DIFFICULT ECONOMIC CONDITIONS IN CENTRAL-WESTERN

UNCLAS ABIDJAN 000227


E.O. 12958: N/A
TAGS: ECON PGOV EMIN SENV EAGR EFIN EAID IV
SUBJECT: DIFFICULT ECONOMIC CONDITIONS IN CENTRAL-WESTERN
COTE D'IVOIRE

REF: ABIDJAN 216



1. Summary. During a March 16-19 visit to the
central-western region of Cote d'Ivoire, DCM and econoff
found residents and local leaders to be greatly concerned
about economic conditions, despite improved security in the
area. The national political crisis has hampered the area's
economic progress since 2002. The worldwide recession, with
its accompanying decrease in demand for commodities, is now
also taking a toll on the region, a major timber- and
rubber-producing area. The diminishing productivity of
Ivorian cocoa farms, another mainstay of the regional
economy, is also cause for concern. End summary.


2. Emboffs met with political leaders, NGO staff members,
community organizations, and business representatives during
a four-day trip to Man, Guiglo, Toulepleu, Daloa, and some
small villages in the area. This cable focuses on economic
matters; political and security issues were covered in reftel.


3. In general, economic concerns seemed to outweigh political
issues in the minds of emboffs' interlocutors in the region.
Malnutrition, unemployment, and poverty are significant
problems for residents and local leaders. Nationwide, the
poverty rate increased by more than 10 percentage points, to
48.9 percent from 38.4 percent, between 2002 and 2008. In
the Daloa region, poverty increased to 62.9 percent from 50.3
percent during the same period. In the Man region, poverty
actually fell by one percentage point during that period, but
remains extraordinarily high, at 63.2 percent.


4. As farmers in this hard-hit area abandoned their fields,
the agricultural sector, which accounts for most of the
region's economic activity, declined sharply, according to
local authorities. Agricultural producers who have returned
find little local demand for their goods. Many secure better
prices for their products (e.g., palm oil, rice, and cassava)
by exporting them--either legally or illegally--to
neighboring countries, driving up food costs for local
residents. Local authorities also reported that the crisis
resulted in significant damage to forest reserves in the
region, as looters took advantage of the absence of forest
rangers to cut and sell trees illegally. Banks have yet to
reopen in Man, forcing residents to travel almost 60 miles to
Duekoue or over 120 miles to Daloa for banking services.


5. In recent months, the global economic slowdown has
exacerbated the effects of the national political crisis.
The manager of the Thanry sawmill in Guiglo reported that the
contraction in demand for wood products has led to major
layoffs at the Thanry facility.


6. According to the Ministry of Environment, Water, and
Forests (EWF),approximately 10 Ivorian sawmills have closed
recently, and 6,000 of the 40,000 workers in the Ivorian
timber industry have lost their jobs. Ninety-five percent of
Ivorian wood products are exported: eighty percent of those
exports go to Europe, and ten percent go to the United
States. Orders are now down 50 percent. The timber
industry, which is concentrated in the center-west and
southwest regions of the country, is a significant element of
the Ivorian economy. Before the crisis, annual sales were in
the range of USD 380 million. EWF, in partnership with the
national forestry development agency (SODEFOR),organized a
seminar in Grand Bassam to address the industry crisis April
2-3.


7. Thanry's experience in Guiglo demonstrates that declines
in business may have effects beyond layoffs. Thanry has been
an active player in the community. The firm built a public
junior high school and renovated and expanded a primary
school in Guiglo. The company also maintains roads in the
area and has reforested some 50 hectares (approximately 124
acres) in the Guiglo area. Such assistance is only possible
when the company is profitable.


8. Declines in the quality and quantity of cocoa produced are
also having a negative effect on the region, independent of
the world recession and largely independent of the political
crisis. Although cocoa prices are relatively high, cocoa
productivity throughout the country continues to fall.
Cargill and other major companies in the cocoa/chocolate
industry are greatly concerned about the decline and have
been working to reverse the trend. Several programs are
underway around the country; the Gates Foundation recently
announced a new regional program valued at approximately USD
40 million to help improve cocoa quality and yields.


9. While in the Daloa area, Emboffs toured a Cargill cocoa
buying station and visited one of Cargill's "farmer field
schools," where Ivorian extension agents, funded by Cargill,
teach farmers how to increase farm yields through better
pruning, treatment of diseases, wiser application of
pesticides, etc. Cargill uses these schools to combat the
worst forms of child labor as well.


10. Although NGOs, USAID, cocoa exporters, and other
participants in the cocoa/chocolate industry are conducting
programs like Cargill's farmer field schools, in industry's
view the GOCI, which has invested little in the cocoa sector,
carries overall responsibility for the decline. The new
program approved for Cote d'Ivoire by the World Bank Board on
March 31, contains measures to address problems in the sector.


11. Comment. While emboffs found the security situation in
the region to be generally calm, they did not find much
encouraging news on the economic front. Post notes that Tata
Steel intends to undertake an iron-mining project valued at
between USD 1.0 billion and 1.5 billion near Man. Local
authorities with whom emboffs spoke were oblivious to this
development, which will not produce significant employment in
the short term, but could be an economic boon if it reaches
fruition. End comment.


NESBITT