MIXED SIGNALS TO SEABOARD IN MADAGASCAR

C O N F I D E N T I A L SECTION 01 OF 02 ANTANANARIVO 000522

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E.O. 12958: DECL: 05/31/2017
TAGS: EINV ETRD ECON KTDB PGOV PREL MA
SUBJECT: MIXED SIGNALS TO SEABOARD IN MADAGASCAR

REF: A. ANTAN 0426

B. 06 ANTAN 1291

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Classified By: AMBASSADOR JAMES D. MCGEE FOR REASONS 1.4 B, D


1. (C) SUMMARY: Tamatave Port Director Pierrot Botozaza kept
U.S. Seaboard Corporation representatives waiting for 12
hours on May 25 for scheduled negotiations to renew its lease
on silos at the Port (Reftels). When the Port's lawyers
finally met with Seaboard, they insisted an application for a
new lease must be completed before a new agreement could be
negotiated, reneging on Botozaza's April 27 promise.
Botozaza also sent a message to Seaboard's Lopes, "stop
involving the U.S. Embassy." When informed May 29, Prime
Minister Lt.-General Charles Rabemananjara told the
Ambassador, "I have no faith in Botozaza," and promised to
look into it. On May 31, following a very stern message from
the Ambassador to the President's Chief of Staff, President
Marc Ravalomanana assured the Ambassador the problem was
"solved." END SUMMARY.

Tamatave Port Director Tries to Intimidate U.S. Embassy
-------------- --------------


2. (SBU) For over a year, Seaboard Corporation has imported
and milled wheat into flour for sale in Madagascar in
partnership with local firm KOBAMA. The enterprise,
"Madagascar Mills" (Les Moulins de Madagascar) operates silos
at the Port of Tamatave under a lease that is due to expire
in November. Since entering the market, Seaboard has sought
negotiations to extend the silos lease as a necessity to
maintain their business. Port and Ministry of Transportation
officials have been slow to respond to Seaboard's request for
communication, information, and discussions of a new lease.
First in September 2006, and again April 27, Port Director
Botozaza promised Seaboard and the Embassy that he would
consider a new lease arrangement; culminating finally in a
confirmed meeting May 25 to negotiate and sign a new lease.


3. (SBU) Arriving at the Port May 25 at 0800, Seaboard's
Lopes and his legal counsel were told Botozaza was
unavailable and his instructions were needed. This delay
continued through the day into the evening. The Ambassador
spoke to Minister of Transportation Julien LaPorte, who
sounded surprised and said he would call Botozaza. PolEcon
Chief also called Botozaza directly, who claimed to be "sick"
and asked why no one had called him. When PolEcon Chief
asked why he had stood up a U.S. company at a meeting he had
agreed to, Botozaza asked angrily, "Why is the U.S. Embassy
intervening?" When PolEcon Chief replied the U.S. Mission
has a right and a responsibility to seek fair treatment for
U.S. enterprises, Botozaza backed off and offered more
excuses. Later that evening, according to Lopes, when
Botozaza's lawyers finally arrived they said talks would have
to start from scratch, to evaluate if Seaboard could apply
for a silos lease. The new requirements, including detailed
engineering plans and an environmental impact statement,
reneged on Botozaza's signed April 27 promise to negotiate a
new lease. Botozaza also sent a message to Seaboard, "stop
involving the U.S. Embassy."

What Next For Seaboard?
--------------


4. (SBU) Back on April 27, the Ambassador saw Prime Minister
Rabemananjara and Transportation Minister LaPorte who
quipped, "I hope you are satisfied," indicating the agreement
between the Tamatave Port and Seaboard that came later the
same day. Port Director Botozaza signed minutes of that
meeting, which confirmed the Port's intention to extend
Seaboard's lease, leaving only terms and conditions to be
negotiated. At that point, it appeared the Government and
the Port Administration had finally accepted the need to
negotiate in good faith with a U.S. firm investing in
Madagascar. Several Ministers and Presidential advisors
seemed to accept the argument that the perception of
corruption would be very damaging to Madagascar if Seaboard
were forced out of the market to provide a monopoly for TIKO,
the President's company.


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Prime Minister Rabemananjara
--------------


5. (C) Ambassador reiterated to Prime Minister Rabemananjara
May 29 the points that official U.S. assistance does not
"buy" capitulation to Seaboard's demands. However, the
Mission insists on communication, fair treatment of U.S.
companies, and a level playing field. Prime Minister
Rabemananjara seemed totally surprised by the turn of events,
adding "I have no faith in Botozaza." He promised to look
into the case and get back to the Ambassador immediately.

President Ravalomanana
--------------


6. (C) Hearing nothing further from the Prime Minister, on
May 31 - just an hour before his farewell call on the
President - the Ambassador spoke candidly with Ivo
Razafimahefa, the President's Chief of Staff. With regret,
but great clarity, the Ambassador said 18 months of
frustration in the Seaboard case has led us to conclude that
U.S. firms do not receive fair treatment in Madagascar - at
least not if they compete with TIKO. The message seems to
have reached the President. In the subsequent farewell call,
Ravalomanana raised the Seaboard issue preemptively, saying
that it had now been "resolved."

COMMENT
--------------


7. (C) If the Port does not extend Seaboard's lease by
November, this U.S. enterprise will be significantly
disadvantaged and will probably be forced out of the
Madagascar market. The result will be a wheat monopoly for
TIKO, which has a new mill coming on line in June. The
President's personal 11th hour reassurance may signal a
resolution of this issue - or an effort to push the problem
into the future, to land on the plate of the next U.S.
Ambassador. We will see. To date, despite several promises
to the contrary, the GOM has done nothing to counter the
overwhelming perception that unfair and corrupt practices are
conferring advantages on President Ravalomanana's company at
the expense of an American company. END COMMENT.


McGEE