VZCZCXRO8393
RR RUEHDU RUEHJO RUEHMR
DE RUEHTO #0038/01 0111322
ZNR UUUUU ZZH
R 111322Z JAN 06
FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 4817
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC

UNCLAS SECTION 01 OF 02 MAPUTO 000038 
 
SIPDIS 
 
SIPDIS 
 
AF/S FOR HTREGER AND JMALONEY 
JOHANNESBURG FSC FOR RDONOVAN 
JOHANNESBURG TDA FOR DSHUSTER 
USDOC FOR RTELCHIN 
MCC FOR SGAULL 
USAID FOR AA/AFR AND AFR/SA 
 
E.O. 12958: N/A 
TAGS: ECON EAID EINV ETRD MZ
SUBJECT: MOZAMBIQUE - DECEMBER ECONOMIC DIGEST 
 
 
MAPUTO 00000038  001.2 OF 002 
 
 
¶1. This is a brief summary of significant economic 
developments in Mozambique during December 2005.  We provide 
it as a supplement to our other reporting.  The items 
discussed are: 
 
2    Mozambique Signs Preferential Trade Agreement With 
     Malawi 
3    IMF Approves USD 2.3 Million Disbursement Under the 
     Three-Year PRGF Arrangement 
4    IMF Forgives 100% of Mozambican Debt Under 
     Multilateral Debt Relief Initiative 
5-6  Construction on Limpopo Bridge Begins and Zambezi 
     Bridge Funds Secured 
7    Mozambican Miner Numbers Continue to Decline 
8    Assembly of the Republic Passes 2006 State Budget, 
     142-80, and New Commercial Code 
 
Mozambique Signs Preferential Trade Agreement With Malawi 
--------------------------------------------- ------------ 
 
¶2. On December 28 Mozambique and Malawi entered into a 
preferential trade agreement.  This agreement is an update of 
a similar agreement signed by the Portuguese colonial 
authorities with Malawi prior to Mozambican independence.  It 
allows for duty-free trade in goods originating in the two 
countries, excluding beer, certain soft drinks, tobacco, 
sugar, vegetable oil, chickens and eggs, office equipment, 
petroleum products, weapons, ammunition and explosives.  The 
Mozambique-Malawi FTA has simpler rules of origin than those 
outlined in the Southern African Development Community (SADC) 
Trade Protocol.  Mozambique is not required under the SADC 
Trade Protocol to move to a free trade regime with other SADC 
countries until 2015.  Mozambique's most significant 
bilateral trade relationship is with South Africa. 
 
 
IMF Approves 2.3 illion USD Disbursement Under the 
Three-Year PRG Arrangement 
--------------------------------------------- ------------- 
 
¶3. On December 19, 2005 the Executive Board of the 
International Monetay Fund (IMF) completed its third review 
of Mozambque's economic performance under the current 
Povrty Reduction and Growth Facility (PGRF) arrangemet, 
approved by the Executive Board of the IMF onJune 21, 2004. 
This enabled a disbursement of aproximately USD 2.3 million 
by the IMFto the Government of Mozambique, bringing total 
disbursements under PGRF to approximaely USD 9.4 million. 
 
 
IMF Forgives 100% of Mozamican Debt Under Multilateral Debt 
Relief Initiatve 
--------------------------------------------- ------------- 
 
¶4.  In December 2005 the IMF forgve 100% of Mozambique's 
debt under the Multilateal Debt Relief Initiative (MDRI) 
that resulted frm last year's G8 Summit.  The relief is on 
all rmaining debt incurred by Mozambique to the IMF prir to 
January 1, 2005, amounting to USD 119 millin.  This is in 
addition to approximately USD 34 illion remaining in Heavily 
Indebted Poor Countries (HIPC) Initiative relief.  The new 
debt relief will be effective as of arly January 2006. 
 
Construction on Limpopo Bridg Begins and Zambezi Bridge 
Funds Secured 
--------------------------------------------- ------------ 
 
¶5. On December 23 President Guebuza laid the first stone for 
construction of a new bridge over the Limpopo river in the 
Gaza province.  The new bridge will be a two-lane concrete 
bridge approximately nine meters in width and 500 meters in 
length.  The project will cost about USD 14.4 million, and is 
financed by the Nordic Development Fund and the Mozambican 
government. 
 
¶6. Earlier in the month, the Mozambican and Italian 
governments finalized an agreement whereby the Italian 
government will grant approximately USD 23 million to finance 
construction of a new bridge over the Zambezi river.  This 
grant is in addition to 24 million Euros contributed by the 
 
MAPUTO 00000038  002.2 OF 002 
 
 
European Union and 21 million Euros by the Swedish 
government.  Also, the Japanese government has contributed 
nine million USD for environmental impact studies and the 
resettlement of people displaced by construction.  The new 
bridge will replace the current Caia-Chimuara ferry service 
and thereby link the country's main north-south highway. 
 
 
Number of Mozambican Miners in SA Continues to Decline 
--------------------------------------------- -------------- 
 
¶7.  Mozambican miners in South Africa, who for over a hundred 
years have been providing significant remittances to their 
families back in Gaza and Inhambane provinces, over the past 
decade have seen their numbers drop by 16%, from 55,000 in 
1996 to 46,000 in 2005. Influencing this decline is South 
Africa's 2004 immigration law (which limits the number of 
foreign workers any given company can employ), an aging 
workforce and an overall decline in gold mining activity. 
Long-term forecasts suggest that unless deeper shafts are 
explored, South Africa's gold reserves may last only until 
¶2015.  The growing number of platinum mines in South Africa 
are only expected to absorb a small percentage of Mozambican 
miners. 
 
 
Assembly of the Republic Passes 2006 State Budget -- 142 
votes in favor, 80 votes opposed -- and New Commercial Code 
--------------------------------------------- ------------- 
 
¶8. The Assembly of the Republic, the Mozambican parliament, 
passed the 2006 state budget on December 16 by a vote of 142 
to 80.  The vote represents a clean split between the ruling 
Frelimo party (in favor) and the opposition Renamo-Electoral 
Union coalition (wholly opposed).  In addition, the Gubueza 
government passed a new Commercial Code at the end of 
December.  The adoption of the revised Commercial Code is 
generally seen as very positive, since the original 
Commercial Code was obsolete and interventionist, with 
clauses dating from the 19th century.  It did not provide a 
foundation for modern commerce or resolution of modern 
commercial disputes. 
Dudley