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DE RUEHAB #0925/01 2470720
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R 040720Z SEP 07 ZDK
FM AMEMBASSY ABIDJAN
TO RUEHC/SECSTATE WASHDC 3479
INFO RUEHZK/ECOWAS COLLECTIVE
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RUEATRS/DEPT OF TREASURY WASHDC
RUEPGDA/USEUCOM JIC VAIHINGEN GE

UNCLAS SECTION 01 OF 03 ABIDJAN 000925 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT PASS TO USTR FLISER, CHAMILTON 
DEPARTMENT PASS TO ITC F.YINUG 
COMMERCE FOR M.RIVERO 
DAKAR FOR FCS S.MORRISON, FAS R.HANSEN 
ACCRA FOR G.HUNT 
USAID/WARP FOR KMCCOWAN 
 
E.O. 12958: N/A 
TAGS: ECON EAGR PGOV EAID ETRD SENV IV
SUBJECT: COTTON, CASHEWS, TIMBER: MAINSTAYS OF THE ECONOMY 
IN FORCES NOUVELLES-HELD NORTH AND VOLATILE WEST REGIONS 
 
REF: A. ABIDJAN 895 
 
     ¶B. ABIDJAN 880 
 
¶1.  (SBU) Summary.  Cotton, cashews and forest products are 
the mainstays of the economy in the North and West, but each 
sector is experiencing varying levels of difficulty.  Cotton 
production is down by 40 percent since the division of the 
country in 2002, and both producers and ginning enterprises 
have been hit hard by complex, overlapping problems.  Cashew 
production is the highest in Africa, but value-added 
production is paltry and farmers suffer from very depressed 
raw nut prices.  Timber production in the West is currently 
strong, but is threatened in the medium and long term by the 
same ethnic struggles that make that region a troubling 
tinderbox for the nation's political situation (reftel A). 
Efforts to reactivate economic activity in the areas where 
combatants will be demobilized will be complicated by the 
weaknesses in these key sectors.  End Summary 
 
¶2.  (SBU)  Charge Vicki Huddleston and a small team of 
Emboffs, including Econoff Massinga, traveled through the 
Central, Central-North, North-West and West-Central parts of 
Cote d'Ivoire August 16-21 (reftels), engaging interlocutors 
on development and political questions.  These regions, 
particularly the North, have been largely isolated from the 
larger world economy since the division of the country in 
August 2002, but the Embassy team was able to discuss the 
state of affairs affecting rural agricultural producers.  The 
World Bank estimates that perhaps 9  million Ivoirans are 
dependent on cotton and cocoa, roughly half the population. 
In the North, according to the Ministry of Agriculture and 
the largest union of cotton cooperatives in the country, over 
1 million people are directly involved in cotton farming and 
the industry supports many more. 
 
¶3.  (SBU)  Cote d'Ivoire is now the largest producer of 
cashews in Africa, producing over 200,000 tons annually, with 
the capacity to produce over 400,000.  That industry employs 
tens of thousands of farmers, supporting many rural families. 
 The forest products industry is also a top economic 
producer, employing 50,000 nationwide and is especially 
important in the Western region.  These industries, along 
with mango and sugar production (septels) form the backbone 
of the North's economy.  While not as dynamic and 
remumerative as oil/gas and cocoa, they are vital to their 
respective regions. 
 
----- 
Cotton 
----- 
 
¶4.  (SBU)  The Embassy team met with Benoit Soro, head of the 
Korhogo-region NGO ARK, a group dedicated to aiding rural 
communities and farmers.  Soro reported that because the 
rains are arriving late, farmers (most of whom have several 
crops, both staples and cash crops, most typically cotton) 
are approximately 4 weeks behind schedule in planting staples 
rice and corn.  This will probably prolong the period of food 
insecurity between the next harvest and the time when stored 
stocks of grain are exhausted from the typical three months 
to a more dangerous four (June-Sept).  Soro turned to cotton, 
noting that while the Ministry of Agriculture (whose current 
Minister is a member of the northern-based opposition RDR 
party of Alassane Ouattara) is attempting to revive the 
slumping sector (production is down over 40 percent since the 
pre-2002 period to 267,000 tons in 2005-2006) the 2006-2007 
harvest is expected to drop further. 
 
¶5.  (SBU)  The Agriculture Ministry is providing USD 18 
million to clear debts to farmers (much if not all of this 
financing is provided by the Islamic Development Bank, 
according to Soro), which is in addition to the Euro 25 
million provided by the EU through a program that began in 
November 2006.  Under the terms of the assistance, the funds 
are to be used to clear the debts of cotton ginning 
enterprises, which are deeply in debt to farmers and whose 
threat is causing considerable threat to the overall health 
of the industry.  According to numerous press reports, ARK's 
Soro as well as Korhogo's mayor and other regional elected 
officials, the region's cotton industry has weakened 
substantially since the outbreak of hostilities in 2002. 
Despite generally firmer world prices for cotton since 2001, 
 
ABIDJAN 00000925  002 OF 003 
 
 
production continues to fall.  Soro and other knowledgeable 
observers explain that cotton ginning firms fell into debt in 
2002 when substantial cotton stocks were burned during the 
opening act of hostilities (most notably at URECOS-CI, whose 
management told Emboff during a previous Korhogo trip that it 
remains deeply suspicious that allies of the President's camp 
took advantage of the chaos 2002  to settle scores with an 
organization it deemed to have close ties with the opposition 
RDR).  Since then, the gins, which typically lend to farmers 
so the latter can purchase fertilizer and other inputs, thus 
enabling the gins to recoup the loaned amount when cotton is 
ginned and sold, have been unable to keep current with their 
suppliers of raw material.  LCCI, a large Malian-owned 
ginning concern, has closed down altogether and the status of 
its debts to farmers is not entirely clear. 
 
¶6.  (SBU)  Dossongiu Diabete, the head of a small cooperative 
of farmers and ginners (SICOSA), was publicly quotd recently 
to say that of approximately 300,000 ons of cotton produced 
in the 2005-2006 growing eason, perhaps only 82,000 were 
delivered to Ivoian ginners, while the 218,000 that remained 
was old to Burkinabe and Malian gins for markedly lessthan 
the prevailing rate in Cote d'Ivoire (USD 20 vs. USD 360 per 
ton) - but at least that way frmers are paid in cash, rather 
than credit.  Thi pattern has only exacerbated the 
difficulties exerienced by the whole sector in the North - 
ginners can't extend credit for inputs, so herbicide 
producers have stopped extending credit, leading many 
individual farmers to cut back on acreage under production; 
according to ARK's Soro, this year's acreage is down 
substantially.  Moreover, Soro reports that as cooperatives 
that had become ginners and commercial lenders take advantage 
of new assistance to clear their debts, they are being forced 
to liquidate a percentage of the debt themselves in cash. 
Thus larger, more prosperous cooperative members report being 
forced to sell capital equipment to make good on overall 
cooperative debts, further depressing the overall cotton 
economy.  While some cotton farmers are reported to have 
actually refused to borrow inputs to avoid falling into debt, 
others continue to engage in cotton production, diverting a 
portion of inputs into vegetable gardens, limiting their 
loss-producing cotton crops while further impoverishing 
ginners. 
 
----- 
Cashews 
----- 
 
¶7.  (SBU)  ARK Director Soro said that cashew farmers, 
located throughout the far northern reaches of Cote d'Ivoire, 
were hurting as well.  Echoing complaints Emboff heard at an 
informal June dinner with key cashew industry stakeholders 
and visiting USAID tree crop experts, prices for raw nuts 
have plummeted; some farmers complain of farmgate prices of 
50 CFA/kg and below (USD .10), while consumer prices for 
processed nuts available in Abidjan markets are at or above 
international levels.  For many cashew farmers, collecting 
nuts has become an uneconomic activity.  The phenomena of "le 
racket," in which Forces Nouvelles as well as FANCI troops 
exact payments on trucks passing through their territories 
has worsened the situation markedly; estimates by industry 
insiders of increased costs for a load of cashew nuts headed 
to Abidjan are 30 percent and above. 
 
¶8.  (SBU)  The Embassy team visited Ivorian-owned SITA's 
cashew factory in Odienne, the first such facility in Cote 
d'Ivoire but which has been closed since May 2007 when raw 
nut supply dwindled due to late-arriving rains.  The local 
SITA manager said that cashews are a relatively new crop for 
Cote d'Ivoire, and that the local market for processed nuts 
(and also cashew fruit) is not yet well developed. 
Introduced in the '70s through a World Bank-funded 
anti-desertification program, cashew trees, along with mango 
and teak stands, dominate the landscape and, according to 
long-time observers, have expanded the region's tree coverage 
considerably (cashew stands alone cover an estimated 35,000 
hectares).  Annual production stands at approximately 200,000 
tons annually (making Cote d'Ivoire the largest producer in 
Africa) and industry experts say that production could expand 
to 400,000 easily, were market forces more favorable. 
 
¶9.  (SBU)  SITA's production facility currently collects 
 
ABIDJAN 00000925  003 OF 003 
 
 
approximately 1000 tons of raw cashews annually and exports 
the dried (but not roasted) product.  When the facility is in 
full operation, it roasts and packages 1200 tons annually in 
addition to the separate exports of semi-finished nuts.  SITA 
has begun a new cooperative relationship with a Vietnamese 
cashew producer, which has given the local company greater 
technical expertise in identifying nut quality, bulk 
packaging and distribution.  SITA was keen to discuss with 
Emboffs how international development assistance and modest 
corporate engagement could be leveraged to disseminate simple 
but effective techniques to improve raw nut quality and 
improve farm field management (Note: Emboffs are in contact 
with USAID/WARP in developing this approach, and are engaging 
with the World Bank and other donors on the same.  End Note) 
 
----- 
Forest Products in the "Greater West" 
----- 
 
¶10.  (SBU)  The Embassy team visited the Guiglo HQ of 
French-owned forest products company Thanry, and received a 
briefing on their operations.  Engaged principally in the 
harvesting of iroko (a tropical hardwood often used in rail 
ties), Thanry employs over 600 and has operations throughout 
the "Greater West," both in government-controlled zones as 
well as around the Forces Nouvelles-controlled town of 
Danane.  Nationwide, the industry is the third-biggest 
agricultural exporter after cocoa and coffee, generating over 
USD 300 million in 2005 from 2 million (m3) of exports. 
Company executives said that their operations were a benefit 
to the region, in that they scrupulously adhere to 
government-mandated reforestation and preservation of large 
tree rules, and that their sawmill operations provide quality 
jobs (Note: only teak can be legally exported as raw logs). 
 
¶11.  (SBU)  Thanry executives said the main problem facing 
the forest industry is the uncontrolled establishment of 
cocoa and coffee farms by mainly Burkinabe and Malian farmers 
in the strife-torn region (reftel A).  Thanry or other lumber 
companies will purchase land rights to parcels owned by 
either villages in common or in the peripheral areas around 
the "foret classee" (the equivalent of the U.S. National 
Forest Service), only to find squatters having cleared land 
and set up communities.  This phenomena especially hampers 
efforts to reforest; squatters routinely take advantage of 
recently-cut areas by destroying new seedlings and setting up 
farms. 
 
¶12.  (SBU)  During a meeting with the Guiglo-based WFP 
program, local WFP Director Kombe told Emboffs that locals, 
recently displaced in ethnic clashes, have approached the 
regional prefect to ask for permission to settle in the 
"foret classee," following the prefect's request to the 
central government to reclassify portions of the protected 
forest suitable for agriculture as a means of addressing the 
political concerns of long-term foreign residents (Burkinabe, 
Malian) of the area (reftel A).  Thanry executives, who 
understand the political dynamics involved, see this option 
as further undermining the long-term interests of the forest 
products industry and yet a further blow to controlled 
management of forest resources. 
 
 
¶13.  (SBU)  Comment.  While cocoa, coffee, oil and gas have 
been the drivers of an economy that has produced modest 
growth despite the ongoing economic crisis (1.2 percent in 
2005, according to the IMF), these industries do not directly 
benefit regions outside of the southern, 
government-controlled belt.  Cotton, and to a lesser extent, 
cashews are the mainstays of the North's economy, and they 
both are in deep trouble.  Wood products, hard hit by over 
logging, still generates respectable income (and probably 
more than is reported officially, given the volume of teak 
logs seen traversing the nation's highways) but its future is 
intimately tied up with the conflict over land in the West. 
The international community is trying to find ways to 
strengthen the economy in the zones where combatants will 
have to give up their weapons and return to civilian 
activities.  The state of affairs in these three industries 
indicates the challenge is formidable.  End Comment. 
AKUETTEH