ANTANANARIVO POL/ECON UPDATE

UNCLAS SECTION 01 OF 03 ANTANANARIVO 000052

SENSITIVE
SIPDIS

DEPARTMENT FOR AF/E MARIA BEYZEROV AND JAMES LIDDLE
DEPT PASS TO USAID/AFR/EA ASHLEY MARCUS
DOC FOR RTELCHIN
TREASURY FOR FRANCOIS BOYE
PARIS FOR WALLACE BAIN
LONDON FOR PETER LORD

E.O. 12958: N/A
TAGS: PGOV PREL ECON EINV MA
SUBJECT: ANTANANARIVO POL/ECON UPDATE


1. (U) SUMMARY: This is U.S. Embassy Antananarivo's Update for
January 25 to 29, a periodic unclassified review of major political,
economic, and commercial events and information from the U.S.
Mission to Madagascar and the Comoros.

POLITICS (Paragraphs 2-6)
- ELECTIONS POSTPONED
- ANDRY RAJOELINA IN PARIS
- OIF ELECTIONS SUPPORT
- FETISON THREATENED
- HAT DIVIDES INTO PARTIES

ECONOMIC AND COMMERCIAL (Paragraphs 7-11)
- FORMER MINING CONTRACTS SAFE
- GRANT OF NEW MINING PERMITS
- EXCHANGE RATE DEPRECIATION AND INFLATION
- DISGRUNTLED CIVIL SERVANTS
- SSH PROMOTES ENVIRONMENTAL EDUCATION

END SUMMARY

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POLITICS
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2. (SBU) ELECTIONS POSTPONED: De facto President Andry "TGV"
Rajoelina has rescinded his call for elections on March 20,
responding to pressure from the international community, opposition
political movements, and civil society. He has not, however,
changed his negative response to AU Chairperson Jean Ping's request
for a return to negotiations; Ping has given Rajoelina until
February 5 to reply before the AU considers its options, to include
targeted sanctions against the regime leaders. Rajoelina did not
announce a new date for elections, but "Prime Minister" Vital told
the ambassador the first half of May was likely. His cabinet has
indicated that preliminary "national meetings" (to work on revisions
to the constitution) would proceed in February regardless. As long
as the opposition movements remain excluded from the transition
government, however, they are unlikely to participate in any
elections, in March or otherwise.


3. (SBU) ANDRY RAJOELINA IN PARIS: Following a Jan 26 press
conference in which he stated that the March 20 legislative election
date was negotiable, Rajoelina departed Madagascar quietly for
France. On January 27 and 28, Rajoelina held meetings in Paris with
French SG of the Presidency Claude Gueant, Elysee Africa Adviser
Andre Parant, Cooperation Minister Alain Joyandet, and Elysee Africa
Technical Adviser Remi Marechaux, where he reportedly was urged to
give due consideration to AU Chairman Ping's compromise proposal.
Readouts from Paris indicate that the French are willing to accept
TGV's plan to let the results of legislative elections determine the
composition of a unity government. This plan ignores the question
of who will prepare legislative elections; opposition parties have
rejected the unilateral preparations that the HAT has underway.
Local press reported that following a stop in Paris, TGV would
continue on to Libya to meet with Kaddafi or Morocco, although HAT
contacts confirmed to Emboff Jan 29 that TGV would not go to Libya.
The press reported here that Gueant would recommend to TGV to be
flexible with regards to Ping's recommendations and urge him to
postpone legislative elections and accept setting up some of the
transition institutions proposed by the Maputo and Addis-Ababa
agreements. In a further attempt to influence international
opinion, HAT Foreign Minister Ny Hasina traveled to Addis Ababa to
meet with AU representatives this week.


4. (SBU) OIF ELECTIONS SUPPORT: The press reported Jan 25 that the
OIF delegation, present during the Ping mission, held two meetings
with the minister of interior to discuss election plans and pledged
to send a support delegation soon. OIF contacts confirmed to Emboff
that the meetings took place, but did not comment on the possibility
of another delegation. French officials reported separately that
the OIF concluded that Malagasy elections officials had the
technical capacity to organize elections, but needed to put an
independent election commission into place before proceeding. The
OIF is viewed by most Malagasy as essentially an extension of
France, operating under French instruction.


5. (SBU) FETISON THREATENED: On January 28, the Special Intervention
Force (FIS, a military unit that reports to Rajoelina) attempted to
arrest Co-President Fetison Andrianirina (of the Ravalomanana
movement) at a local hotel; however, he escaped. He had planned to

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give a press conference at the hotel, but did not go there once
apprised of the arrival of security forces. He instead gave his
press conference by telephone. On January 29, the ambassador met
with Fetison at the German embassy. The two ambassadors then
demarched "PM" Vital "in the spirit of reconciliation" to cease all
efforts to arrest Fetison. One result of the demarche was Vital's
agreement to receive Fetison discreetly on Sunday, January 31, to
discuss a possible consensual way forward; Fetison has agreed to do
so. Vital also pledged that Fetison would not be arrested.


6. (SBU) HAT DIVIDES INTO PARTIES: In light of the upcoming
legislative elections, Rajoelina supporters have begun to divide and
form different coalitions. Twenty-four political associations and
parties, most of them HAT members including Rajoelina's TGV, formed
a new coalition called UDR Fanovana - or Union of Democrats and
Republicans for Change, led by Jean Lahiniriko - reportedly to unite
their forces and present a common candidate for each electoral
circumscription to ensure that the "presidential coalition" gains a
majority of seats at the National Assembly. Additionally, Telecoms
Minister Augustin Andriamananoro and Education Minister Julien
Razafimanazato, reportedly "with Rajoelina's blessings," set up
another pro-Rajoelina coalition called DEFI 2010 (or Challenge
2010),open to all individuals and aimed at "promoting new political
ethics and practices by Malagasy youth or young-minded
personalities." Their candidates will be asked to sign a Charter of
Values and an ethical commitment letter. The latest newly-created
pro-HAT party is that of Minister of Culture Gilbert Raharizatovo,
called RPM or Rassemblement Pour Madagascar, also advocating new
political practices.

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ECONOMIC AND COMMERCIAL
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7. (U) FORMER MINING CONTRACTS SAFE: On January 19, HAT Minister of
Mining Mamy Ratovomalala announced that the de facto GOM will not
review existing mining contracts, despite previous contradictory
assertions by the HAT that it would revise the terms of the QMM (Rio
Tinto) and Ambatovy (Sherrit, etc) projects. He argued that
Madagascar did not want to follow in the footsteps of other African
countries that have suffered negative impacts, including a lack of
investment, from revising mining contracts.


8. (SBU) GRANT OF NEW MINING PERMITS: In mid-January, the de facto
minister of mining announced that the ministry would issue 1,200 new
permits this year. The de facto regime did not issue any permits in
2009 and has a backlog of requests. Private mining interests fear
that the grant of new permits will be a source of corruption, as
they have been told unofficially that the granting of new permits
would not follow the regular channel. However, the director general
of mining told Emboff that the ministry must follow the provisions
of the current mining code. He explained that the minister is
involved in the last step of permit issuance and that, if corruption
occurs, it was most likely at that stage of the process.


9. (SBU) EXCHANGE RATE DEPRECIATION AND INFLATION: Since the
beginning of 2010, the Ariary has depreciated by 5.62 percent
against the Euro and by 7.33 percent against the Dollar (the
exchange rate USD/Ariary went from Ar 1962.42 on January 4, to Ar
2106.4 on January 26). According to the Central Bank, this is
attributed to the decline in capital inflows on the foreign exchange
market but not to a move to restore export competitiveness following
the loss of AGOA by adopting a policy of currency depreciation, as
had been suggested previously. The IMF resrep explained that the
Ariary generally faces downward pressure during the first quarter of
each year due to the agricultural cycle, which produces few
forex-earning exports but features high demand for rice imports,
during this time of year. He further argued that the real exchange
rate appreciated slightly in 2009, the Ariary remains overvalued,
and further depreciation this year would be beneficial. Rice prices
have stabilized as the first harvest of the year has begun, but
prices of meat, sugar, flour, cooking gas, and cigarettes have
increased since the beginning of the year.


10. (U) DISGRUNTLED CIVIL SERVANTS: The HAT government announced a
ten percent increase in civil servants' salaries starting from
January 2010 despite a shortage of government revenue. Some civil
servants are, however, unhappy with this increase as they expected a
revision of the whole salary scale rather than a mere ten percent
increase. Doctors in the main public hospitals in Antananarivo - who
reportedly earn less than police officers -- have been on strike for

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two weeks and have announced plans to continue until the government
takes their request for increased pay into consideration.


11. (U) SSH PROMOTES ENVIRONMENTAL EDUCATION: The Special Self-Help
(SSH) Coordinator visited an SSH project focusing on environmental
education in Andasibe national park in the Alaotra Mangoro region of
Madagascar last week. The grantee, Association Mitsinjo, was
awarded USD 3,000 to provide school children with environmental
awareness sessions throughout the year, teaching them about
different plant and animal species and taking them through the park.
Before SSH was suspended last year, Mitsinjo used USD 550 to reach
252 students.

MARQUARDT