UNCLAS SECTION 01 OF 02 CASABLANCA 000198

SIPDIS

SENSITIVE
SIPDIS

STATE FOR NEA/MAG AND NEA/PI

E.O. 12958: N/A
TAGS: ECON EFIN KDEM MO
SUBJECT: CASABLANCANS' ANGER OVER PRICE INCREASES HAS DISSIPATED, NOT
DISAPPEARED

REF: A. 06 CASABLANCA 1233 B. RABAT 1542 C. RABAT 1525


1. (SBU) Summary: Anger over price increases in Morocco is not a new
phenomenon and can be explained in part by factors such as Ramadan
speculation and lack of government planning. At the same time, many
Casablancans contend that the problem is worse than in years past.
Not only did price increases fall on the heels of disappointing
parliamentary elections, but they were steeper as a result of high
world commodity prices and the need for more imports due to Morocco's
poor agricultural performance. Many Moroccans now wonder how the GOM
will sustain the subsidies it offers to maintain both price and
social stability. End Summary.

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PRICE INCREASES - AN ON-GOING ISSUE
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2. (U) Recent discontent over price increases in Morocco is hardly a
new phenomenon. Demonstrations against cost of living increases took
place last year during Ramadan as they did this year, with protesters
railing against the high price of goods such as bread, sugar and
cooking oil (ref A). Many Casablancans blame typical Ramadan
speculation for driving up basic commodity prices. For example,
according to a teacher, speculators buy tomatoes before Ramadan at 12
to 25 cents per kilo, then sell them for between USD 1.25 and 1.50
during the month-long holiday, when a tomato-based soup called harira
is a staple of every Ftour.


3. (SBU) Others fault the government for the situation, saying it
should plan better. A professional from Casablanca also used
tomatoes as an example, charging that the GOM should stop exporting
so much of the supply to avoid the shortages that push prices upward
during Ramadan. Expressing a similar complaint, another individual
pointed out that millers knew last spring that they would have to
import wheat, and therefore raise prices, to meet demand. The GOM
saw the problem coming and knew that it would peak at Ramadan, but
did nothing to head off a crisis in advance.

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WHY IS THIS YEAR DIFFERENT?
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4. (SBU) While anger over price increases has been an on-going issue
for years, some contend that the problem is worse this year. The
violent turn that a September 23 demonstration in Sefrou took was a
major indication that tensions were running high (ref B). Some
attribute the heightened sense of anger to this year's unique local
context. Price increases came not just on the eve of Ramadan, but
also after parliamentary elections in which low voter turn-out
highlighted the frustration many Moroccans feel with their country's
democratic efforts.


5. (SBU) Others cite the global context. World prices of commodities
such as milk and wheat have gone up at the same time that Morocco's
poor agricultural output has necessitated increased imports of these
goods, making them more expensive. Although the Central Bank reports
that inflation is actually down, projected at 2.1 percent in 2007
versus 3.3 percent in 2006, citizens have the perception that prices
have risen more dramatically this year than last.

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HOW WILL THE GOM SUSTAIN SUBSIDIES?
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6. (SBU) The GOM's decision to retract bread price increases,
subsidize flour, and suspend duties on wholesale market goods during
Ramadan has made Moroccans in Casablanca question how it can sustain
this level of financial support. Clearly, the GOM will have to find
alternate revenue sources. One Casablancan suggested the GOM tax
items that would not spark widespread protest, such as cigarettes or
alcohol. Another advised being savvier about timing price increases.
If the GOM raised milk prices in three months rather than during
Ramadan, for example, consumers may not notice as much. Still
another suggestion was to replace general subsidies with those aimed
specifically at the poor. Regardless of how the GOM pays for
promised subsidies, many lament the need for them. Not only would
they rather see funds used for initiatives such as job creation and
tourism, but they prefer a liberalized economy.


7. (SBU) Comment: Although anger over price increases has dissipated
since the GOM took action to return prices to normal in late
September, many Casablancans believe the problem remains. One
individual anticipated that bread subsidies would last a long time to
maintain both price and social stability. Another projected that the
violence in Sefrou could happen again; if it does, he said, "You

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won't stop it easily." While the GOM has quelled discontent for the
moment, from a Casablanca perspective, the new government will be
challenged to figure out how to do so in the future. End Comment.

GREENE