MOROCCO ECONOMIC HIGHLIGHTS

UNCLAS SECTION 01 OF 02 RABAT 000490 SIPDIS C O R R E C T E D COPY (ADDED CAPTION AND SIGNATURE) SENSITIVE SIPDIS DEPT FOR NEA/MAG, NEA/OFI AND INL/AAE DEPT ALSO FOR EB/TPP, EB/IFD AND DRL/IL STATE PASS USTR FOR DOUG BELL STATE PASS USAID FOR JENNIFER RAGLAND USDOC ITA/MAC/ANESA FOR DAVID ROTH USDOC FOR FSC/OIO AND CLDP USDOL FOR ILAB PARIS FOR ZEYA LONDON FOR TSOU ROME FOR ROSE E.O. 12958: N/A TAGS: ECON EFIN EINV ELAB ECPS MO SUBJECT: MOROCCO ECONOMIC HIGHLIGHTS RABAT 00000490 001.3 OF 002 This message is Sensitive but Unclassified. Please treat accordingly. -------------- Exchange Rate on the Move? -------------- ¶1. (U) Central bank governor Abdellatif Jouahri said March 14 that Morocco plans to move "in the medium-term" towards a more flexible exchange rate system. Jouahri said the country's increasing openness to trade warrants a transition to an as-yet-unspecified exchange regime, a move the IMF has consistently recommended. The Dirham is currently loosely pegged to a basket of currencies strongly weighted toward the Euro. Jouahri said to do this the country will work to strengthen its monetary policy and its banking system. He also said the kingdom will be ready in 2007 to meet banking transparency requirements under the Basel II agreement concluded in 2004. -------------- FTA Attracting Investment -------------- ¶2. (SBU) Econ contacts in the Prime Minister's office have confirmed that Italian textile manufacturer Legler will soon announce an investment of more than $65 million to establish manufacturing operations in Morocco. The move will create 800 jobs and is part of Legler's strategy to access the American market using the newly-implemented U.S.-Morocco Free Trade Agreement. Industry contacts say they have heard rumors of forthcoming investment in Morocco (and in some cases reinvestment) by several prominent retailers including Gap, JC Penny, Levis and Nike. These investments would be, in many cases, directly related to FTA implementation. -------------- Yes, We Have No Gas -------------- ¶3. (U) Gas stations were closed nationwide on March 13 as the Federation of Fuel Traders (FNCCM) staged a one-day strike to protest a new increase in fuel prices and new taxes on oil products. The latest price hike was the third since July 2005. The FNCCM also protested a seven percent rise in VAT on fuel sold by service-stations, a measure aimed at reducing a $1.5 billion deficit in state subsidies. -------------- Funding Entrepreneurs -------------- ¶4. (U) The International Finance Corporation (IFC) and the Foundation for Local Development and Partnership (Fondep),a Moroccan microfinance institution, signed an agreement to provide Fondep with credit to expand its microfinance lending activities. Created in 1996, Fondep offers loans and counsel to entrepreneurs normally excluded from traditional bank lending, such as rural women and young people. IFC's partial credit guarantees will allow Fondep to obtain financing of up to $6 million at favorable rates. The agreement marks IFC's first structured finance transaction in Morocco. -------------- Mortgages for All -------------- ¶5. (U) In an encouraging sign for a moribund banking sector, Attijariwafa bank, the largest bank in Morocco and the eighth largest in Africa, is expanding its position in the home mortgage market. Although traditionally, Moroccan banks have shied away from mortgage lending and small business loans in favor of large collateralized loans to known customers, Attijariwafa will introduce three new products targeting professionals, students and low income earners. The new products have been publicized through an aggressive (albeit humorous) advertising campaign. The Moroccan mortgage market has grown considerably over the past five years, with 2005 mortgages reaching almost $7 million, up from less than $4 million in 2000. -------------- World Bank Supports INDH -------------- ¶6. (U) The World Bank announced March 14 that it will provide substantial funding in support of the GOM's Human Development Initiative (INDH),the King's signature economic and social development program. The announcement was made after a meeting between World Bank president Paul Wolfowitz and Prime Minister Driss Jettou. During the same visit, Jettou also met with IMF deputy managing director Takatoshi Kato and with Millennium Challenge Corporation (MCC) CEO John Danilovich. The GOM is also seeking substantial funding for the INDH from MCC and other members of the donor community. -------------- Not Just Casablanca -------------- ¶7. (U) American actor/director Irwin Winkler has begun shooting his latest film "Home of the Braves" in the southern Moroccan city of Ouarzazate. The film, which features American rapper 50 Cent and Samuel L. Jackson, will also be shot in Spokane, Washington. Riley RABAT 00000490 002.2 OF 002 -------------- Mortgages for All -------------- ¶5. (U) In an encouraging sign for a moribund banking sector, Attijariwafa bank, the largest bank in Morocco and the eighth largest in Africa, is expanding its position in the home mortgage market. Although traditionally, Moroccan banks have shied away from mortgage lending and small business loans in favor of large collateralized loans to known customers, Attijariwafa will introduce three new products targeting professionals, students and low income earners. The new products have been publicized through an aggressive (albeit humorous) advertising campaign. The Moroccan mortgage market has grown considerably over the past five years, with 2005 mortgages reaching almost $7 million, up from less than $4 million in 2000. -------------- World Bank Supports INDH -------------- ¶6. (U) The World Bank announced March 14 that it will provide substantial funding in support of the GOM's Human Development Initiative (INDH),the King's signature economic and social development program. The announcement was made after a meeting between World Bank president Paul Wolfowitz and Prime Minister Driss Jettou. During the same visit, Jettou also met with IMF deputy managing director Takatoshi Kato and with Millennium Challenge Corporation (MCC) CEO John Danilovich. The GOM is also seeking substantial funding for the INDH from MCC and other members of the donor community. -------------- Not Just Casablanca -------------- ¶7. (U) American actor/director Irwin Winkler has begun shooting his latest film "Home of the Braves" in the southern Moroccan city of Ouarzazate. The film, which features American rapper 50 Cent and Samuel L. Jackson, will also be shot in Spokane, Washington.