SEABOARD FIGHTS FOR LEVEL PLAYING FIELD IN MADAGASCAR

UNCLAS ANTANANARIVO 000053

SIPDIS

SENSITIVE
SIPDIS

DEPT FOR AF/E AND AF/FO

E.O. 12958: N/A
TAGS: ETRD PREL ECON MA

SUBJECT: SEABOARD FIGHTS FOR LEVEL PLAYING FIELD IN MADAGASCAR

Reftel: 07 Antan 1144


1. (U) SUMMARY: Seaboard Corporation continues to report
difficulty in doing business in Madagascar, citing unfair
competition from the President's TIKO conglomerate. Seaboard's
Madagascar country manager has concluded the President is trying to
force them out of the market. Seaboard has begun a new round of
lobbying and will not go without a fight, for which they continue to
enjoy full embassy support. END SUMMARY.


2. (SBU) Armando Lopez, Manager of Seaboard's flour mill
investment in Madagascar "Les Moulins de Madagascar," updated the
Ambassador on operations and competition with President
Ravalomanana's TIKO flour mill. Sharing data on world wheat prices
and shipments, Lopez made the case that TIKO is selling flour well
below cost in what Seaboard concludes is an attempt to force them
out of the market. He estimated TIKO is losing up to USD 200,000
per month in this strategy. Seaboard, sitting on stocks of
lower-cost wheat bought forward, has suspended operations until such
time as TIKO raises its price - then they will restart flour sales.


3. (SBU) Lopez continues, without success, to seek a meeting with
TIKO's General Manager to discuss potential business cooperation.
He believes the President has forbidden TIKO officials from having
any contact with Seaboard. Similarly, officials at the Port of
Tamatave are dragging their feet on promised upgrades to the
conveyor facilities to the Seaboard silos, and also refuse to meet
with or speak to Seaboard. Overall, Lopez concluded, Seaboard faces
obstacles at every turn to remain in the Madagascar market.

Playing Hardball
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4. (SBU) To up the ante on the price war over flour, Seaboard will
soon enter Madagascar's rice, sugar, cooking oil, and powdered milk
markets - all sectors where TIKO is dominant or has an outright
monopoly. "We will try to get the President's attention, to hit him
where it hurts," Lopez said.

New Round Of Lobbying
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5. (SBU) Lopez shared that he will initiate a new round of lobbying
of international organizations in Madagascar, starting with the
International Monetary Fund. He will make the case that TIKO must
be compelled to pay tax and port fees in Tamatave, otherwise the
President's company clearly has an unfair advantage. Seaboard Vice
President Ralph Moss will make the rounds in Washington to make the
point that if President Ravalomanana continues efforts to force
Seaboard from the market, then the United States should reexamine
its support for Madagascar. This comes just as the GOM is preparing
their "MAP Road Show" to Washington during the week of February 4Q
during which they hope to showcase Madagascar's investment
potential.

What the Embassy Will Do
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6. (SBU) The Ambassador readily agreed to continue to raise
Seaboard's current problems with the GOM, including with President
Ravalomanana and Prime Minister Rabemananjara, with whom meetings
have been requested (MCC will be the other major agenda item). The
Ambassador arranged a meeting last week between Lopez and the
Agriculture Minister to buttress our own meeting with the latter on
this issue. Our point continues to be that potential American
investment in Madagascar will remain stillborn unless and until
Ravalomanana makes good on his November promise of a level playing
field (reftel) and to welcome foreign investment in all sectors. On
that point, New Year's receptions on Friday and Monday at the
Presidency and Foreign Ministry respectively offered the Dean of the
Diplomatic Corps the opportunity pointedly to remind the GOM of
those promises, using language we provided.

MARQUARDT