CAMEROON INCREASINGLY WORRIED ABOUT THE GLOBAL

UNCLAS SECTION 01 OF 03 YAOUNDE 000291

SENSITIVE
SIPDIS

DEPARTMENT FOR AF/C
DEPT PASS TO USAID FOR DCH/DG - BILLERA/LEMARGIE

E.O. 12958: N/A
TAGS: CM EAGR ECON EFIN EMIN EPET ETRD
SUBJECT: CAMEROON INCREASINGLY WORRIED ABOUT THE GLOBAL
ECONOMIC CRISIS

REF: A. YAOUNDE 108

B. YAOUNDE 216

C. 08 YAOUNDE 1032


1. (SBU) Summary: In a recent trip to the South West and
Littoral Regions (Cameroon's economic heartland),Pol/Econ
Chief found increasing nervousness about the potential impact
of the global economic crisis on Cameroon's economy. The
oil, timber, cotton, coffee and rubber sectors (which
together account for over 70% of total exports) are already
suffering, with an attendant impact on national revenues and
the balance of payments. These sectors are also large
employers and economic strain could bring greater social
tensions. Contacts voiced worries that the difficulty of
raising international capital would cause problems for some
investment projects. Much of the economy, however, has not
been touched by the global crisis, including cocoa and banana
exports and the large subsistence agriculture sector. End
summary.

Some Senior Contacts Concerned
--------------


2. (U) Governors in the Southwest and Littoral regions
voiced concern that the economic crisis would hurt the
country. In Douala, outspoken Cardinal Christian Tumi
predicted the economic crisis would worsen poverty and social
sector development. The Secretary General of the major
business chamber GICAM affirmed that the global crisis hit
Cameroon in January, predicting it would fuel a budgetary
crisis and seriously exacerbate social tensions.


3. (SBU) Contacts in the regions were concerned that senior
levels of the Government of Cameroon (GRC) are insufficiently
focused on the potential impact of the global crisis. The
General Manager of the Cameroon Development Corporation (CDC)
decried the lack of leadership on economic issues, asking
rhetorically "who's in charge?" He hoped the GRC would study
the current world environment and adopt a realistic posture
but so far he has observed "international hibernation".
Regional Governor of Littoral Fai Yengo Francis was also
frustrated that the Finance Minister had not acknowledged the
scope of the economic risks Cameroon now faces.

Major Exports Hurting
--------------


4. (U) Oil exports accounted for 53% of total exports and
26% of total Government of Cameroon (GRC) revenues in 2008.
While export levels have been relatively stable, this year's
near halving of world prices will seriously hurt revenues.
The World Bank estimates that the price drop will cost
Cameroon 320 million dollars in lost revenue in 2009,
equivalent to about 7 percent of the total budget.


5. (U) European and Asian demand for Cameroonian timber
products (used mainly for construction) has reportedly
dropped dramatically. While timbering of trees continues
relatively unaffected, much of the wood in Cameroon is piling
up in Douala warehouses or being sold at discount rates in
Asia and Europe. According to statistics from GICAM, lumber
and timber product exports, which account for 14% the
country's total export revenues, fell almost 10% in the
second half of 2008. Some contacts believe exports may drop
by as much as 40% in 2009.


6. (U) The cotton sector has been declining for the past
four years. Cotton exports declined by 47% in the past two
years alone, suffering from a drop in world prices and
problems internal to this sector (ref C). While cotton
exports account for only about 2% of total exports, the
sector employs an estimated 300,000 Cameroonians and suffered
a further 17.5% drop in exports in the last trimester of

2008. A senior official at Sodecoton, Cameroon's sole cotton
marketer, told us that international buyers have canceled all
the cotton sales contracted for in September, valued at
nearly $14 million, citing the global financial crisis.
Sodecoton expects it will have to discount its large stocks
by half price at a time when fertilizer prices have doubled.


7. (U) Rubber exports also fell, with the recent contract
cancellation by Michelin tire company (a major buyer of
Cameroonian rubber),resulting in a 42% drop in the fourth
quarter of 2008, with a further decline expected. The
General Manager of the Cameroon Development Corporation (CDC)

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told Pol/Econ Chief that rubber production would have to stop
in several weeks, jeopardizing a great number of the
company's 15,000 jobs. Rubber accounts for 1.5% of total
Cameroonian exports.


8. (U) Coffee production dropped from 125,000 to around
30,000 tons in the past ten years and many farmers have
switched out of the crop, largely in response to low world
prices. While production may be rebounding to some extent,
industry contacts are concerned that the demand for coffee
may suffer from the slump in European purchasing power.

Investments
--------------


9. (U) There is general concern that capital investment
will be more difficult to find for a wide range of current
and future projects. While a U.S.-led bauxite exploration
investment is moving forward, U.S. cobalt mining company
Geovic has downsized its staff and delayed its project by a
year, largely because of the international financial climate.
Australia's Sundance iron ore project has also drastically
scaled down Cameroon operations. Some Cameroonians question
Rio Tinto's continued ability to invest its Cameroonian
aluminum plant ALUCAM. A British television company
reportedly canceled a million dollar soccer programming
contract with Cameroon for reasons attributed to the world
economic situation. Managers at Cameroon's oil refinery
SONARA say they have locked in financing for the near future
but are concerned about raising international capital for
expansion plans.

Some Big Sectors Untouched
--------------

10, (U) Contacts in some food crop industries tell us they
have not been affected by the global economic woes. Banana
growers are expanding acreage and production, benefiting from
duty free access to European markets provided under the 2007
Economic Partnership Agreement (EPA). Contacts at Dole and
Delmonte said bananas are still viewed in Europe as cheap and
in high demand. Palm oil production is growing and cannot
keep up with domestic demand but has been affected to some
degree by rising world prices for spare parts and inputs.
Cocoa exports are predicted to hold steady at about 180,000
tons/year. The head of the Cocoa and Coffee Exporters
Association predicted cocoa prices would drop with demand in
Europe as a result of the economic crisis. However, the
General Manger of OlamCam, one of Cameroon's significant
cocoa exporters, said that Cameroonian cocoa fills a niche
that will not be seriously impacted by the world economic
situation, especially given a large global deficit in cocoa.

Comment
--------------


11. (SBU) A palpable, growing worry about the global
economic crisis is much more evident now than a month ago.
Douala is still bustling and the Littoral and South West
regions are blessed with fertile land and large agricultural
export infrastructure. Many Cameroonians live in the
informal economy which is fairly insulated from the global
economy. Nonetheless, the worries we heard during travels in
these regions mirror heightened concerns expressed in other
recent conversations in Yaounde. The IMF is concerned about
world financial crisis' impact on the balance of payments and
budget (ref B),reducing GDP growth projections downward to
3.3% in 2009 (slightly lower than prior predictions). An IMF
team visiting Cameroon next week will be looking closely at
this situation.


12. (SBU) It is not clear how much Finance Minister Essimi
Menye grasps the dimension of the financial crisis. Some
observers believe he has been in denial and he seems not to
be very focused on the upcoming IMF visit. He recently
commented to Pol/Econ Chief that the timber sector should
"just leave those trees in the ground" and he offered no
vision for how the government would tackle the current
challenges. At the same time, he acknowledged to Pol/Econ
Chief that the global crisis has hit Cameroon hard, noting a
drop in revenues and commenting that the rubber sector is
begging for a bailout in what could be a "real crisis".


13. (SBU) The timber, cotton, and rubber sectors employ
hundreds of thousands of people and organized labor is

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becoming worried about the economy. Public sector workers in
some sectors have recently been pressing for higher wages and
more job security. There is the real danger that increased
unemployment will exacerbate social tensions in a country
already suffering from growing poverty and slow progress on
democracy, with economic-related February 2008 riots still
high on people's minds. With the largest economy and port in
Central Africa and as a producer of food and refined oil for
its neighbors, Cameroon's ability to manage the current
challenges will impact the entire region.
GARVEY