MADAGASCAR'S PRESIDENT - PASSIONATE FOR AGRICULTURE

C O N F I D E N T I A L ANTANANARIVO 000540

DEPT FOR AF/E AND AF/FO

E.O. 12958: DECL: 08/04/2018
TAGS: PREL EAGR ECON PGOV MA
SUBJECT: MADAGASCAR'S PRESIDENT - PASSIONATE FOR AGRICULTURE

Classified By: Charge d'Affaires George N. Sibley for Reasons 1.4 (b/d).


1. (C) SUMMARY: The Charge accompanied visiting
agribusiness speaker Dr. Arthur Siaway in a call on President
Marc Ravalomanana (at his request) for 75 minutes August 4.
When encouraged to allow local markets of agricultural goods
to reflect global prices as a way to stimulate production,
Ravalomanana insisted that artificially low prices were
essential to prevent urban unrest. He also doubted that
conservative, risk-averse Malagasy farmers would change their
productive behavior in response to market signals. The
President was nonetheless passionate about his agricultural
plans in which his vision for the country's progress and his
vision for his firms' activities appear intricately
intertwined. There is little doubt that in Ravalomanana's
mind, what is good for TIKO (his company) is good for the
nation. END SUMMARY.

RESPONDING TO A PUBLIC CRITIQUE
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2. (C) Ravalomanana initially sought to meet visiting
Tuskegee University Professor Siaway alone, despite the
request that this meeting also constitute a farewell call for
the Charge. This reluctance arose from a published interview
in which the Charge was openly critical of Madagascar's lack
of a level playing field for U.S. investment, especially
agribusiness investment. The interview described the
President's ownership of TIKO as a "clear conflict of
interest" and noted that a wise counselor might suggest the
President consider divesting himself of it. As a result,
Ravalomanana opened the meeting noting that "some diplomats"
think his activities with TIKO (and his other companies) are
inappropriate. He responded that it is actually his family
that runs these businesses -- although in the remainder of
the meeting it became evident the President is deeply and
personally, even passionately, involved in these activities.
He also justified keeping food prices artificially low to
cushion the blow on the people, already suffering from
sky-high fuel costs. With his relative monopoly in the
staple food sector, he can achieve this through his company's
pricing scheme rather than by government fiat. (How the
company makes a profit under the circumstances was left
unanswered, although we guess that his near-monopoly allows
him to cross-subsidize the staple goods with higher-end
goods.)


3. (C) The Charge suggested allowing the market to set
prices, and then targeting the poor with a social safety net,
as an approach that would encourage producers to increase
production to enhance their revenue. He noted that with
Madagascar's rich agricultural potential, it should benefit
from high food prices as an exporter, rather than suffering
as an importer. Ravalomanana rejected these suggestions,
noting that almost all urban Malagasy are "poor" and that
once a subsidy is instituted it becomes expected by the
people and can never be removed. He also rejected the notion
that market prices would provide incentive for farmers to
increase production. "Big" farmers might do that, he said,
but the small farmers are too tradition-bound to change their
ways. By contrast, he appeared open to subsidizing
agricultural inputs -- fertilizer, seed and irrigation --
although it appeared these would benefit all farmers, not
merely poor farmers.

RELISHING HIS AGRICULTURAL ROOTS
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4. (C) Much of remainder of the meeting covered the
President's present and future activities in the agricultural
sphere. While generally presented as describing ways that
Madagascar can improve and diversify its agricultural
production, it was clear than in almost all instances it was
TIKO that would lead the way. For example, Ravalomanana
spoke at length about his improving dairy production in 1994
(before he entered politics) by importing bovine embryos when
live animal imports were prohibited. Now, following a visit
to a hog farm in Tennessee earlier this year, he plans to
import 5,000 live sows to improve pork production. As he
described it, TIKO would receive the sows and then -- at some
future date -- would distribute piglets to the smaller
farmers.


5. (C) Ravalomanana also extolled the need for businesses to
take risks, and decried the conservative and risk-averse
culture of the Malagasy people. He spoke of his own son
Tojo, who appears as the heir-apparent of the TIKO empire, as
having been unwilling to try new methods and activities until
a visit to California arranged by UNICEF Executive Director
(and former U.S. Secretary of Agriculture) Ann Veneman.
After seeing the U.S. agricultural methodologies, Tojo
apparently was far more willing to explore modernizing
changes on the TIKO farms. Siaway suggested that working
with "model farmers" to demonstrate more productive
agricultural techniques might help to encourage other village
farmers to emulate them. The President countered that
Malagasy culture prefers all to be equal and that the other
villagers, rather than seeking to raise their own
productivity, would be likely to sabotage their successful
neighbor to bring him back down to their level.


6. (C) By contrast, the President was enthusiastic about the
impact of land ownership as a way to spur productivity. He
said most rural agriculturalists do not improve their
holdings because they do not own it, or at least cannot prove
that they do. He noted with approval that the Millennium
Challenge Account (MCA) Compact was addressing this problem
successfully, but only in a few regions. Pressing for a
follow-on MCA Second Compact, Ravalomanana urged that this
effort be expanded nationwide.

BIO NOTES: PROUD OF COMING UP FROM HIS BOOTSTRAPS
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7. (C) As he became more at ease, Ravalomanana began to
expound on his own path to business success. He showed
Siaway pictures of impoverished children in the Madagascar
Action Plan (MAP) brochure, saying that he himself had been
"one of them." Ravalomanana was youngest in his family and
said he was not allowed to go to school by his father until
he had fed the grass to their two cows. When he was older,
the World Bank funded his training in dairy work in both
Sweden and Denmark, where he reported having lived for four
years. He pointed out that Denmark has absolutely no
resources except for beets, but that it is a rich country
because people use their brains, inventing Leggo games and
the like. He said his family opposed his business
innovations (such as the bovine embryos) but that he was
always ready to take risks and that they had succeeded. He
expressed impatience with his European partners and advisors
who always urged caution, and appreciation for his American
advisors who urge him to go ahead and try new policies and
programs to see if they will work. Perhaps reflecting this
preference, Ravalomanana's English language skills have
improved markedly over the past three years and he is now
comfortably a Level 3 speaker.

COMMENT: OBLIVIOUS TO CONFLICT OF INTEREST
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8. (C) Ravalomanana started the meeting somewhat defensive
about the Charge's interview -- which has been widely
commented in private while publicly ignored. As the meeting
continued, however, the President's frank and enthusiastic
descriptions of his role in bringing agricultural change to
Madagascar through TIKO belied any claim that he has passed
control of the operation to his family. Even if he had, the
concern about conflict of interest would scarcely diminish.
Instead, his clear pride in his agricultural leadership
showed what we have long suspected: Ravalomanana truly
believes that what is good for TIKO is good for the nation.
To an extent, if his innovations improve productivity, he is
not wrong. But what he does not seem to understand is that
TIKO's preferred status crowds out competitors and dampens
the investment climate, thereby doing long-term harm to
Madagascar's economy. We tried to convey this message, but
doubt that it was received.

SIBLEY