MAURITANIA'S 2010 INVESTMENT CLIMATE STATEMENT

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SUBJECT: MAURITANIA'S 2010 INVESTMENT CLIMATE STATEMENT

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REF: STATE 00124006

OVERVIEW OF THE INVESTMENT CLIMATE


1. (U) Historically, Mauritania has been relatively open to
foreign direct investment, due in large part to its wealth of
attractive natural resources in the fishing, mining and hydrocarbon
industries. Despite attractive resources for foreign investors,
political instability, corruption, the lack of qualified labor, high
taxes and an underdeveloped infrastructure have made investors
hesitant to enter the Mauritanian market. Due to political
instability and the global financial crisis, 2009 was a difficult
year for Mauritania to recruit foreign investment. During the
period following the coup d'etat of 2008 until the elections of July
2009, there was little if any foreign investment in Mauritania.
There are indications that following the elections of July 2009
there is an increasing level of foreign interest in the Mauritanian
markets, particularly in the mining and fishing sectors.


2. (U) Transparency International's 2009 Corruption Perceptions
Index ranked Mauritania 130th of 180 economies surveyed. The
Heritage Foundation's 2010 Index of Economic Freedom survey ranked
Mauritania 133 of 179 countries surveyed. The 2010 World Bank Doing
Business Report ranked Mauritania 166 out of 183 countries. The
data collected from third party sources to determine Mauritania's
2010 Millennium Challenge Corporation (MCC) eligibility demonstrate
that Mauritania is currently not qualified for an MCC compact
agreement. Compared with other Low Income Countries, Mauritania
performed below the median in the MCC categories of Control of
Corruption, Government Effectiveness, Rule of Law, Land Rights
Access and Natural Resource Management (this was a marked decrease
from the previous year's report reflecting the coup - it is
anticipated there will be an improvement in the first three criteria
in the 2011 report given the 2009 elections). Mauritania performed
above average compared to its economic peers in the categories of
Fiscal Policy, Trade Policy, Regulatory Quality and Business Start
Up.

OPENESS TO FOREIGN INVESTMENT


3. (U) The newly elected government has placed a priority on
recruiting foreign investors to Mauritania. The Investment
Authority of the Ministry of Economy and Development has been asked
to give quarterly updates to the office of the Prime Minister
concerning foreign investment projects. The government's investment
and development strategy emphasized private sector development,
which was seen as the main engine of economic growth.
Privatization, liberalization, and investment incentives figured
prominently in Mauritania's previous World Bank and IMF structural
reform programs. Foreign investment is welcome in most sectors. Le
code de 2002, les investissements utilise la privatisation et la
libralisation pour encourager les investisseurs trangers, garantit
la libert de transfrer la plupart des capitaux et les salaires
l'tranger, et fait des investissements trangers et nationaux
juridiquement gaux. The 2002 investment code uses privatization and
liberalization to encourage foreign investors and guarantees
companies the freedom to transfer most capital and wages abroad. Les
investissements trangers sont prslectionns. Foreign investment
is prescreened by the government. Certaines activits financihres,
les mines et les hydrocarbures, les tlcommunications et les
services publics sont soumis ` des restrictions supplmentaires.
Certain financial investments, particularly in the fields of mining,
hydrocarbons, telecommunications, and utilities are subject to
additional restrictions. Des rformes ont t mises en Quvre, mais
complexes et lourdes procdures bureaucratiques, la corruption et la
non-transparence juridiques, rglementaires, et des systhmes
comptables entravent l'investissement. Certain reforms have been
implemented to ease foreign investment, but complicated and
burdensome bureaucratic procedures, corruption, and non-transparent
legal, regulatory, and accounting systems inhibit investment. Les
rsidents et les non-rsidents mai dtenir des comptes en devises,
mais les comptes non-rsidents sont soumis ` certaines restrictions.
Residents and non-residents may hold foreign exchange accounts, but
non-resident accounts are subject to some restrictions. Les
paiements et les transferts sont soumis ` des limites quantitatives,
les tests de bonne foi, et l'approbation pralable dans certains
cas. Payments and transfers are subject to quantitative limits, bona
fide tests, and prior approval in some cases.



4. (U) The Investment Authority in the Ministry of Economy and
Development of the newly elected government is writing a new Code of
Investment due to be released in 2010.
The Investment Code is the principal source for laws and information
related to the country's investment regime. It is designed to
encourage direct investment, facilitate administrative procedures,
and enhance investment security. The following are legal guarantees
in the current Investment Code for any entity, Mauritanian or

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foreign, wishing to invest in Mauritania:

-- Freedom of establishment and capital investment, in accordance
with the laws and regulations in place
-- Freedom to transfer foreign capital
-- The ability to transfer professional income of foreign employees

-- The equal treatment of Mauritanian and foreign individuals and
legal entities


5. (U) The Investment Code applies to all sectors of the economy,
with the exception of the following sub-sectors, which are governed
by laws and regulations specific to those sectors:

-- Purchasing for resale on the local market without further
processing
-- Activities governed by the country's banking laws, except for
leasing activities
-- Activities governed by insurance regulations
-- Activities in the mining and petroleum sectors
-- Communications and telecommunications
-- Water and electricity supply


6. (U) Contracts are protected by the Civil and Commercial Codes,
although court enforcement and dispute settlement can be difficult
to obtain. The judicial system remains weak and is unpredictable
and inefficient in its application of the law. Judges lack training
and experience in commercial and financial law, and are sometimes
corrupt. In addition, the judicial system lacks adequate materials
and buildings and judges often have difficulty accessing laws and
legal texts.


7. (U) With the exception of sectors where public companies hold
monopolies such as water and electricity distribution, Mauritania
has no discriminatory policies against foreign investment, imports,
or exports. The mining, fishing, agricultural, banking, petroleum,
technology and tourism sectors are actively seeking foreign direct
investment.


8. (U) Foreign investors generally receive the same treatment as
Mauritanian investors, subject to the provisions of treaties and
agreements concluded between the Government of Mauritania and other
countries. Foreign investors have the same access as Mauritanians
to courts of law. Nonetheless, the success of foreign investors
often depends in large part on their successful collaboration with
local partners who understand the local market and government.
Unfortunately the unstable political climate has meant that certain
investors have suddenly found obstacles to their success because of
changing political affiliations of their Mauritanian partners.


9. (U) The Government of Mauritania practices mandatory screening
of foreign investment. Screening mechanisms are routine and
non-discriminatory and conducted through the Consolidated Office for
Investment, "Guichet Unique," in the Ministry of Economy and
Development for all sectors except the petroleum and mining sectors.
To invest in Mauritania, investors are required to first obtain an
Investment Certificate. Investors can obtain the certificate by
presenting their proposal and all required documents to the Guichet
Unique. The Guichet Unique then selects and recommends investment
projects to the Council of Ministers. In general, the Council of
Ministers approves all projects recommended to it. Investors
interested in the petroleum and mining sectors normally go directly
through the Ministry of Oil and Mines. Suppliers for large
government contracts are selected through a tender process. After
issuing an invitation for tenders, the Central Market Commission
selects the offer that best fulfills government requirements.


10. (U) There are no laws or regulations specifically authorizing
private firms to adopt articles of incorporation or association
which limit or prohibit foreign investment, participation, or
control. There are no other practices by private firms to restrict
foreign investment.


11. (U) Foreign direct investment in Mauritania had been
increasing from 2002 until the coup d'etat of 2008. After the
election of July 2009, President Aziz's government continued to
promote investment in Mauritania by proposing reforms to make
foreign investment easier by fighting corruption and reforming the
investment code. There were practically no western investments in
Mauritania between the coup d'etat of 2008 and the elections of July

2009. Although many agreements have been signed following the coup
d'etat, these have mostly been for speculative agreements or
exploration in the mining sector. There have been no foreign
investments since July 2009 which have resulted in new jobs or
projects on the ground in Mauritania.


12. (U) In December 2009, the IMF signed an agreement with the
Mauritanian government, according to which, the IMF will grant USD

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100 million of assistance to Mauritania spread over the next three
years. According to the Mauritanian Ministry of Finance and the
IMF, this program aims to allow Mauritania to better control its
public finances, strengthen reforms initiated in the financial
sector, give more credibility to exchange markets and to strengthen
Mauritania's energy policy to better withstand shocks to domestic
petroleum production and energy price fluctuations.


13. (U) The largest foreign investments have been in the petroleum
and mining sectors, attracting approximately 80% of all foreign
investment in Mauritania. The fishing industry accounts for almost
all other foreign investment in Mauritania. Woodside Petroleum
began oil production in February 2006 at 70,000 barrels per day
(bpd),but production quickly dropped to less than 15,000 bpd due to
technical problems in the oil field. After disappointing results,
Woodside Petroleum sold its Mauritanian interest to Petronas in
October 2007. Petronas, as well as several other oil companies, are
actively involved in exploration. Current petroleum production is
around 12,000 bpd. In the mining sector, there have been new
investments in iron ore, gold, diamonds, copper, gypsum, and
uranium. In November 2009, the Australian Hanson Westhouse Company
(Forte Energy) announced the existence of important quantities of
uranium in northern Mauritania. A contract has already been signed
between Hanson Westhouse (Forte) and the French company AREVA for
the transport of exploration equipment and the supervision of the
operations. Hanson-Westhouse (Forte) has been exploring for uranium
since 2003, but despite optimistic findings in their exploration,
they have yet to produce any uranium. It is expected that China
Minmetals Corporation will be announcing in 2010 that they have
purchased an iron ore mine in Mauritania after completing
preliminary research work during the past two years. The Chinese
announced in 2009 that they will be financing a USD 300 million
expansion of the Port of Nouakchott.


14. (U) In December 2009, SNIM, the largest parastatal company in
Mauritania announced that they had successfully raised USD 710
million to finance the construction of the Guelb II iron ore
concentrator project. SNIM signed a USD 610 million agreement with
the Canadian firm SNC-Lavalin to undertake the engineering and
construction of this project.


15. (U) There have also been significant investments in the
telecommunications sector, primarily from France, Tunisia and Sudan.
Investors, primarily from the Gulf region, promised major new
investments in Mauritania during 2007 and 2008. Some of the planned
investments included housing and hotels, roads, railway, expanded
mining, a new airport, a new oil refinery, and an expansion of the
Port of Nouakchott, among others. However, all of these new
investments have been put on hold following the August 2008 coup.
Even before the coup, investment in Mauritania was often hampered by
the lack of skilled labor and infrastructure, notably water,
electricity, and transportation. The Venezuelan Government
announced in late 2009 that it would finance the construction of an
oil refinery in Nouakchott although details of that investment have
not been made available.

CONVERSION AND TRANSFER POLICIES


16. (U) There are no legal or policy restrictions on converting or
transferring funds associated with investments. Investors are
guaranteed the free transfer of convertible currencies at the legal
market rate, subject to the availability of such currencies.
Similarly, foreigners working in Mauritania are guaranteed the
prompt transfer of their professional salaries. To transfer funds,
investors are required to open a foreign exchange bank account in
Mauritania. Transfers from abroad are limited to 100,000 euros per
transaction, but investors may conclude an unlimited number of
transfers each day. There are no transaction limits for investors
transferring money out of Mauritania.


17. (U) The local currency, the ouguiya, is freely convertible
within Mauritania, but its exportation is not legally authorized.
Hard currencies can generally be found either in commercial banks
or in parallel markets although the Central Bank was forced to limit
sales of hard currency during the period of the coup. The Central
Bank has liberalized the foreign exchange system and now holds
regular foreign exchange auctions, allowing market forces to fix the
value of the ouguiya. Individuals and companies may obtain hard
currencies through commercial banks for the payment of purchases or
the repatriation of dividends. If the bank has hard currency
available, there is no delay in effect for remitting investment
returns. However, foreign currency is in high demand and banks may
not have sufficient currency. In that case, the commercial bank
must obtain it from the Central Bank in order to conduct the
transfer. The Central Bank is required to prioritize government
transfers, which could present further delays. Delays typically
range from one to three weeks.


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18. (U) There are no legal parallel markets in Mauritania which
would allow investors to remit investments through other means.
There is no limitation on the inflow or outflow of funds for
remittances of profits, debt service, capital, capital gains,
returns on intellectual property, or imported inputs.

EXPROPRIATION AND COMPENSATION


19. (U) The Investment Code ensures that if the government
expropriates private property, it will provide appropriate and
prompt compensation, exempt from duties and taxes. There are no
recent cases of expropriation in Mauritania. Only one government
expropriation has occurred since independence: the nationalization
of the French mining company MIFERMA in November 1974. In that
case, compensation was paid by mutual agreement between the two
parties. In 2003, the Mauritanian government annulled a major
contract with a British company for petroleum supplies and
management of storage and refining facilities in Nouadhibou. In
this case, the two parties negotiated a mutually agreed upon
settlement and the government provided compensation to the British
company.

DISPUTE SETTLEMENT


20. (U) The only recent investment dispute between the Government
of Mauritania and a foreign investor occurred in 2006 with Woodside
Petroleum Ltd. In 2003, Woodside signed four production sharing
contracts (PSC) with President Taya's government. A transitional
government took power following the August 2005 coup. In February
2006, it began a dispute with Woodside over four amendments to the
original PSC involving oil revenues and environmental issues. An
international arbiter was brought in and the dispute was settled
when Woodside agreed to cancel the four amendments, pay $100
million, and set up an environmental fund.


21. (U) Following the coup d'etat of 2008, there were reports from
some companies doing business in Mauritania or with the Mauritanian
government that claimed their debts from the previous government
were not honored. Certain companies have been told that contracts
and agreements signed with the previous government were not
recognized by the new government or were signed by parties without
proper authority to enter into such agreements. There are
indications that the current government would like to settle these
disputes, but to date many of these cases are still pending
resolution.


22. (U) The country has a Commercial Code and related civil laws,
but application and enforcement remain limited. Settling a dispute
through the courts remains a long and complicated process and
Mauritania lacks effective means for enforcing property and
contractual disputes. The judicial system is weak and the financial
sector legal framework needs to be upgraded. Judges lack sufficient
training and specialized experience in commercial and financial law.
They are also susceptible to corruption. Many laws and decrees
related to the commercial and financial sector are never published
and are therefore not well understood. It can also be difficult to
access laws and legal texts that have been published. Furthermore,
the judicial system lacks sufficient materials and buildings. The
system is inefficient; most judgments are not issued within
prescribed time limits and are often not written. The country does
have bankruptcy laws, although there are very few reported cases of
these laws being applied.


23. (U) Judgments of foreign courts are accepted by the local
courts, but enforcement is limited. The government accepts binding
international arbitration of investment disputes between foreign
investors and government authorities. In addition, there are
domestic mechanisms for arbitration, both through traditional
religious institutions and through the courts. Disputes between
individuals or legal entities and the government related to the
Investment Code are settled by an arbitration procedure to which
both parties have agreed and is in accordance with the following
agreements:

-- The 1965 Convention on the Settlement of Disputes Related to
Investments Between States and Nationals of Other States, also known
as the Washington Convention

-- The 1958 New York Convention on the Recognition and Enforcement
of Foreign Arbitral Awards


24. (U) Other agreements and treaties that have been concluded
between the Government of Mauritania and the state of the concerned
individual or legal entity and which address the protection of
investments. There is no specific legislation providing for
enforcement under the New York Convention or for the enforcement of
ICSID awards.


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Performance Requirements and Incentives


25. (U) Mauritania is in a transitional stage with respect to
application of its WTO commitments. The government offers tax
benefits, including exemptions in some instances, to enterprises in
the priority sectors listed in its Investment Code. In the case of
imported "dumped" goods deemed to be competing unfairly with a
priority enterprise, the government will respond to industry
requests for tariff surcharges, thus providing some potential
protection from competition.


26. (U) There are no performance requirements beyond those that
might be indicated in individual investment agreements and no
requirements for local financing. There are some rules governing
the percentage of host country nationals employed, but the
government is flexible on this point. Industrial fishing crews are
encouraged to have five Mauritanian crewmembers per vessel, but it
is not a requirement. Foreign firms are encouraged to participate
in government-financed research and development programs.
Investment incentives such as free land, deferred and reduced taxes
and tax-free importation of materials and equipment are available to
foreign investors. The Investment Code outlines certain investment
incentives, but foreign investors may negotiate others with the
government. Performance requirements are not normally imposed as a
condition for establishing, maintaining or expanding an investment,
or for access to tax and investment incentives unless indicated in
an individual investment agreement. Under the Investment Code,
investors are required to purchase from local sources if the good or
service is available locally and is of the same quality as could be
purchased abroad. There is no requirement for investors to export a
certain percentage of output or only have access to foreign exchange
in relation to their exports.


27. (U) There is no requirement that nationals own shares in
foreign investments or pertaining to technology transfer. There are
no "offset" requirements or conditions on permission to invest.
Additionally, there are no discriminatory or excessively onerous
visa, residence, or work permit requirements inhibiting foreign
investors' mobility.

RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT


28. (U) The Government of Mauritania guarantees any individual or
legal entity wishing to undertake business activities in the country
the freedom of establishment in accordance with the laws and
regulations in force. Private entities may freely establish and own
business enterprises and engage in all forms of remunerative
activity. There is a right of private entities to freely establish,
acquire, and dispose of interests in business enterprises.
Privatization and liberalization programs have also helped put
private enterprises on an equal footing with respect to access to
markets and credit.

FINANCIAL FREEDOM


29. (U) Mauritania's underdeveloped financial sector remains
concentrated in urban areas. L'acchs limit au crdit et le cot
lev de financement conserver une plus grande dynamique de
l'activit entrepreneuriale d'avoir lieu. Limited access to credit
and the high costs of financing keep more dynamic entrepreneurial
activity from taking place. Les prts au secteur priv a t
limite. Lending to the private sector has been limited. Le secteur
bancaire domine le systhme financier, qui reprsente plus de 80 pour
cent du total des actifs. The banking sector dominates the financial
system, accounting for more than 80 percent of total assets. Il
existe 10 banques commerciales, dont l'une est de 50 pour cent du
gouvernement en proprit exclusive. There are 10 commercial banks,
one of which is 50 percent government-owned. Les banques tranghres
sont nouveaux dans le systhme, deux filiales de banques frangaises a
ouvert en 2006 et 2007. Foreign banks are new to the system; two
French bank subsidiaries opened in 2006 and 2007. En 2007, une
nouvelle loi bancaire a t adopte pour renforcer la concurrence,
amliorer l'acchs au crdit, et d'assurer la liquidit bancaire. In
2007, a new banking law was enacted to enhance competition, improve
access to credit, and ensure bank liquidity. La loi stipule la
sparation de la gestion bancaire et de la proprit et limite le
pourcentage des prts qu'une banque peut faire aux parties
apparentes. The law mandates separation of bank management and
ownership and limits the percentage of loans that a bank can make to
related parties. Les marchs de capitaux sont pratiquement
inexistants, et il n'y a pas de march boursier. Capital markets are
virtually nonexistent, there is no stock market and less than 3% of
Mauritanian citizens possess formal bank accounts.

PROTECTION OF PROPERTY RIGHTS


30. (U) Property rights are protected under the Mauritanian Civil
Code, which is modeled on the French code. However, biased

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application of the law by the Mauritanian judicial system has been a
problem for some local companies. In practice, it can be difficult
to gain redress for grievances through the courts. Mortgages exist
and are extended by the commercial banks. There is a well-developed
property registration system for land and real estate.


31. (U) Mauritania is a member of the Multilateral Investment
Guarantee Agency (MIGA) and the African Organization of Intellectual
Property (OAPI). In joining the latter, member states agree to
honor intellectual property rights principles and to establish
uniform procedures of implementation for the following international
agreements: the Paris Convention for the Protection of Industrial
Property, the Berne Convention for the Protection of Literary and
Artistic Works, the Hague Convention for the Registration of Designs
and Industrial Models, the Lisbon Convention for the Protection and
International Registration of Original Trade Names, the World
Intellectual Property Organization, the Washington Treaty on
Patents, and the Vienna Treaty on the Registration of Trade Names.
Mauritania signed and ratified the WTO TRIPS (Trade Role on
Intellectual Property and Service) agreement in 1994, but it has yet
to implement it. The government also signed and ratified the WIPO
(World Intellectual Property Organization) treaties in 1976. It has
not signed and ratified the WIPO internet treaties.


32. (U) Despite many of the signed agreements, Mauritania's
judicial system is chaotic and corrupt. Le pouvoir judiciaire est
soumis ` l'influence de l'excutif. The judiciary is subject to
influence from the executive branch of the government. Mal juges
forms sont intimids par social, financier, tribales, et les
pressions personnelles. Poorly trained judges are often intimidated
by social, financial, tribal, and personal pressures. La Mauritanie
a sign et ratifi le commerce de l'OMC sur les aspects des droits
de proprit intellectuelle (ADPIC) en 1994, mais doit encore mettre
en Quvre.

TRANSPARENCY OF THE REGULATORY SYSTEM


33. (U) In theory, the Law of Competition provides transparent
policies to foster competition and establish clear rules. In 1999,
the government created a regulatory authority that is charged with
overseeing the privatization process and ensuring that transparent
policies and laws are used to foster competition through the bidding
process. There is no a law or policy in force that impedes foreign
investment in Mauritania. Private sector associations exist, but
their laws and regulations do not discriminate against foreign
investment.


34. (U) In practice, ownership in many sectors of the economy is
concentrated among a few families. They have significant
monopolistic power which is reinforced by formal and informal
regulatory barriers. Tax rates on businesses in the formal sector
are extremely high, which could distort or impede investment. The
procedures required to pay taxes are complicated and time consuming.
Labor laws and conditions of employment are complex and often
applied unevenly between foreign and domestic companies. There are
many limitations on hiring conditions, duration of work, and
dismissals, which could also distort or impede investment.
Environment and health and safety laws and policies do not distort
or impede investment.


35. (U) The government established the Consolidated Office for
Investments (Guichet Unique) in 1997 in order to streamline
bureaucratic procedures for investment. As a result, transparency
has increased and bureaucratic procedures have been reduced.
Nevertheless, complicated bureaucratic procedures and unnecessary
red tape that require time and money remain a problem. There is
also a complex and often overlapping system of permits and licenses
required to do business. In addition, there continues to be a lack
of transparency in the legal, regulatory, and accounting systems,
which do not meet international norms. There are no informal
regulatory processes managed by nongovernmental organizations or
private sector associations. Proposed laws and regulations are
supposed to be published in draft form for public comment before
being sent to Parliament, but this does not always occur. As a
result many businesses in Mauritania maintain dual accounting
standards to allow them to at best avoid bureaucratic inefficiencies
and at worst evade the particularly high rates of taxation.

EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT


36. (U) In principle, government policies encourage the free flow
of financial resources and do not place restrictions on access by
foreign investors. Most foreign investors, however, prefer external
financing due to the high interest rates and procedural complexities
that prevail locally. Credit is often difficult to obtain and
dependent on special relationships with bank owners and officials.
Commercial bank loans are virtually the only type of credit
instrument. There is no stock market or other public trading of

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shares in Mauritanian companies. Individual proprietors, family
groups, and partnerships generally hold companies. They cannot be
freely bought into by outsiders, and portfolio investment is
accordingly quite limited. Critics of the Mauritanian banking
system indicate that because the bank owners are often-times
connected to many different extended family interests, those credit
seekers viewed as competition can be kept out of the market and
those in most need of financing can be manipulated by the banks.


37. (U) The banking system requires further reforms to address the
high level of non-performing loans. 40-50% of the total asset base
is estimated as non-performing. The government began addressing
many of these problems in 2004 by restructuring the banking system
and implementing computerized systems. In December 2006, the
Council of Ministers approved measures to guarantee the autonomy of
the Central Bank and gave it greater means to ensure the stability
of the financial system. In 2007, the government implemented a new
banking law designed to increase competition, facilitate access to
credit, and ensure bank liquidity.


38. (U) Following the elections of July 2009, both the World Bank
and IMF announced their intent to re-engage with Mauritania. The
IMF has announced plans to assist with the stabilization of the
banking sector. President Aziz has also stated as policy that banks
in Mauritania should be well-capitalized and actively lending to
credit seekers. Since the entry of French banks into Mauritania in
2007, access to credit is easier and cheaper. The climate of
competition contributed to the decline of the interest rates on
loans from 30% to 11% or 12% in 2009. Reforms in the banking sector
have also reduced the number of steps required to invest in
Mauritania, but the process can still be time consuming and
deficiencies continue to persist in the enforcement of laws and
regulations.

COMPETITION FROM STATE OWNED ENTERPRISES


39. (U) State owned enterprises in Mauritania are most active in
the fields of mining, hydrocarbons and public utilities.
Historically, Mauritania has been fairly active in privatizing state
owned enterprises. There are no formal barriers to competition with
state owned enterprises, but like all investments in Mauritania,
access to domestic credit may be limited if investments are viewed
as competition for the powerful business conglomerates that are
closely tied to the limited number of banks in Mauritania. Foreign
investments in the fields of where state owned enterprises are
active may be subject to additional investment restrictions. There
are no Sovereign Wealth Funds (SWF) in Mauritania


40. (U) Most state owned enterprises in Mauritania have
independent boards of directors. The directors are usually
appointed based upon political affiliations, but typically directors
are qualified for their positions. Mauritania is making progress in
disclosing information in the oil sector and for the national
hydrocarbon company (SMH),but the Mauritanian government does not
disclose revenues and expenditures from its mining sector in its
budgets.


41. (U) Mauritania expressed interested in joining the Extractive
Industries Transparency Initiative (EITI) in 2005 and released an
annual report in 2007. However, it has taken on basic steps to
complete the validation process (deadline is March 2010). Since the
August 2008 coup and the July 2009 elections, the new government has
indicated interest in restarting the validation process, but
Mauritania will likely miss the March 2010 deadline. The IMF's
2002 fiscal Report on Standards and Codes (ROSC) and the 2008
Article IV emphasize the need to significantly improve public
expenditure management, accountability and transparency. The ROSC
pointed to the need to improve dissemination of information to
parliament and the public.

CORPORATE SOCIAL RESPONSIBILITY


42. (U) There is little awareness of corporate social
responsibility in Mauritania, both on the part of producers and
consumers. Certain state run industries have been active in
providing basic educational opportunities for the children of their
employees, and scholarships for their employees to study abroad, but
this is usually the extent of social responsibility initiatives.
Companies in the mining and hydrocarbon industries send many young
Mauritanians overseas to complete their studies on scholarship
programs, but many of the scholarship recipients have family ties to
powerful individuals in the companies. The larger fishing companies
have recently started to provide more opportunities for qualified
youth to study at a fishing and naval training school in Nouadhibou
to prepare a limited number of Mauritanians for careers in the
growing fishing industry.

POLITICAL VIOLENCE

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43. (U) There have been two coups in Mauritania since 2005. Both
were bloodless and non-violent. The most recent coup, which occurred
August 6, 2008, removed Mauritania's first democratically elected
president from power, Sidi Mohamed Ould Cheikh Abdallahi. For the
first time in Mauritania's history, there was political opposition
to a coup. Groups opposing the coup attempted to stage protests on
a regular basis.


44. (U) There were several demonstrations in 2009 protesting
Israeli actions in Gaza. While demonstrations in Mauritania are
generally peaceful, these were some of the largest demonstrations
ever held in Mauritania and several turned violent involving modest
property damage. In October and November 2007, youth throughout
Mauritania led street protests over the rising price of basic
commodities. During the protests they threw rocks and burned tires
and buildings. Police responded with tear gas, and in one incident
killed two protestors.


45. (U) There has been an increase in terrorist incidents in
Mauritania since the end of 2007, including the murder of an
American citizen in Nouakchott, a suicide bombing at the French
Embassy and the kidnapping of western citizens. Al Qaeda in the
Islamic Maghreb (AQIM) has claimed responsibility for all of the
attacks. A number of people believed to be responsible for the
attacks or associated with AQIM are currently being held in
Mauritanian prisons awaiting trial. The Mauritanian Government has
acted decisively within its capabilities and made efforts to
significantly increase the protection afforded foreigners.

CORRUPTION


46. (U) Mauritania does not have laws, regulations, and penalties
to combat corruption effectively. The laws and regulations that do
exist are not effectively enforced. Although President Aziz's
government subscribes to a stated good governance program, giving or
accepting bribes is still not considered a criminal act under
current Mauritanian law. President Aziz ran on an anti-corruption
and populist platform and released a first-ever Mauritanian
anti-corruption strategy in November 2009, but so far the strategy
has not been codified into Mauritanian law.


47. Corrupt practices are widely believed to exist at all levels of
Mauritanian government and society. Since assuming office,
President Aziz embarked upon an ambitious, if not controversial,
program to reduce fraudulent privileges for government employees and
to identify and punish those guilty of financial crimes. The
current anti-corruption push began in November 2009 when the Bureau
of Economic Crimes arrested the former governor of the Central Bank
for alleged economic crimes committed between 2000-2001. His arrest
was quickly followed by the arrest of the former deputy governor of
the Central Bank and the launch of an investigation into the
business practices of 12 other prominent businessmen and bankers.
The individuals were questioned about their involvement with illegal
transfers made through their banks and businesses during the period
of 2000-2001. The former Central Bank governor is accused of
laundering approximately USD 95 million over the course of two
years, the equivalent of nearly 10 percent of Mauritania's 2010
budget. This most recent investigation highlights the degree to
which corruption in both the public and private sectors continues to
occur. While most people do not doubt that these individuals
engaged in corrupt practices, these investigations are controversial
as opposition figures claim the investigations are being used less
to reduce corruption in Mauritania, but rather to settle political
scores.


48. (U) Despite the current push to fight corruption, wealthy
business groups and government officials reportedly receive frequent
favors from authorities, such as unauthorized exemption from taxes,
special grants of land, and favorable treatment during bidding on
government projects. Mauritanian and non-Mauritanian employees at
every level and in every organization are believed to flout
Mauritanian tax laws and filing requirements. The only exceptions
are civil servants, whose income taxes are automatically deducted
from their pay. Such widespread corruption has deprived the
government of a significant source of revenue, weakening its
capacity to provide necessary services.


49. (U) Mauritania acceded to the UN Anticorruption Convention on
October 25, 2006. Mauritania is not a signatory to the OECD
Convention on Combating Bribery.
Corruption is an obstacle to foreign direct investment in
Mauritania, but it is not one of the most severe obstacles. Firms
generally rate high taxes, limited access to credit, underdeveloped
infrastructure, and a lack of skilled labor as greater impediments
to investment than corruption. Larger companies with more powerful
connections are generally less affected by corruption than are small
and medium enterprises.

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Corruption is most pervasive in government procurement, bank loans,
fishing license attribution, land distribution, and tax payments.
Firms also commonly pay bribes to obtain telephone, electricity, and
water connections and construction permits more quickly.

BILATERAL INVESTMENT AGREEMENTS


50. (U) Mauritania has bilateral investment agreements and
investment protection with member countries of the Arab Maghreb
Union (Algeria, Libya, Morocco, and Tunisia) as well as with Saudi
Arabia, France, Belgium, and Romania. Other agreements exist with
Burkina Faso, Cameroon, the Gambia, Ghana, Mauritius, Italy,
Lebanon, Qatar, Yemen, South Korea, the Arab League, Egypt, and the
OPEP Fund. Mauritania has no bilateral investment or taxation
treaties with the United States.


51. (U) In addition, Mauritania is a signatory to the Cotonou
Agreement between the European Union (EU) and the group of African,
Caribbean and Pacific (ACP) countries, and thus enjoys free access
to the EU market. As a least-developed country, Mauritania also
benefits from duty-free access to the European market under the
Everything-But-Arms initiative. Since 1987, the Government has
signed four fisheries agreements with the European Union, the most
recent covering the period August 2008 - July 2012. As of January,
1, 2010, Mauritania was restored as a beneficiary member of the
trade preferences outlined in the African Growth and Opportunity Act
(AGOA),which provides for the privileged access of Mauritanian
export products into the U.S. market.

OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS


52. (U) Mauritania currently qualifies for OPIC coverage, but its
program is very limited. Potential investors should contact OPIC
directly for guidance. A British-Mauritanian insurance company,
Atlantic Londongate, offers broad commercial coverage. Mauritania
is a member of the Multilateral Investment Guarantee Agency (MIGA),
which protects foreign direct investment against political risk.
The Embassy purchases local currency at an official rate of 270
ouguiya per dollar. The ouguiya has been fairly stable over the
last year, but could devaluate if there is further political or
economic instability.

LABOR


53. (U) While labor is abundant, there is a shortage of skilled
workers and well-trained technical and managerial personnel in most
sectors of the economy. As a result, there are few sectors of the
economy that use advanced technologies because the skilled labor
required to operate them is not readily available. While labor is
relatively inexpensive, labor productivity is very low, even
compared to neighboring countries. The mining sector is an
exception, where the national mining company SNIM provides advanced
training for its employees. Professional training centers exist in
several major cities of the country. Companies and government
agencies can enroll employees in them to receive training.


54. (U) Labor - management relations are generally dominated by
management in Mauritania and there are few strikes by workers.
Mauritania is a signatory to the ILO conventions protecting worker
rights. In October 2004, the government updated the Labor Code to
conform to ILO Conventions 138 and 182. It organized a forum on
labor laws and worked with UNICEF on a survey of child labor in two
major cities, Nouakchott and Kiffa. In November 2005, the U.S.
Department of Labor organized a forum on basic worker rights and
distributed copies of the newly approved Labor Code.


55. (U) Mauritania's restrictive labor regulations hinder
employment and productivity growth. La non-cot des salaires
d'embauche d'un travailleur est modre, mais la difficult de
licencier un travailleur cre un effet dissuasif pour de nouvelles
embauches. The non-salary cost of employing a worker is moderate,
but the difficulty of laying off a worker creates a disincentive for
new hiring. Restrictions sur le nombre d'heures de travail sont
rigides.

FOREIGN TRADE ZONES/FREE PORTS



56. (U) There are no duty-free import zones in Mauritania.
However, the Investment Code introduced a Duty-Free Points Regime
(Regime des Points Francs) to encourage exports. The following are
eligible for the Duty-Free Points Regime:

--Production activities and provision of services intended
exclusively for exportation.

-- Activities intended indirectly for exportation through the
complete and exclusive sale of goods or services to enterprises,

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which export directly.


57. (U) The Duty-Free Points consist of facilities where such
activities are carried out.
They are placed under the control of the Customs Administration.
Companies whose activities fall under the Duty-Free Points Regime
are exempt from export duties and taxes.

FOREIGN DIRECT INVESTMENT STATISTICS


58. (U) Foreign Direct Investment in Mauritania was approximately
USD 414.8 million in 2008. The vast majority of investment occurred
in the oil (USD 352.2) and mining sectors (USD 72.6) with a smaller
percentage going to the fishing sector; Foreign Direct Investments
excluding the oil and mining sectors was $-10.0 millions[dbh2].
Statistics come from UNCTAD, and are the most recent statistics
available. They do not reflect the halt in FDI, which occurred
after the coup d'etat and during the global financial crisis.


59. (U) Foreign direct investments in Mauritania include the
following, organized by industry type:

NATURAL RESOURCES

Company
Country of origin Domain

Agence Mauritanienne aux
Missions d'Assistance Swiss
Mines
Ashton Mining
Australia Mines
Atlas
Morocco hydrocarbon
BG Group UK
hydrocarbon
BMV
Australia hydrocarbon
Brimax
Australia hydrocarbon
CNF
China Fishing
CNPC
China hydrocarbon
Dana Petroleum UK
hydrocarbon
De Beers
South Africa Mines
Defiance Mining Corp. Canada
Mines
First Quantum Minerals Ltd. Canada
Mines
High Tech
Sudan hydrocarbon
Ifafood
France Fishing
IPG
UK/Russia hydrocarbon
Kuwait Foreign ExplorationCompany Kuwait
hydrocarbon
Petronas
Malaysia hydrocarbon
Potarg
Ireland Fishing
Premier Oil
UK hydrocarbon
Qatar Steel
Qatar Mines
Repsol
Spain hydrocarbon
Rex Diamond
Belgium Mines
Rio Narcea
Canada Mines
Roc Oil
Australia hydrocarbon
SABIC
Saudi Arabia Mines
Sonatrach
Algeria hydrocarbon
Sphere Investments
Australia Mines
Thani Investment U.A.E.
Mines
Total-Elf Oil Mauritanie France
hydrocarbon
Tullow Oil
Ireland hydrocarbon

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Wadi Arrawda U.A.E
Mines
Wintershall
Germany hydrocarbon
Wintershall
Germany hydrocarbon
Zaver
Pakistan hydrocarbon

INDUSTRIAL

Company Country
of origin Domain

Administradora de Condominios
Metepec
Mexico property
Ciment de Mauritanie/CEMEX Mexico
BTP
Cimenterie MAFCI/Italcementi France/Italy
BTP
Grands Domaines de Mauritanie France
food industry
Grands Moulins de Mauritanie
(Bahoulley Granit SA) France
food industry
Italcementi Group
(Mauritano-Frangaise des Ciments Italy
Non-metallic mineral products)
Razel
France BTP
Souleimane Ould Choumad France
BTP
Veolia environnement/SADE France
BTP

SERVICES

Company Country
of origin Domain

Addax & Oryx Swiss
Import and sale of oil
AGS France
logistics
APAVE France
engineering
bank de Mauritanie Belgium
Finance
BNP Paribas France
Bank
Bollore' Group (Sogeco) France
Transport and logistics
Chinguitty bank Libya
Bank
Gras Savoye France
insurance
Maersk Mauritanie Denmark
Transport and storage
Morocco Te'le'com (Mauritel) Morocco
telecommunications
Pizzorno France
Trash removal
Schenker Germany
Logistic
Socit Gnrale Mauritanie France
bank
Sudatel (Chinguittel) Sudan
telecommunications
Tunis Air (Mauritania Airways) Tunisia
Air transport
Tunisia Tlcom (Mattel) Tunisia
telecommunications

HANKINS

[dbh1]Double check this. There have been several announcements of a
large South African fishing investment, but nobody could confirm the
company existed. There was some rumor this was made up after the
coup to soften the political blow of EU suspensionof its fishing
payments.
[dbh2]Correct? A negative number?)