Identifier
Created
Classification
Origin
08YAOUNDE428
2008-05-02 11:51:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Yaounde
Cable title:  

RESPONSE: IMPACT OF RISING FOOD/COMMODITY PRICES -

Tags:  EAGR ECON EINV EFIN CM 
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R 021151Z MAY 08
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UNCLAS SECTION 01 OF 03 YAOUNDE 000428 

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SENSITIVE
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STATE ALSO FOR EEB/TPP/ABT/ATP JANET SPECK

E.O. 12958: N/A
TAGS: EAGR ECON EINV EFIN CM
SUBJECT: RESPONSE: IMPACT OF RISING FOOD/COMMODITY PRICES -
CAMEROON

REF: STATE 39410

UNCLAS SECTION 01 OF 03 YAOUNDE 000428

SIPDIS

SENSITIVE
SIPDIS

STATE ALSO FOR EEB/TPP/ABT/ATP JANET SPECK

E.O. 12958: N/A
TAGS: EAGR ECON EINV EFIN CM
SUBJECT: RESPONSE: IMPACT OF RISING FOOD/COMMODITY PRICES -
CAMEROON

REF: STATE 39410


1. (SBU) Summary. Cameroon's civil unrest in February
highlighted the risk of political volatility caused by rising
food prices. Cameroon's high food prices are mostly caused
by poor economic planning and management over the long-term.
Blessed with enormous agricultural potential, Cameroon could
reap tremendous benefits from rising global demand for food.
However, food production has not responded sufficiently,
largely because of pervasive corruption, especially in key
agricultural and planning ministries, a stifling business
climate, the high-cost of inputs (especially gas),and the
lack of necessary infrastructure (especially farm-to-town
roads). The Government of Cameroon (GRC) has responded with
a series of short-term measures, suspending taxes and
pressuring retailers. In our conversations with Cameroonian
interlocutors, we continue to focus on the need to improve
governance and economic planning. Post encourages Washington
to match the USG's short-term response to the immediate
crisis with policies to address the long-term factors
underlying the problem. These could include: redoubled
pressure for good governance and fighting corruption,
policies to reduce the price of gas and encourage new energy
technologies, creative ways to foster food production in
underperforming countries, and USG funding for infrastructure
developments (especially for roads). End summary.

Demand
======


2. (U) The GRC's Ministry of Economy and Planning 2007
household survey concluded that rice is "by far, the
principal food for Cameroonians." The Food and Agricultural
Organization's 2004 statistics show Cameroon imported 300,000
MT of rice at a total value of $85 million, its top import
item. Wheat was the second most important import, with
260,000 MT valued at $69 million. Other essential
commodities in Cameroon's food economy include vegetable oil
(especially palm oil),sugar, fish, corn, plantains, sorghum,
yams, beans, potatoes, and cassava. The prices for all food
and other commodities in Cameroon have increased
substantially in the last twelve months, especially in the

last four months. Although Cameroon is a net agricultural
exporter, the preponderance of agricultural exports is
non-food products like coffee and cocoa and Cameroon is a net
food importer. Rural communities have been less affected
than urban populations because they are more self-sufficient
in food. Demand for food in Cameroon is magnified by
consumers in neighboring countries who shop in Cameroon
because prices are relatively cheaper.

Supply
======


3. (SBU) The World Food Program classifies Cameroon as a
Low-Income Food Deficit Country. In 1980, Cameroon's
coverage of domestic food needs stood at 96 percent; by 2003,
it had fallen to 80 percent, illustrating that the food
crisis in Cameroon is systemic and long-term. Although the
GRC has announced new spending programs to boost agricultural
production, there is little evidence that domestic production
will respond adequately. Corruption and mismanagement
promises to misdirect much of the new funding, and many
obstacles to increased production -- substandard
infrastructure (especially roads),poor distribution systems,
insufficient access to credit and other agricultural inputs,
and prohibitive transportation costs -- will require greater
planning and a more sustained response. The press has
carried some announcements of prospective new investments in
industrial agriculture and post has noted an up-tick in
American entities seeking investment opportunities in this
sector, but most of these projects remain in planning stages.
Recent media reporting indicates Chinese companies are
exploring large-scale rice production in Cameroon. Most
Cameroonian production is done by small-scale farmers who do
not possess the capacity to store their production, and as a
result many crops are sold at harvest time, when prices are
already relatively low.


4. (U) Processing delays in Douala port (which serves
Cameroon, Chad and the Central African Republic),and
pervasive corruption are important bottlenecks to increased
production and more effective use of imported goods.
Cameroon is receiving a growing number of proposals to
convert agricultural land into the production of non-food
crops like bio-fuels. According to the IMF, food prices in
Cameroon are especially affected by fuel prices because
poorly developed infrastructure means fuel costs constitute

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an abnormally high percentage of food prices.

Political Impact
================


5. (SBU) Higher food and fuel prices played a major role in
the violent protests that shook dozens of Cameroonian cities
and towns during the week of February 25 and which, according
to official figures, left 40 dead. The GRC was able to exert
effective control over the troubled areas within several
days, but many observers agree that the rare display of
social unrest revealed fundamental threats to Cameroon's
stability. The problem of high food prices is magnified by
other problems in the country -- widespread discontent about
President Biya's recent decision to amend the constitution
and eliminate term limits, about his long tenure and
authoritarian style, about the economy's weak growth and high
unemployment -- which could combine with continued food and
oil prices to spur further unrest in the future. In the
midst of the unrest, there were some isolated statements by
public officials that risked igniting ethnic tension.
However, although ethnic divisions in Cameroon are still
worrisome, the mantra of ethnic divisiveness was roundly
condemned by more vocal appeals to reason. Comments from a
number of Post's interlocutors suggest that some Cameroonian
decisionmakers would be open to considering biotech products.

Economic Impact
===============


6. (U) Official inflation statistics reflect growing
pressure on prices, but the impact is reportedly moderate.
However, anecdotal evidence suggests that the impact on the
average pocketbook is higher than official statistics
indicate. The impact of higher food prices, exacerbated by
higher oil prices, will probably be felt more strongly in the
coming year. Cameroon's fiscal position will be negatively
affected by government decisions to suspend import duties and
taxes on basic commodities (and concurrent decisions to raise
civil service wages).

Environmental Impact
====================


7. (U) Post is currently unaware of a direct impact on
Cameroon's environment, but the growing number of proposals
to produce biofuels and other products suggest that more land
will be consumed by agriculture (and not necessarily for food
crops) in the coming years.

Government Policy Response
==========================


8. (U) The GRC has temporarily suspended import duties and
other taxes on basic food stuffs. There have been no quotas
or restrictions on exports. There have been no
nationalizations or redistributions of farms or industries.
The Central African Bank (BEAC) that controls monetary policy
for Cameroon and the Central African Economic and Monetary
Union (CEMAC) zone has not announced any special measures to
curb inflation. The GRC, through the Ministry of Commerce,
has negotiated with wholesalers to set new, reduced prices
for many commodities. Anecdotal and press reports, however,
suggest that few retailers are adhering to the price
guidelines. A 50 kg bag of rice that cost 10,000 CFA in 2006
is now selling for between 15,000 and 20,000 CFA, with some
analysts predicting 30,000 by December 2008.


9. (SBU) Government official concede that these measures
can only address food prices in the very short-term,
acknowledging that the longer term solution has to focus on
boosting agricultural production. The Ministry of
Agriculture and other government entities have announced a
series of new assistance programs for agricultural producers.
In the past week, the GRC held an urgent Cabinet meeting to
discuss food prices and ways to improve agriculture.
However, given the GRC's poor track record with such programs
in the past and the persistence of barriers like poor
infrastructure and high fuel prices, there is scant reason to
believe these programs will have much impact. There has not
been any impact on relations with neighboring countries, and
the GRC is likely to avoid confrontation, but high and rising
demand for Cameroonian food from oil-rich Nigeria, Equatorial
Guinea, Gabon and Chad could enflame nationalist resentments
among Cameroonian consumers.

Impact on Post Programs
=======================

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10. (U) Mounting pressure on the GRC to increase domestic
food production has helped remove long-standing bureaucratic
bottlenecks to a stalled food-production component of the
USDA's FY03 Food for Progress program. A proposed
rice-husking factory in the northern Lagdo region had been
stalled by political opposition within the GRC. Informal
reports from contacts in the GRC and published minutes from
Prime Minister Ephriam Inoni's April 24 meeting with the
cabinet suggest that the GRC plans to fast-track final
approval for the project.

Policy Proposals
================


11. (U) For the GRC: In our conversations with Cameroonian
interlocutors, we continue to focus on the need to improve
governance and economic planning. Cameroonians are demanding
meaningful action from the GRC; we may be able to leverage
this domestic political pressure (partly, but not fully,
resulting from rising food prices) to press for greater
movement on broader economic reform and efforts to attract
investment.


12. (U) For the USG: Post encourages Washington to match
the USG's short-term response to the immediate crisis with
policies to address the long-term factors underlying the
problem. These could include: redoubled pressure for good
governance and corruption fighting, policies to reduce the
price of gas and encourage new technologies, creative ways to
foster food production in underperforming countries and
USG-funded infrastructure developments (especially for
roads). We could also urge countries like Cameroon to keep
more accurate, up-to-date data on agriculture to help with
better planning.
GARVEY