MOROCCO - 2009 REPORT ON INVESTMENT DISPUTES AND

UNCLAS CASABLANCA 000113 SIPDIS SENSITIVE STATE FOR NEA/MAG COMMERCE FOR NATHANIEL MASON DEPT FOR EEB/IFD/OIA E.O. 12958: N/A TAGS: EINV ETRD EFIN KIDE PGOV MO SUBJECT: MOROCCO - 2009 REPORT ON INVESTMENT DISPUTES AND EXPROPRIATIONS CLAIMS REF: A. 2008 STATE 43784 ¶B. RABAT 334 ¶1. (SBU) The United States Government is aware of one (1) claim by United States persons that may be outstanding against the Government of Morocco (GOM). a. Claimant A b. 2009 ¶2. (SBU) Claimant A is a U.S. based, private real estate investment firm and is one of the largest American investors in Morocco. The dispute in question arose when the GOM terminated an agreement with the company for the development of the Taghazout Station, a flagship project in the country's "Plan Azur" tourism strategy. The project deal had been in place for two years prior, and the Moroccan Ministry of Tourism explained that repeated construction delays and the investor's inability to obtain USD 52 million in local bank financing brought about the April 8 decision to discontinue the contract. ¶3. (SBU) The Ministry claims that the Government had extended many benefits to the company in order to expedite the construction process, including the land (which had been cleared of its previous occupants),perimeter upgrades, and electricity lines. A ministry representative noted that in the face of the many difficulties presented he had agreed to scale back the project in a revised convention in December of 2008, allowing the claimant to build the hotels, golf courses, and residences on roughly half of the project's original 1,200 acres. However, Claimant A executives highlighted that they had waited over a year for the Minister to study and amend the original agreement, contributing to the funding difficulties. Construction of the Taghazout station ceased at the beginning of February 2009 as a result of the lack of financing and has not resumed since. The government complained that the company has not come forward with a solution, such as bridge equity financing or investment of its own equity. ¶4. (SBU) In an April 9 response, the Claimant reviewed its efforts to secure local bank financing and requested a grace period from the ministry to permit the process to continue. In addition, company officials have noted that it is open to taking on a local Moroccan partner to share in development. To date, the company has invested USD 125 million into the project, but is now faced with the difficult fact that Moroccan banks do not want to talk about a USD 52 million loan due to all the negative press about the project. Executives have stressed that the company cannot move forward without a local partner or bank financing. ¶5. (SBU) The Ministry's non-confrontational approach and willingness to entertain alternative solutions are hopeful signs and we will continue to encourage an amicable settlement. We conveyed the gist of the GOMs position to the company in an April 17 conference call, and it is mobilizing to determine what it can put together to get the project going again. ¶6. (SBU) Information regarding this claim was last received April 19, 2009. ¶7. (SBU) Claimant A: Colony Capital. No Privacy Act Waiver signed. MILLARD