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2004-05-14 08:34:00
Embassy Maputo
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						C O N F I D E N T I A L SECTION 01 OF 04 MAPUTO 000659 

E.O. 12958: DECL: 05/14/2014

Classified By: Econ/Pol Officer Chris Jester for reasons 1.4 (b) and (d)

1. (U) Introduction and summary. Your visit comes at a time
when the positive bilateral relationship between the U.S. and
Mozambique is expanding. Mozambique is the only country in
the world that is both a focus country under the President's
Emergency Plan for AIDS Relief and one of the sixteen
candidates to receive funding under the Millennium Challenge
Account. Following the announcement on May 6 that Mozambique
was selected, planning has begun for a team to visit from
Washington by the end of May to begin discussion on the MCA
Compact with Mozambique. Your visit also closely follows the
visit April 28-30 of the President's Global Coordination for
HIV/AIDS, Ambassador Randall Tobias.

2. (C) Last month the Ministry of Defense agreed to receive
peacekeeping training under ACOTA and specifically requested
that a contingent scheduled to replace their troops in
Burundi be trained by December. The Interior Minister met
with the Ambassador and emphasized their willingness to
receive assistance in border security, noting the critical
situation of Mozambique increasingly serving as a transit
country for trafficking in narcotics, people, and other
contraband, and conducive environment for international crime
and terrorism. We have been working with the Mozambicans to
try and build their capacity to receive EDA coastal patrol
vessels, but have met with bureaucratic delays, specifically
in their lack of progress drafting a model maritime code.
End summary.


3. (U) Mozambique is rightly considered a post-conflict
success story. Since the signing of the 1992 Peace Accords
that ended sixteen years of civil war, Mozambique has made
significant progress in promoting economic reforms and
consolidating democracy. But Mozambique still faces enormous
development challenges. The HIV/AIDS epidemic puts at risk
much of the progress gained over the past decade and growing
corruption hinders development and further foreign
investment. US bilateral relations are strong. US
government efforts in Mozambique have focused on good
governance, economic development and health. The USG was also
the major donor contributing to reconstruction and
rehabilitation activities following the catastrophic floods
in 2000.

4. (U) In late 2004, Mozambique will hold its third
multi-party presidential elections since independence in

1975. The current constitutionally-elected president,
Joaquim Chissano, will step down after having served eighteen
year, including two elected terms. Chissano and the
leadership of FRELIMO dominate policy-making and
implementation. Mozambique currently holds the Presidency of

the African Union (AU). President Chissano has been actively
engaged on broader African issues and has sought to use his
AU Presidency both to build stronger African institutions and
to find African-led solutions to African problems. In
February, Planning and Finance Minister Luisa Diogo replaced
Pascoal Mocumbi as Prime Minister (while retaining the
finance portfolio). On November 19, 2003, Mozambique held
municipal elections which were considered generally free and
fair. However, many institutions, such as the judiciary and
the police, remain weak. Corruption remains a problem in both
the public and private sectors.

5. (U) Mozambique continues to be one of the most dynamic and
fastest-growing economies in sub-Saharan Africa, albeit from
a low base. Mozambique is one of the world's poorest
countries, with per capita GDP of less than $250. That said,
economic growth has averaged 8% over the last 3-4 years and a
recent household survey indicates that the incidence of
extreme poverty has declined from 70% to 55% over the past
five years. Mozambique has significant but so far mostly
untapped natural resources, including coal, natural gas,
titanium ore, tantalite, graphite, iron ore, and
semi-precious stones. One third of the economy is based on
agriculture, most of it subsistence, but Mozambique exports
cashews, cotton, sugar, sorghum, tea, citrus fruit, and
tobacco. Mozambique has privatized over 1200 mostly smaller
companies and 37 large enterprises since the privatization
program began 10 years ago. Only 11 large state-owned or
operated companies remain, including the national airline,
telephone, electricity, insurance, oil and gas exploration,
port and rail, airports, water supply, and fuel distribution
companies. US-Mozambican trade, although quite small, is
expanding, with the vast majority of Mozambique's exports to
the US entering under either AGOA or GSP. South Africa and
Portugal are the leading foreign investors. In 2003,
Mozambique was assigned an international credit rating of B/B
by Fitch Ratings, reflecting Mozambique's positive track
record on economic reforms, political stability, strong
economic growth, openness to FDI, and expanding exports.

6. (U) Mozambique faces significant development challenges.
The literacy rate is about 40 percent and infant mortality
rates are among the highest in Africa. Life expectancy is 46
and is expected to decline into the 30s by 2010 as a result
of AIDS. The country also lacks infrastructure, power, and
clean water for most of its citizens. The Government has
placed its Plan for the Reduction of Absolute Poverty (PARPA)
at the head of its policy agenda. PARPA emphasizes six areas
as the key reducers of absolute poverty: education; health;
basic infrastructure; agriculture and rural development; good
governance; and macroeconomic and financial management. The
donor community funds approximately 60 percent of the
national budget, though the HIPC and Enhanced HIPC (Heavily
Indebted Poor Countries) debt relief programs have permitted
increased budgetary support to alleviate poverty.


7. (U) The GRM has acceded to all twelve UN
Counter-Terrorism conventions. The USG has offered to assist
the Mozambican MFA in preparations for hosting a 2004
National Counter-Terrorism Conference in Maputo on
implementation of UN Counter-Terrorism conventions. We have
sent Ministry of Finance and Central Bank of Mozambique
officials to USG training provided in Botswana.

8. (C) Mozambique has no capacity to patrol its maritime
border, with an unprotected coastline twice the length of
California. We have sent eight Mozambican naval officers to
the International Maritime Officers Course in Norfolk over
the past five years. Four groups from DIILS in Newport to
provide Mozambican Navy an international law course for MFA,
MOD, Interior and Justice Ministries, with goal of
establishing maritime patrol capacity (provision of EDA
patrol craft and IMET crew training). Mozambique is
addressing the need to establish a codified system of
maritime law, as we seek to identify equipment and funding
available through US programs. DOD also conducted a Maputo
airport survey in 2003.

9. (C) Officials from Customs, Police, Ministry of interior,
Immigration, and Finance Ministry attended a USG
Counterterrorism seminar in Gaborone, Botswana. DOJ has
provided FBI training for prosecutors at Mozambique's
Judicial Training Center including anti-money laundering
components. Post will also seek State INL funding for
equipment requested by Mozambican customs for container
inspection in ports of Maputo, Beira, and Nacala. The
Minister of Interior seeks US assistance in tackling problems
faced by the GRM in trying to combat trans-border crime and
the growing role of Mozambique as a transit country for
narcotics, especially cocaine originating in Brazil destined
for South Africa.

10. (SBU) The Interior Minister would also welcome any
assistance to improve GRM capacity to track money laundering.
He noted the demographic factor of the large number of
Muslim businesses in the northern provinces involved in
importing goods for sale in Mozambique and the difficulty his
ministry faces in knowing the real names of account holders
and merchants bringing goods through customs. He also
confirmed reports of large numbers of undocumented Pakistani
aliens and the more recent trend of Somali refugees entering
or transiting Mozambique.

12. (SBU) In February, we hosted a Counterterrorism Action
Group (CTAG) meeting with counterparts from Spain, Portugal,
Russia, France, Italy, Switzerland, UK, Germany, European
Commission, and Ireland (representing EU troika).
Participants concurred that improved maritime security for
Mozambique's vulnerable coastline was the top priority and
agreed to coordinate the efforts of the USG, France,
Portugal, and the EC to provide coastal patrol capacity.
Other areas of mutual concern discussed include financial
oversight, trafficking of drugs and people, money laundering,
and corruption. CTAG participants indicated few direct
programs; however, nearly all indicated programs to build
government capacity in areas directly related to CT


13. (C) The French see the coast as the key to
counterterrorism efforts and are also addressing this
specific vulnerability. They will provide two small patrol
boats to the GRM in 2004, which are currently being refitted
in Simonstown by the South African Navy. They plan joint
naval exercises for later this year and had two GRM Navy
personnel on their frigate during a January 2004 port visit
to Maputo. Portugal is working with the GRM on developing
the necessary maritime code, a prerequisite for our EDA
request. They are optimistic that they have more success
that we have seen after four DIILS visits. The British
provide training in bank auditing and financial systems and
are conducting a large project with Mozambican Customs
implemented by Crown Agents. However, British concerns
regarding counterterrorism have their focus on Kenya,
Tanzania, and South Africa.

14. (C) The European Commission provided some customs
training to the GRM, but has focused on assisting GRM public
sector reform, judicial reform, and increased budget
accountability. They provide direct financial support to the
Ministry of fisheries for monitoring the coastline (including
funding surveillance flight hours). The have funded the
chartering of a vessel from the South African Fisheries
Ministry, through SADC,s Monitoring, Control, and
Surveillance of Fisheries program (MCS). In April, two
illegal Chinese fishing vessels were seized. The European
Union provide approximately two million euros annually for
assistance related to fisheries. Included in the program is
technical support for development of a maritime code.
Portugal, the driving force behind CPLP joint military
exercises, emphasizes training for PKOs and staff command and
control. They provide support to the GRM Military Academy in
Nampula and are also assisting with development of the
maritime code.

15. The group recognized the need to coordinate our efforts
to get the GRM to adopt a model maritime code and prepare
themselves to utilize coastal patrol boats. All participants
agreed that weak land borders, ineffective and corrupt police
and judicial officials, absent coastal patrol capacity, and
poor coordination between GRM entities all contribute to an
environment conducive to organized crime and terrorists. Post
and many other donors are focused on corruption and
transparency issues, especially considering their linkage to
transnational crime, alien smuggling, money laundering, and
possible terrorist financing. The EC and others also express
concern regarding weak security in ports and along the coast
contributing to illegal fishing and export of precious
hardwood timbers, both with severe environmental


16. (U) Mozambique is at a critical stage in its efforts to
stem the HIV/AIDS epidemic. In Southern Africa, Mozambique
presents both the greatest challenges and possibly the
greatest opportunity to become the next Uganda-like success
in turning around the HIV/AIDS threat. The Mozambican
Government (GRM) has been outspoken in the battle against
HIV/AIDS and is a cooperative partner in our HIV/AIDS
efforts. The USG has been a leading player in international
HIV/AIDS efforts in Mozambique, working closely with our
implementing partners, other donors, the Ministry of Health
(MOH) and the National AIDS Council (NAC). Mozambique's
overall HIV/AIDS prevalence rate is 14.9%, though prevalence
rates vary greatly by region, with the highest rates
occurring in the principal transportation corridors. The
political environment in Mozambique is very favorable to
accelerating ARV treatment throughout the country, though
Mozambique's significant development challenges are a
constraint for rapid scale-up of treatment activities. In
addition to the Emergency Plan, funding has been committed
through the Global Fund, the World Bank MAP and the Clinton
Foundation (via several European donors) to strengthen the
MOH and its services to expand ARVs.