AGOA ELIGIBILTY REVIEW - SAO TOME AND PRINCIPE

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SIPDIS

SIPDIS

DEPT PASS USTR FOR CHAMILTON
DEPT FOR AF/EPS JPOTASH

E.O.12958: N/A
TAGS: AGOA ECON ETRD TP
SUBJECT: AGOA ELIGIBILTY REVIEW - SAO TOME AND PRINCIPE

REF: STATE 163056

Following is an update of the 2005 AGOA review information for Sao
Tome and Principe.

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Country Background
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Historically, Sao Tome and Principe's economy has been based on
cocoa exports and international donor assistance. With an
IMF-estimated GDP per capita of $430, STP is severely
underdeveloped. Trade with the US is minimal. Today, it is in the
early stages of petroleum exploration. STP has a reputation for a
strong and vibrant democracy in a region not historically known for
democracy. The GoSTP generally respects citizens' and workers'
rights. The legislative election in March 2006, the presidential
election in July 2006 and the local elections of August 2006 were
all judged free and fair by international observers.

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Comments on Eligibility Requirements
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1. Market-based Economy:

a. Major Strengths Identified -

- STP is in the early stages of petroleum exploration.

- In 2001, the GoSTP formed a Joint Development Zone (JDZ) with the
Government of Nigeria. Since then, two bid rounds have been
conducted (in 2004 and 2005) and six of nine oil blocks have been
awarded.

- American firms Exxon-Mobile and Chevron-Texaco were awarded rights
to block 1. Another US company, Anadarko, is the operator for block

3.

- The Embassy worked with the West African Trade Hub (WATH) and the
STP Chamber of Commerce in establishing the AGOA Resource Center in
March 2006.

b. Major Issues/Problems Identified -

- Sao Tome and Principe is severely underdeveloped and, to date,
trade with the US is minimal.


2. Political Reforms/Rule of Law/Anti-Corruption

a. Major Strengths Identified -

- Sao Tome and Principe has a reputation for a strong and vibrant
democracy in a region not historically known for democracy.

- Three elections in 2006 (legislative in March, presidential in
July, and local in August) were all judged free and fair by
international observers.

- In December 2005, the Attorney General submitted to the National
Assembly a report on his investigation regarding allegations of
corruption in the awarding of oil blocks. The report stated that
the bidding process was seriously flawed.

b. Major Issues/Problems Identified -

- To date, there has been no action as a consequence of the Attorney
General's report.


3. Poverty Reduction

a. Major Strengths Identified -

- The IMF was satisfied with the first two reviews of Sao Tome and
Principe's three-year Poverty Reduction and Growth Facility (PRGF)
Arrangement, which began in August 2005.

- The GoSTP is working toward reaching HIPC completion point in
early 2007.

b. Major Issues/Problems Identified -

- Efforts at poverty reduction have been hindered by limited
coordination among international donors and scarcity of GoSTP
financial resources.


4. Workers' Rights/Child Labor/Human Rights

a. Major Strengths Identified -


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- The GoSTP generally respects citizens' and workers' rights.

- The constitution provides for freedom of association, workers'
rights to organize and bargain collectively, and workers' rights to
strike.

b. Major Issues/Problems Identified

- Due to its role as the principal employer in the wage sector, the
Government remained the key interlocutor for labor on all matters,
including wages.

- Working conditions in many of the cocoa plantations (the largest
private wage-employment sector) are extremely harsh.

- The average salary for plantation workers does not provide a
descent standard of living.


5. US National Security Concerns / Gross Human Rights Violations -

a. Major Strengths Identified - none

b. Major Issues/Problems Identified - none


DHANANI