ANTANANARIVO POL/ECON WEEKLY UPDATE (10/16/2009)

UNCLAS SECTION 01 OF 02 ANTANANARIVO 000727

SENSITIVE
SIPDIS

DEPARTMENT FOR AF/E - MBEYZEROV AND FOR OES/ENV
DOC FOR RTELCHIN
TREASURY FOR FBOYE
PARIS FOR WBAIN
LONDON FOR PLORD

E.O. 12958: N/A
TAGS: PGOV PREL ECON MA
SUBJECT: ANTANANARIVO POL/ECON WEEKLY UPDATE (10/16/2009)

REF: A) ANTANANARIVO 710, B) ANTANANARIVO 707, C) ANTANANARIVO 701


1. (U) SUMMARY: This is U.S. Embassy Antananarivo's Weekly Update
for October 5-16, an unclassified review of major political,
economic, and commercial events and information from the U.S.
Mission to Madagascar and the Comoros.

POLITICAL (paras 2-4)
- Ambassador Carter Visit
- Public Reaction to ICG
- Human Trafficking to Lebanon

ECONOMIC AND COMMERCIAL (paras 5-9)
- Vanilla Sector: Another Victim of Corruption
- Self-Help Site Visits in Comoros
- Rice Imports Planned to Cover Shortage
- Shipping Rates on the Rise
- AmCham Breakfast

END SUMMARY

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POLITICS
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2. (SBU) AMBASSADOR CARTER VISIT: Ambassador Phillip Carter visited
Madagascar October 2-7 to lead the USG delegation to the
International Contact Group (ICG) meeting organized by the AU to
pressure the Malagasy political leaders to implement the August 9
Maputo accords for a power-sharing transition government.
Ambassador Carter met with Embassy staff, members of civil society,
the military, the mediation team, and the diplomatic corps during
his stay (refs A, B, and C).


3. (SBU) PUBLIC REACTION TO RECENT POLITICAL EVENTS: HAT President
Andry Rajoelina has been branded a "traitor" by factions loyal to
outgoing Prime Minister Roindefo Monja, following Monja's recent
replacement with a consensus candidate, Eugene Mangalaza. Monja's
subsequent refusal to step aside in the face of domestic and
international pressure, however, has tarnished his own image,
leading some former supporters to accuse him of wishing to prolong
the crisis for personal interest. On the other side, Ravalomanana
is also reportedly losing credibility with the "silent majority" for
his categorical refusal to cede the transition presidency to
Rajoelina. Callers to radio programs generally express fatigue on
all sides, with many hoping that planned talks this weekend would be
the last. With Ravalomanana refusing to attend, talks have again
been postponed (septel),and the public's already low opinion of the
feuding politicians will only sink further.


4. (U) HUMAN TRAFFICKING TO LEBANON: Malagasy domestic workers in
Lebanon have resurfaced as a trafficking concern. A recent article
reported on a Malagasy woman who returned after just eight months in
Lebanon, and has been sent to the Antananarivo psychiatric asylum
upon her arrival. She is the seventh returnee from Lebanon received
at this asylum. Another woman reportedly died in Lebanon, and the
repatriation is currently being facilitated by the MFA. The
Malagasy recruiting agency has offered no explanation to family
members, and authorities have thus far been unresponsive to media
inquiries.

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ECONOMIC AND COMMERCIAL
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5. (SBU) CORRUPTION DESTROYING VANILLA SECTOR: A representative of
the leading American buyer of Malagasy vanilla told Emboff October 9
that "ridiculous" pricing policies were killing Madagascar's
successful vanilla sector. Doug Daugherty explained that the
current export price floor of USD 27 per ton, set by the Malagasy
government, made legal Malagasy exports uncompetitive with the world
market price of USD 20, even though Madagascar has the lowest global
costs of production. Daugherty alleged that two large international
buyers - Vanipro and Authentique Product - had bribed the commerce
and finance ministers to implement the price floor to keep Malagasy
vanilla off the global market so that they could unload stock held
outside of Madagascar, which they had accumulated in anticipation of
higher international prices due to vanilla blight. As a result,
vanilla farmers (previously estimated at around 100,000) now unable
to sell their product are switching from vanilla to rice or banana
production, while vanilla collectors are focusing on lucrative
illegal hardwood smuggling.

ANTANANARI 00000727 002 OF 002




6. (U) SELF-HELP SITE VISITS IN COMOROS: Emboff visited several
ongoing SSH projects in Comoros, and conducted site visits for
potential new projects. Out of the 11 projects from FY 2008, for
which USD 60,000 was obligated, three have already finished while
most of the others are near completion. An additional USD 60,000
will be obligated before December 31, 2009 for new projects.


7. (U) RICE IMPORTS: The Director General of internal trade at the
Ministry of Trade declared that the country will import rice to
cover the upcoming shortage period (from December to April). Rice
producers, importers, and the government met in August and decided
that with a national consumption of 2.4 million tons per year, the
country needs to import 125,000 tons of rice before the end of 2009.



8. (U) RISING SHIPPING RATES: Beginning October 15, French shipping
company CMA/CGM will increase its freight cost between Europe and
the Indian Ocean by EUR 150 per 20 foot container, citing their
desire to continue offering customers the same quality and
reliability of services. This increase will have an impact on the
cost of imported goods, as 80 percent of imported goods are sent by
sea. The two other major shipping services, Mediterranean Shipping
Company (MSC) and Maersk, said that they plan to keep their current
rates.


9. (U) AMCHAM BREAKFAST: On Oct 15, around 70 people attended the
monthly AmCham breakfast which featured guest speaker Patrick
Hickey, the manager of the USD 4.5 billion Ambatovy mining project.
The nickel and cobalt mine, the largest investment in Madagascar's
histQ, is scheduled to complete construction in late 2010. Hickey
explained that although the project only pays one percent in
royalties for its refined product, the project is subject to several
additional taxes and fees that, if considered as a whole, provide a
fair take for the government (approximately 40 percent for
government/60 percent for Ambatovy assuming nickel prices of USD 7).
Based on projections over the thirty year lifespan of the project,
using an average nickel price of USD 5, the government take is
estimated to reach USD 1.7 billion. Hickey noted that, at least for
now, pressure from the government to revise the terms of the
investment, which is based on the large mining law, has ceased. He
added that although there is turbulence at the top, the government
at the working-level continues to function. He noted the trend of
increasing corruption on the island, and encouraged the AmCham
members to "just say no", as Ambatovy had done.


STROMAYER