SCENESETTER FOR PRIME MINISTER MOSISILI'S VISIT TO

UNCLAS SECTION 01 OF 04 MASERU 000412

SIPDIS

SENSITIVE
SIPDIS

DEPT ALSO FOR AF/S;
PASS TO MILLENNIUM CHALLENGE CORPORATION

E.O. 12958: N/A
TAGS: ECON EAID PGOV PREL PHUM KMCA LT
SUBJECT: SCENESETTER FOR PRIME MINISTER MOSISILI'S VISIT TO
WASHINGTON


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1. (SBU) SUMMARY: Prime Minister Mosisili's imminent visit to
Washington to sign a $362.5 million MCA Compact on July 23 with
the Millennium Challenge Corporation (MCC) comes at a high point
in the U.S.-Lesotho bilateral relationship, reflecting many
shared values, mutual cooperation, successful foreign assistance
programs, and Lesotho's substantial progress in a number of
important political, economic, and cultural areas. The young
Mountain Kingdom's democratization growing pains are evident at
the moment, however: the country is in the throes of what has
regrettably become a traditional, and potentially worrisome,
post-election political impasse--reflecting a historical
aversion among Basotho to power sharing. Prior to the election
season, Lesotho received the highest scores of any African
nation on the MCC's rigorous cross-sectoral indicators, and the
country's fiscal responsibility and strong exports under the
African Growth and Opportunity Act (AGOA) serve as a model for
other nations in the least developed category. The PM's
first-ever bilateral visit to the United States offers an
opportunity to congratulate Lesotho on its achievements
vis-`-vis the Millennium Challenge Corporation and its
progressive efforts as a developing nation. The visit is also
an opportunity for senior USG officials to underscore the
importance to the bilateral relationship, and to Lesotho's
international standing, of dialogue, tolerance, inclusiveness,
and respect for the rule of law and human rights. The MCC
Compact signing will be a moment of triumph for the Basotho
people, and will also be a personal victory for the man who has
led this nation for almost a decade. END SUMMARY.

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Introducing the Mountain Kingdom
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2. (U) Lesotho is a highly mountainous nation, slightly smaller
than the state of Maryland, which is completely landlocked by
South Africa. A nearly mono-ethnic state (although strife and
rivalries among family-based clans create tensions not unlike
ethnic conflict elsewhere on the continent),Lesotho became a
unified British protectorate in 1868 and gained its independence
in 1966. Following its tumultuous birth as an independent
nation, Lesotho was governed by a string of military rulers from
1970 until 1993, when a new constitution established a
constitutional monarchy. In 1998, violent post-election
protests and an army mutiny were quelled by a Southern African
Development Community (SADC) military invasion, causing
considerable damage to the country's economy, infrastructure,
and national psyche.


3. (U) Lesotho's Prime Minister Pakalitha Mosisili is head of
government and has executive authority, while King Motlotlehi
Letsie III serves a largely ceremonial function and wields
minimal constitutional powers. Lesotho's February 2007 national
assembly elections reaffirmed the leadership of the Lesotho
Congress for Democracy (LCD),which has governed since 1998.
Local and international observers declared the elections free
and peaceful, but persistent disagreements concerning the
application and potential manipulation of the country's
generally well regarded Mixed Member Proportional (MMP) model
marred the post-election political environment. A turbulent
period followed the election which has included a vitriolic
political impasse between governing and opposition parties,
attacks on residences and property of senior political figures,
a short-lived but restrictive curfew that led to additional
security implications, and opposition-led mass demonstrations
and work stoppages. In June, the GOL launched a controversial
round of arrests and detentions of military personnel and
individuals associated with the opposition and alleged coup
plotting.


4. (U) Lesotho is ranked by the World Bank among the world's
least developed nations, and its primary industries are
subsistence agriculture, textile and apparel manufacturing,
mining, and water utilities. While Lesotho's growth rate
remains at a troublingly low 2.9%, the GOL's fiscal discipline
has allowed the country to keep inflation just under double
digits, maintain sizable foreign currency reserves, and run a
public sector budget which is strongly in the black. The GOL's
revenues are based largely on transfer payments from the South
African Customs Union (SACU),which account for more than 60% of
all government financing.


5. (U) Food insecurity has been a perpetual problem in Lesotho.
Currently, persistent drought and failed crops since December
2006 and subsequent hikes in commodity prices have created an
increasingly acute food crisis. On average, Lesotho's total
agricultural production declined over 40% this season,
increasing food insecurity for upward of 500,000 people (roughly

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25% of the population). The situation is worsened by Lesotho's
high prevalence of HIV/AIDS, creating groups highly vulnerable
to fluctuations in food availability and cost. Embassy Maseru
declared a disaster on July 10, following the Prime Minister's
declaration of a food crisis on July 9.


6. (SBU) Until August 2007, Lesotho retains chairmanship of the
Southern African Development Community (SADC). This position
currently allows the nation to punch beyond its weight class
politically, as it did at the recent African Union (AU) Summit
in Ghana when Prime Minister Mosisili called on the AU to
demonstrate its fiscal accountability before the organization
takes further steps towards political integration. The
importance of SADC is likely to grow as regional integration
continues and the block seeks greater consensus on policy issues
in multilateral forums. Lesotho has used its current leadership
role to achieve gains on regional trade and economic integration
and to press, quietly at least, for more effective SADC
influence in dealing with the deterioration in Zimbabwe.

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The U.S.-Lesotho Bilateral Relationship
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7. (U) The United States and Lesotho have had a long-standing
relationship, beginning when the U.S. established one of the
first foreign diplomatic missions in Lesotho in 1966 immediately
after independence. The United States is the single largest
donor of humanitarian food assistance to Lesotho, contributing
an estimated $58 million in food aid since 2002 (including
nearly $8 million in supplemental contributions this year).


8. (U) Lesotho is poised to sign a $362.5 million Millennium
Challenge Corporation (MCC) compact to reduce poverty and
increase economic growth. Lesotho produced an innovative
compact, and has taken ownership of a program that focuses on
increasing the provision of water supplies for industrial and
domestic use ($164 million),improving health outcomes and
productivity ($122.4 million, the MCC's first ever support for
the health sector),and removing barriers to foreign and local
private sector investment ($36.1 million). During the five-year
scope of the compact, MCC projects will impact the majority of
Lesotho's 1.8 million people due to their broad geographic scope
and focus on sectors that reach most Basotho, such as health
care and the provision of potable water.


9. (U) Lesotho is one of the greatest success stories of the
United States' African Growth and Opportunity Act (AGOA),which
helped create over 40,000 jobs and facilitates exports valued at
nearly half a billion dollars annually. NGOs estimate that
Lesotho's textile and garment mills, exclusively owned by
Taiwanese and PRC controlled companies, indirectly support over
350,000 individuals in the Mountain Kingdom. Embassy Maseru is
now working with the USAID Trade Hub to expand the benefits of
AGOA beyond textiles.


10. (U) Lesotho's Peace Corps program has operated continuously
for 40 years, during which some 2,000 American volunteers have
worked in education, health, and community development in all
ten of Lesotho's districts, including some of the most remote
villages and communities. Eighty volunteers serve in the
Kingdom currently.


11. (U) Through PEPFAR funding totaling over $11 million this
year and U.S. contributions to the Global Fund, the United
States has partnered with the GOL, other donors, and dozens of
NGOs and universities to help the Mountain Kingdom cope with,
prevent, and eliminate HIV/AIDS. Lesotho has the world's third
highest prevalence rate of HIV/AIDS, infecting approximately 23%
of the country, considerably higher among high-risk populations,
including the nation's youth. The disease impacts all spheres
of life in Lesotho, including lost productivity, constant and
expensive by-elections to replace deceased politicians, a
population that has essentially declined over the past ten years
despite high fertility rates, the creation of nearly 200,000
orphans, and the unofficial designation of every Saturday as
"funeral day." HIV/AIDS efforts are among Embassy Maseru's most
visible and rapidly growing areas of operation.

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Political Turbulence and Human Rights
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12. (SBU) Following Lesotho's February 2007 national assembly
election, a political impasse developed between the governing
LCD and opposition parties regarding the distribution of
parliamentary seats and other issues. While international and

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domestic monitors observed Lesotho's polling process to be fair
and peaceful, opposition parties allege that the LCD manipulated
Lesotho's complex Mixed Member Proportional (MMP) parliamentary
system through the use of dubious political alliances.
Opposition parties, however, used the same tactic in efforts to
gain more seats and influence in Parliament. SADC appointed
former President of Botswana Masire to mediate ongoing talks
between governing and opposition parties aimed at resolving the
impasse. The dialogue process succeeded in bringing the two
side together, although progress has been limited to a small
number of process modalities and tightly referenced issues.


13. (SBU) In June, unknown gunmen attacked several ministerial
residences over a series of evenings, disarming military
bodyguards. In response, the Lesotho Mounted Police Service
(LMPS),backed by the Lesotho Defense Forces (LDF),declared a
curfew to reclaim weapons stolen from military bodyguards and to
arrest the perpetrators. Troubling accusations emerged that
unidentified security forces took former and current military
personnel and several civilians into secret custody and
mistreated them. The GOL/LDF's heavy handed tactics in dealing
with recent events, and dismissal of abuse allegations, have
drawn criticism from local civil society and human rights
groups. Lesotho has a history of politically related violence,
but the true motives for the recent spate of attacks, like those
in the past, may remain a mystery. The GOL has not
substantiated its claims that the political opposition is behind
the violence and alleged coup plotting.


14. (SBU) Some criticism of the GOL and its MCC compact has
surfaced regarding the consultative process, projected rates of
return, and alleged disregard for human rights issues. The
criticism may reflect an opposition tactic to use the compact as
political leverage in getting the GOL to address recent
allegations of human rights abuses and other opposition
grievances, although several local NGOs and human rights groups
have also raised similar concerns.

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Our Message
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15. (SBU) The PM's first-ever bilateral visit to the United
States offers an opportunity to congratulate Lesotho on its
achievements vis-a-vis the Millennium Challenge Account and its
progressive efforts as a developing nation. The visit is also
an opportunity for senior USG officials to underscore the
importance to the bilateral relationship, and to Lesotho's
international standing, of dialogue, tolerance, inclusiveness,
and respect for the rule of law and human rights. We recommend
raising the following points:

-- Congratulate Lesotho for gaining MCC eligibility, achieving
in 2006 the highest score of an African nation on MCC's
indicators and making specific progress in key criteria areas
such as gender equality; and for creating an innovative compact
that stands to alleviate poverty, spur economic growth, and
benefit generations of Basotho to come;

-- Thank the GOL for signing an "Article 98 Agreement" with the
United States in 2006, supporting counterterrorism efforts, and
for playing a leading role in regional and global trade
liberalization;

-- Applaud Lesotho's efforts on HIV/AIDS, including strong
support by His Majesty the King and senior GOL officials to
fight the disease, the Kingdom's model "Know Your Status"
national campaign, and a recent statement of commitment by the
country's influential church leaders;

-- Give assurances of continued USG cooperation in fighting
HIV/AIDS, but noting that a successful response to this
historical challenge requires burying stigma, implementing
efforts that may intrude upon cultural assumptions, and
effectively using resources;

-- Express support for Lesotho's leadership within SADC and the
African Union (AU),including modest but important contributions
to the international peacekeeping force in Darfur; and encourage
greater leadership efforts to address the Zimbabwe crisis;

-- Encourage the GOL to ensure that all political voices,
including those of the opposition, are heard in the policy
formulation and are invited to participate in the governing
process;

-- Observe that disputes and differences among political

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stakeholders can only be resolved through dialogue and adherence
to the rule of law.

-- Suggest that the GOL should not dismiss broad accusations of
human rights abuses, but rather address such matters directly
and transparently;

-- Reiterate that review of Lesotho's MCC eligibility does not
end with compact signing, but that Lesotho must maintain its
annual eligibility across the board, including in key areas such
as civil liberties, human rights, and the rule of law.
MURPHY