Mozambique - World Bank Apparently Pushing Use of

UNCLAS MAPUTO 000599 SIPDIS SIPDIS AF/S FOR HTREGER EB/IFD/ODF FOR JGARBER USAID for AA/AFR and AFR/SA SENSITIVE E.O. 12958: N/A TAGS: EINV ECON EAGR ETRD MZ SUBJECT: Mozambique - World Bank Apparently Pushing Use of Sena Line for Moatize Coal Ref: Maputo 422 Sensitive But Unclassified - Handle Accordingly ¶1. (SBU) Summary: Two World Bank railway specialists recently visited Maputo, urging the GRM to support a final definitive study comparing the Sena railway line with the Nacala railway corridor for the export of coal from Moatize. We told them that we would not oppose a study, but that we thought Nacala was preferable and that we understood this was the view of the Brazilian coal mining company awarded the Moatize concession, Companhia Vale do Rio Doce (CVRD). On May 22 a senior GRM official queried the Ambassador on "why donors were all supporting using the Sena line" for Moatize coal. She emphasized that the decision on which line to transport the Moatize coal is a commercial one, but that informal assessments USAID had undertaken indicated that the use of the Nacala corridor would be more efficient than the Sena line. It appears that the World Bank is making a final push to have the Sena line used for Moatize coal. End Summary. World Bank Study -------------- ¶2. (SBU) On May 9 retired World Bank railway specialist for Mozambique, Yash Kedia, and current World Bank lead transport specialist for the Africa Region, Anil Bhandari, met with emboffs briefly over lunch to discuss using the Nacala corridor as a export railway for coal from the Moatize region of central Mozambique. Kedia and Bhandari told emboffs that they felt the Nacala corridor option was favored over the much shorter route via the Sena corridor without sufficient justification. They asked emboffs whether the USG would stand in the way if the World Bank contracted a study, to be conducted in a matter of weeks in the next month or two, to compare definitively one railway corridor with the other. The respective ports for each corridor would be part of the comparison. They claimed that they wanted to ensure that the GRM opted to support the most cost-effective route. They added that they would be seeing Mr. Munguambe, Minister of Transport, later that day to urge his support for such a study, and that they would make a similar case to the Ms. Bias, Minister of Mineral Resources. ¶3. (SBU) Emboffs answered that they had no objection to such a study, although they added that the matter had been examined several times and the consensus favored Nacala. They pointed out that our position for some time had been to support the Nacala line over the Sena line for the export of coal from Moatize because of Nacala's deep water port. Background -------------- ¶4. (U) In December 2004 the World Bank announced a USD 110 million loan to the GRM for the repair and upgrading of the Sena railway line. That same month, the GRM awarded the Brazilian mining company, Companhia Vale do Rio Doce (CVRD), mining rights to the Moatize coal basin. In the intervening 16 months, CVRD engineers examined the two main export corridors for Moatize coal -- via the Sena line or via a spur to the Nacala railway line and apparently came to the conclusion that using the Nacala line and the deep water port of Nacala was preferable to the Sena line and its shallow water port at Beira. To this end, on March 31, 2006, CVRD and the US/Mozambican consortium operating the Nacala line reached an agreement giving CVRD the option, until the end of 2006, to buy them out as managers of the Nacala line (reftel). Donors Favor the Sena Line? -------------- ¶5. (SBU) On May 22, at a lunch at the Portuguese Ambassador's residence, President Guebuza's chief of staff, Antonio Sumbana, asked the Ambassador why the World Bank now claimed that donors were all supporting using the Sena railway line to export Moatize coal rather than the Nacala railway corridor, which CVRD preferred "for commercial reasons." The Ambassador, surprised by the question, responded that the decision of how to export Moatize coal is a commercial one. She indicated that USAID informal assessments and discussion of this topic last year had us all agreeing that the Nacala line made more sense because of Nacala's deep water port. She noted that we had been told by CVRD and others that the use of the Sena line required the building of a 15 km pier out into the ocean, and still dredging would be required because waters around the port of Beira are very shallow. She stated that more than a year ago we had registered our doubts with the World Bank over the economic viability of rehabilitating the Sena line since we did not think it could be made viable to export Moatize coal. Ultimately, the choice should be up to CVRD in terms of which route was most viable commercially, she reiterated. Comment -------------- ¶6. (SBU) Judging from Sumbana's question, it appears that the World Bank railway experts are twisting our non- objection to a study comparing the two corridors into outright support for the Sena line. This, of course, is not the case at all. From our vantage point, it appears that the World Bank is making a last ditch effort to shore up its USD 110 million Sena line rehabilitation project, which would be much less economically justifiable should Moatize coal be carried out via the Nacala corridor. We will seek to clarify this with the World Bank locally. La Lime