ZIMBABWE - INPUT FOR 2007 PRESIDENT'S REPORT ON

UNCLAS SECTION 01 OF 03 HARARE 000217

SIPDIS

SIPDIS

AF/S FOR S. HILL
AF/EPS FOR J. POTASH
NSC FOR SENIOR AFRICA DIRECTOR B. PITTMAN
STATE PASS TO USAID FOR M. COPSON AND E.LOKEN
TREASURY FOR J. RALYEA AND T.RAND
COMMERCE FOR BECKY ERKUL
ADDIS ABABA FOR USAU
ADDIS ABABA FOR ACSS

E.O. 12958: N/A
TAGS: ETRD ELAB PHUM PGOV ZI
SUBJECT: ZIMBABWE - INPUT FOR 2007 PRESIDENT'S REPORT ON
AGOA

REF: STATE 22438


1. Zimbabwe continues to fall far short of AGOA's qualifying
criteria. Post's input for the 2007 President's Report on
AGOA (reftel) follows:

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Market Economy/Economic Reform
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2. The Zimbabwean Government (GOZ) pays lip service to
Marxist economic principles. Over the past 10 years the GOZ
has increasingly used ideology to mask growing official
corruption. Zimbabwe has become a forbidding place to invest
for foreigners and Zimbabweans. Private sector confidence
has collapsed as property rights have been seriously eroded
and the rule of law ignored. The government has sanctioned
seizures of privately owned agricultural land without
compensation, and changed the constitution in 2005 to
transfer ownership of expropriated agricultural land to the
government without recourse to the courts.


3. The GOZ's disastrous fiscal and monetary policies have
also contributed to the country's economic collapse. The IMF
estimates the government's budget deficit at more than 50
percent of GDP. The A major part of the deficit is the
result of off-budget subsidies provided by the Reserve Bank
of Zimbabwe (RBZ) to corrupt and mismanaged parastatals. The
main driver of inflation, which surpassed 1700 percent
officially in February 2007 (private sector calculations are
nearly double that rate) is the government's profligate
monetary policy, which is the government's only means of
covering the deficit. Inflation appears poised to increase
exponentially. The IMF predicted that inflation would hit
5000 percent by the end of 2007, however, it may reach that
mark before the year's mid-point.


4. The RBZ has kept the foreign exchange rate fixed since
July 31, 2006 despite the country's hyperinflation,
undermining what is left of the country's export sector. The
scarcity of forex has fueled a parallel foreign exchange
market in which the RBZ is the main actor. RBZ purchases of
forex with local currency are the main factor driving the
accelerating fall in value of the Zimbabwean dollar, which
also appears poised to depreciate exponentially.


5. Zimbabwe's IMF voting rights remain suspended and the GOZ
has shown no political will to implement the comprehensive
package of macroeconomic policies and structural reforms
required for their restoration and to regain eligibility for
IMF lending. The country has stopped servicing its large
external debt and is falling ever further into arrears.

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Political Pluralism/Rule of Law/Anti-Corruption
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6. The government, dominated by President Robert Mugabe and
the ruling ZANU-PF party since independence, has resorted to

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brute force to perpetuate its rule. The opposition and civil
society operate in an environment of state-sponsored
intimidation and violence. In March, 2007 the government
moved to ban all rallies and demonstrations in contravention
of Zimbabwe's constitution. The government used deadly force
to break up an opposition prayer meeting subsequently
arresting 50 opposition leaders, who were then beaten while
in custody.


7. Presidential elections are scheduled for 2008. Recent
elections have been stolen by the government and the ruling
ZANU-PF party, which has relied on its total control of the
electoral machinery to perpetrate fraud. In addition, the
government and ruling party have heavily tilted the playing
field against the opposition by closing independent news
media and by manipulating the distribution of food
assistance.


8. Following the parliamentary election in March 2005, which
international observers deemed neither free nor fair, the
ruling party now controls enough seats to change the
country's constitution at will. Despite announcing plans to
leave office in 2008, Mugabe and his loyalists have proposed
amending the constitution to extend his current term until

2010. Opposition to the extension has been widespread,
including within the ruling party. In response, Mugabe has
threatened to run again for a full presidential term in the
2008 elections.


9. Government efforts to influence and intimidate the
judiciary have seriously eroded independence and undermined
the rule of law. The government and ruling elite have
ignored numerous adverse judgments, including those related
to the taking of private property. Additionally, senior
government officials and police have willfully defied court
orders that are not politically acceptable to the ruling
party.


10. The corruption in government has become endemic,
including the redistribution of expropriated commercial farms
to the ruling party elite, privileged access to foreign
exchange and fuel, and the distribution of new housing plots
primarily to civil servants, security forces, and ruling
party supporters. The government-appointed Anti-Corruption
Commission includes no members from civil society or the
private sector and it has yet to register any notable
accomplishments. The Ministry of State Enterprises,
Anti-Monopolies, and Anti-Corruption lacks sufficient
political backing to carry out its anti-corruption mandate.
Instead the government prosecutes individuals selectively,
focusing on those who have fallen out of favor with the
ruling party and ignoring transgressions by favored elite.

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Poverty Reduction
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11. The government maintains several programs that ostensibly
provide food or basic services to the poor. However, the

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programs are grossly under funded and their implementation is
often influenced by politics, with areas represented by the
opposition disadvantaged. Moreover, the government's
economic policies have caused most Zimbabweans to grow
progressively poorer over the past seven years. Human
development indicators that were once among the best in
sub-Saharan Africa have deteriorated sharply. Zimbabweans,
for example, now have the world's lowest life expectancy and
face acute food shortages this year. Zimbabwe has not
finalized a Poverty Reduction Strategy Paper.

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Labor/Child Labor
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12. Zimbabwe has ratified all eight of the ILO core
Conventions, including ILO Convention 183 on the minimum age
and ILO Convention 182 on the worst forms of child labor.
The government, however, lacks the commitment and resources
necessary to effectively enforce labor standards. Moreover,
it frequently uses repressive laws and intimidation to limit
workers' right to organize and hold labor union meetings.


13. The government has stepped-up harassment of the Zimbabwe
Congress of Trade Unions (ZCTU) and its leadership. In
September 2006, for example, police arrested and severely
beat several senior leaders of ZCTU for their role in
planning a peaceful demonstration for better wages and
working conditions. The government also has taken steps to
marginalize the traditional unions and the formal labor
dispute resolution mechanism.


14. The ongoing economic crisis severely impedes the
government's ability to address its child labor problems.
Several international donors have committed multi-year
funding to support social programs aimed at orphans and other
vulnerable children but the scale the assistance is
insufficient to alleviate the problem. Zimbabwe has, for
instance, the highest percentage of orphans in the world.


15. The growing rate of unemployment has reduced the number
of children employed in the formal sector, but informal child
employment has increased as more children work to fill the
income gap left by ill, unemployed, or deceased relatives.
The minimum age for light work, other than apprenticeship or
work associated with vocational education, is 15 years.
Children work in agriculture, street vending, and as domestic
servants. There are reports that an increasing number of
girls are involved in prostitution, especially in border
towns. Primary education is compulsory, however, it is not
free and an increasing number of Zimbabwean children have
fallen out of the education system. The government's
commitment to children's rights and welfare remains weak.
DELL