VZCZCXRO5978
RR RUEHDU RUEHJO RUEHMR
DE RUEHTO #0230/01 0540543
ZNR UUUUU ZZH
R 230543Z FEB 06
FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 5021
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC
RHEHNSC/NSC WASHDC

UNCLAS SECTION 01 OF 02 MAPUTO 000230 
 
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E.O. 12958: N/A 
TAGS: ECON EAID EINV ETRD CH MZ
SUBJECT: MOZAMBIQUE: JANUARY ECONOMIC DIGEST 
 
MAPUTO 00000230  001.2 OF 002 
 
 
¶1. This is a brief summary of significant economic 
developments in Mozambique during January 2006.  We provide 
it as a supplement to our other reporting.  The items 
discussed are: 
 
- Inflation Higher Than Expected 
- Government May Cancel Leases for Unused Land 
- Taking Longer Than Expected to Phase Out Leaded Petrol 
- Will the Chinese Own Part of Cahora Bassa? 
- Microsoft Meets Mozambique 
- "Made in Mozambique" Campaign 
 
Inflation Higher Than Expected 
------------------------------ 
 
¶2.  Despite the GRM,s target of a 2005 inflation rate 
between 7 and 8%, the accumulated inflation rate for 2005 was 
14%.  The discrepancy between projected and actual inflation 
is being blamed on significant increases late in the year in 
the cost of fuel and food.  The government remains optimistic 
regarding 2006 inflation rates, projecting an increase of 
only 7%. 
 
Mozambique May Cancel Leases for Unused Land 
-------------------------------------------- 
 
¶3.  Minster of Agriculture, Tomas Mandlate, issued an 
announcement in January that individuals who do not use the 
land granted to them should lose their tenure rights, as 
called for in the law on land.  All land in Mozambique is 
owned by the GRM.  Individuals obtain land use rights from 
the government - these leaseholds may be obtained for up to 
49 years - but those leasing the land must make improvements 
within a specified timeframe.  Mandlate spoke against those 
who receive a use-right but then do not make productive use 
of the land: "(T)hose who pay, but do nothing with their 
land, must lose their tenure rights, because the land can be 
redistributed to other citizens capable of making better use 
of this resource."  Land redistribution and land rights are 
sensitive issues in Mozambique, and the private sector and 
donor communities are watching this issue closely. 
 
Taking Longer to Phase Out Leaded Petrol 
---------------------------------------- 
 
¶4.  The government of Mozambique originally planned to phase 
out leaded petrol in favor of unleaded fuel by January 2006. 
However Mozambique could not afford to clean out all tanks 
containing leaded petrol and is therefore diluting leaded 
petrol with the unleaded variety, for the time being. 
Officials now anticipate that all leaded fuel will be flushed 
from the system by March.  As the result of the delays, 
Mozambique missed the end-2005 SADC (Southern African 
Development Community) target to phase out leaded petrol. 
 
Will the Chinese Own Part of Cahora Bassa Dam? 
--------------------------------------------- 
 
¶5.  Local media are reporting that Geocapital, a Chinese 
company owned by Chinese businessman Stanley Ho, is 
interested in purchasing shares of HCB, which owns the 
Zambezi river Cahora Bassa dam.  A draft agreement 
transferring control of HCB from Portugal to Mozambique, 
which is still under negotiation, calls for a payment of USD 
950 million to Portugal by the end of 2006.  While the first 
USD 250 million will come from HCB itself, there has been 
much speculation about how Mozambique would pay the remaining 
USD 700 million.  The GRM currently insists that it will find 
the funds, but there have been increasingly frequent reports 
of interested third parties such as Stanley Ho/Geocapital, 
the South African electricity company Eskom and Brazilian 
investors wanting to be part of the deal.  The framework 
agreement does allow for additional shareholders if both 
Portugal and Mozambique sell a third of their holdings. 
Meanwhile, the Energy Ministry continues to negotiate the 
agreement details with its Portuguese counterpart.  The 
negotiations have fallen behind schedule; back in November 
both sides hoped to conclude them by the end of 2005. 
 
Microsoft Meets Mozambique 
 
MAPUTO 00000230  002.2 OF 002 
 
 
-------------------------- 
 
¶6.  Minister of Science and Technology, Venancio Massingue 
and Ali Hoballah, Microsoft Regional Director for West, East 
and Central Africa signed an action plan at the beginning of 
January under which Mozambique will receive funding and 
computer products to assist with the government's 
computerization program.  Under the plan, which is for the 
2006-2007 period, Microsoft will donate nearly USD 500,000 
worth of education/training, software, equipment, consultants 
and money.  The goals of the plan include developing a 
strategic information and communication technologies plan for 
the education sector and local community centers, and 
developing computer solutions that support the government's 
provision of public services. 
 
"Made in Mozambique" Campaign 
----------------------------- 
 
¶7.  On January 16 the Ministry of Industry and Commerce 
launched its "Made in Mozambique" campaign.  This is an 
effort to raise awareness of Mozambican goods in a market 
dominated by South African and other foreign imports.  Faced 
with the eventual end of tariffs on trade among SADC nations 
(in 2015), Mozambique is attempting to boost its own 
industrial production and create a national market.  Some 
businessmen objected to the use of the English language, 
arguing that the slogan should have been the Portuguese 
equivalent:  "Produzido em Mocambique." 
La Lime