TUNISIA ECONOMIC HIGHLIGHTS: JULY - AUGUST 14

UNCLAS SECTION 01 OF 02 TUNIS 002173

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/MAG (MHARRIS) AND EB/CIP
STATE PASS USTR (BELL),USPTO (ADLIN),USAID (METZGER)
USDOC FOR ITA/MAC/ONE (ROTH),ADVOCACY CTR (JAMES),AND
CLDP (TEJTEL)
CASABLANCA FOR FCS (RORTIZ)
PARIS FOR NEA WATCHER

E.O. 12958: N/A
TAGS: ECON EFIN ETRD ELAB TS
SUBJECT: TUNISIA ECONOMIC HIGHLIGHTS: JULY - AUGUST 14

REF: TUNIS 1946


1. (U) This cable contains highlights of recent economic
developments in Tunisia on the following topics:


A. Minimum Wage Increase

B. Tunisian and Mauritanian Central Banks to Cooperate

C. Arab Fund for Development Finances Tunisian Power Plant

D. GOT to Liberalize the Cereal Sector

E. GOT Blocks, Then Unblocks, Export of Tomato Paste

--------------

A. MINIMUM WAGE INCREASE
--------------

2. (U) The Prime Minister announced an increase of 7 dinars
(roughly 5 USD) per month in the Minimum Guaranteed Wage
(SMIG) for the Tunisian-standard 48-hour work week and 6
dinars per month in the SMIG for the Tunisian-standard 40-
hour work week. The monthly SMIG will now be 231 dinars (75
USD) and 200 dinars (151 USD),respectively. The Minimum
Guaranteed Agricultural Wage(SMAG) will also increase by 245
millimes (20 cents US) a day for a total minimum wage of
7.129 dinars per day. According to the government,
approximately 280,000 workers will be affected by these wage
increases.


3. (SBU) Comment: While most workers receive at least the
minimum wage, many Tunisian employers pay their workers less
than the minimum guaranteed wage due to inadequate
enforcement of the law. Due to the high rate of
unemployment, many Tunisians are willing to accept jobs
below the minimum rate. End comment.

-------------- --------------

B. TUNISIAN AND MAURITANIAN CENTRAL BANKS TO COOPERATE
-------------- --------------


4. (U) The Governments of Tunisia and Mauritania signed a
framework agreement that will improve cooperation between
their two respective central banks. The two banks have
agreed to exchange information and experts in order to
facilitate the movement of capital between the two countries
and to prevent crises and shocks at both the regional and
international levels.


5. (SBU) Comment and Background: The agreement reflects the
growing trade and investment between the two countries,
especially in the IT sector. In 2000, the Tunisian state-
owned Telecom operator Tunisie Telecom became a shareholder
in the Mauritanian state-owned telecom operator MATTEL. In
2005, the volume of the Tunisian IT sector's business in
Mauritania totaled 27 million Tunisian dinars (roughly 20.7
million USD). In 2003 Tunisian exports to Mauritania
totaled 4.1 million USD, growing to 9.2 million in 2005.
End comment and background.

-------------- --------------

C. ARAB FUND FOR DEVELOPMENT FINANCES TUNISIAN POWER PLANT
-------------- --------------


6. (U) On July 6, the Arab Fund for Economic and Social
Development signed an agreement to co-finance a USD 115
million power plant in the city of Ghannouch. The loan is
repayable over 20 years with an interest rate of 4.5 percent
and a grace period of five years. The investment provides
funds for civil engineers and equipment, engineering
studies, and for improving connections to the national power
grid. The Arab Fund has invested in 44 projects in Tunisia,
representing a total investment of 2.2 billion dollars.

--------------

D. GOT TO LIBERALIZE CEREAL SECTOR
--------------


7. (U) According to the Director General of the Cereal
Office, the GOT is moving towards the progressive

TUNIS 00002173 002 OF 002


liberalization of the cereal sector. The process will
concern two separate activities of the sector. The Cereal
Office and private operators have signed an agreement
allowing private companies to harvest, collect, and store
the domestic cereal crop. The GOT is in the process of
drafting the required legislation, expected by the end of
2007, to allow private sector participation in this
industry. The GOT also plans to liberalize cereal imports
by 2008-2009, starting first with the import of barley and
flour.


8. (SBU) Comment: This is not the first time that the GOT
has announced plans to liberalize the importation of
cereals. As no concrete steps have been taken towards trade
liberalization, the GOT's commitment to this reform remains
unclear. U.S. wheat would be very competitive in a
liberalized Tunisian market as the Tunisian wheat market is
likely to be more quality-responsive once the GOT loosens
its grip. The U.S. wheat industry would be well-positioned
to compete against the low-quality, less-expensive wheat
sourced from other countries. End comment.

-------------- --------------

E. GOT BLOCKS, THEN UNBLOCKS, EXPORT OF TOMATO PASTE
-------------- --------------


9. (SBU) According to local reports, Tunisian Customs
officials "informally", but temporarily, blocked the export
of tomato paste by refusing to complete necessary export
procedures. Following complaints by tomato paste producers,
the Minister of Commerce intervened to correct the
situation. This followed a reported 20 percent reduction in
the tomato crop this year. According to unconfirmed
reports, the blockage could have been indicative of a desire
to secure higher prices for this product, a staple of
Tunisian cuisine, as Ramadan approaches. Approximately two-
thirds of Tunisia's tomato crop is normally turned into
tomato paste. Tunisia's annual production of tomato paste
represents approximately 170 million dinars (129 million
USD).

BALLARD