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.

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