, cotton, timber, and prawns.


6. On November 11, in Maputo, the delegation met with
the Minister of Industry and Commerce, Carlos Morgado.
Morgado told them that he would like to see one
American firm invest successfully in Mozambique in the
near future, paving the way for others to follow suit.
(COMMENT: In 2003 Morgado explored an opportunity for
American Axle to buy Mozambican-made axles. This would
mean a purchase commitment with Mozambique's largest
revenue-producing firm, Mozal, which has been extremely
successful in smelting aluminum for aluminum ignot
export. However, following Morgado's 2003 visit to
Detroit, American Axle's management changed and since
then nothing substantive has arisen from the idea. END
COMMENT). Morgado suggested that if CCA were to adopt
Mozambique as a "focal point" and sell Mozambique as an
attractive investment destination, he would guarantee a
strong GRM commitment to a creating a successful
business relationship between U.S. companies and
Mozambican partners. CCA President Hayes expressed his
view that the key is to get one or two carefully
identified small businesses interested in Mozambique,
establish partnerships accordingly, and create small
wins in the trade relationship.


7. Morgado advocated partnerships involving timber
and/or sugar processing and processing of jams or
concentrates. He said he strongly believed that U.S.
companies can bring value and innovation to Mozambican
products. Hayes committed to sending a follow-up CCA
team to Mozambique in 2005. He added that CCA would be
looking for ways to market Mozambique in the U.S., and
that he hoped CCA could identify and send one or two
U.S. businesses to Mozambique to explore specific
opportunities. Longer term, he hoped CCA would be able
to produce an investment guide on Mozambique. As part
of the discussion, Hayes asked Morgado the status of
the U.S. - Mozambique Bilateral Investment Treaty
(BIT). Morgado stated that he would request that the
PM allow the treaty to circulate through the Council of
Ministers on November 15 (COMMENT: Post understands
that the treaty has circulated through the Council of
Ministers and will be sent to the PM for signature and
approval on November 23. This date is critical, as
Mozambican general elections are scheduled for December
1-2. END COMMENT).


8. Also noteworthy, the CCA delegation met with
officials and members of the Confederation of
Mozambican Business Associations (CTA),a group
working to improve the business climate in Mozambique.
CTA representatives emphasized that the time is right
to create linkages and business relationships between
Mozambique and the U.S. They acknowledged that
Mozambique would need more outside advice and training
to take better advantage of AGOA. In the afternoon, the
delegation met with U.S. firms operating in Mozambique
- including Coca-Cola, KPMG, PriceWaterhouseCoopers,
Caterpillar, Mobil, and Colgate-Palmolive.

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PRESS COVERAGE
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9. The CCA visit generated substantial and positive
press coverage. A press conference given by Hayes
prompted stories on STV Mozambique (a private
television station, which interviewed Hayes),Radio
Mozambique (the official radio network with nationwide
reach),and several daily and weekly publications. The
stories stressed Hayes' commitment to bringing more
U.S. investment to Mozambique - especially in the areas
of tourism, seafood, agriculture/agro processing, and
transportation. Local press noted that trade between
the U.S. and Mozambique is very small; only USD 8
million in Mozambican exports went to the U.S. in 2003.
Hayes admitted that businesspeople in the U.S. remain
uninformed about investing in Mozambique, but made a
commitment to increasing awareness of Mozambique's
investment potential among the U.S. business community
(CCA members particularly).

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ANTICIPATED OUTCOMES
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10. Following a productive visit, the Ambassador and
CCA President Hayes agreed on ways to strengthen the
U.S. - Mozambican trade relationship. To raise
Mozambique's profile in the U.S. as an investment
destination, the CCA will feature Mozambique in an
upcoming issue of its publication, The Africa Journal.
With a new Mozambican president in place after the
December general elections, the Mission will encourage
an early visit to the United States, where he will be
able to meet with key CCA members and a business
audience regarding specific opportunities for
investment in Mozambique. This visit may coincide with
the annual CCA summit that will take place in June

2005. Another possibility would be a planned Millennium
Challenge Corporation (MCC) dinner. Hayes promised the
CCA would reach out to its membership and beyond
regarding opportunities uncovered in the Mozambique
visit (sugar, irrigation, and construction, in
particular). Finally, a follow-up CCA team will visit
Mozambique on a thorough fact-finding mission in 2005.
As stated by Hayes to the Minister of Industry and
Commerce, CCA's goal is to "attract one or two
investors to Mozambique in 2005". All sides agreed
that building the trade relationship should begin with
small steps. One or two American successful investors
in Mozambique in the next year would set a positive
precedent for future cooperation.
LA LIME