VZCZCXRO8666
PP RUEHPA
DE RUEHAB #1347/01 3410731
ZNY CCCCC ZZH
P 070731Z DEC 06
FM AMEMBASSY ABIDJAN
TO RUEHC/SECSTATE WASHDC PRIORITY 2243
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHC/DEPT OF LABOR WASHDC PRIORITY
INFO RUEHZK/ECOWAS COLLECTIVE

C O N F I D E N T I A L SECTION 01 OF 02 ABIDJAN 001347 
 
SIPDIS 
 
SIPDIS 
 
STATE PASS TO USTR 
 
E.O. 12958: DECL: 12/01/2016 
TAGS: EAGR ECON AID PREL IV
SUBJECT: COCOA STRIKE ENDS WITH HARDLY A WHIMPER, 
UNDERSCORING OPAQUE NATURE OF THE SECTOR 
 
REF: ABIDJAN 1167 
 
Classified By: Econ Chief EMassinga, Reasons 1.4 (b,d) 
 
¶1.  (C)  Summary.  The strike in the cocoa sector has come to 
a quiet, almost stealthy end although most of the putative 
demands made by strikers remain unaddressed.  The harvest is 
proceeding, and a good crop is expected.  According to 
industry observers, the government was essentially able to 
buy off the strikers, and cooperative executives never truly 
intended to push for reforms to benefit farmers.  Prices paid 
to farmers remain very low, reflecting effective governmental 
control over the ostensibly farmer-run bodies that set the 
prices.  The industry effectively remains a cash cow for the 
government and some of its supporters.  End Summary. 
 
¶2.  (SBU)  In early November, the press reported that cocoa 
cooperatives had lifted their strike order after several 
weeks (reftel).  After the government's announcement that it 
would 'loan' the striking cooperatives $20 million, things 
quieted down considerably, even though the negotiators had 
yet to work out the main issue, i.e., the cocoa purchasing 
board's (BCC) offer of CFA 400/kg, which has effectively 
stood firm.  Since the early November reports of the 
suspension of the strike and the granting of the loan to the 
cooperatives, the 2006-2007 cocoa campaign has proceeded 
normally.  Industry experts are predicting a good harvest, 
and world prices have remained stable despite brief supply 
disruption in the world's largest producer (approximately 
40%).  There have been no reports in the press on the 
grievances of farmers or cooperatives, with the exception of 
back page articles detailing squabbling among cooperatives 
over use of the loan along with more recent complaints that 
the money has not, in fact, been received.  But for all 
intents and purposes, the strike is over even though the 
issues that motivated farmers to action are unaddressed. 
 
¶3.  (C)  What happened?  Multinational cocoa purchasing 
company executives and senior representatives of NGOs working 
with cocoa farmers are unsurprised at the turn of events 
(strictly protect).  Local Cargill and ADM representatives, 
as well as senior local representatives from the USG-funded 
NGOs, Sustainable Tree Crops Program and Winrock 
International, all commented to Econ Chief in separate 
conversations that the principal aim of the main striking 
cooperative, ANAPROCI, had always been to receive 
governmental assistance to develop its internal 
organizational machinery (hiring cadres, purchasing 
equipment, office supplies, etc), and that demands related to 
the price of cocoa paid to farmers showed up in later demands 
circulated closer to the eve of the strike announcement. 
These industry and NGO sources confirm privately that once 
the private interests of the cooperatives' chiefs were 
addressed, the main impetus behind the strike faded. 
Additionally, each opined that the loan was in effect a 
bribe, and was never expected to be repaid. 
 
¶4.  (SBU)  In describing the turn of events to Econ Chief, 
sources indicated the structure of the industry, subsequent 
to its liberalization in 1998-99, makes it vulnerable to 
governmental manipulation of its revenues.   Cocoa generates 
over $2.0 billion annually in exports, second (for the first 
time ever accoring to the WB and IMF) only to oil and gas, 
with projected revenues of $3.0 billion for the first time in 
¶2006.  From the world price for cocoa of approximately 800 
CFA/kg (492 CFA = USD 1), farmers receive a little over 200 
CFA/kgbefore they have to pay for inputs such as fungicides 
and fertilizers.  This contrasts sharply with the 
approximately 650 CFA/kg Ghanaian farmers receive, a 
discrepancy that accounts for the significant level of 
illegal smuggling of cocoa across the border (reftel). 
 
¶5.  (C)  The '98 liberalization of the cocoa industry was 
designed, in theory, to benefit producers, but has failed in 
that aim.  The liberalization plan created a brace of cocoa 
industry governing bodies that are all ostensibly controlled 
by farmers through elections: 
The Authority for the Regulation of Coffee and Cocoa (ARCC) 
that controls the issuance of export licenses, 
The Cocoa and Coffee Exchange (BCC) that sets the field price 
middlemen are to pay cooperatives, and 
The Cocoa and Coffee Financial Regulator (FRC), the 
administrator of the Cocoa and Coffee Development Fund 
(FDPCC) and the Prudential Reserve, which invests in rural 
electrification, roads, etc. and smoothes out price 
fluctuations, respectively. 
Given the supposed governance of these structures, the recent 
 
ABIDJAN 00001347  002 OF 002 
 
 
strike's demand to raise the field price (400 CFA/kg for 
2006-2007) as well as reduce the fees (totaling 52 CFA/kg) 
paid to support these organizations and funds made, in 
theory, no sense.  However, industry and NGO executives 
unanimously note that the government wields effective control 
over the BCC and other cocoa bodies (vice formally controls 
them, as erroneously reported in reftel). 
 
¶6.  (SBU)  Cooperatives justified their demand for reducing 
fees associated with the cocoa governing bodies by recalling 
long-standing complaints that money destined for the 
Prudential Reserve and FDPCC are not being paid by the 
government, despite that farmers are obligated to pay these 
fees immediately upon sale of their product to middlemen. 
Additionally, the interaction between the BCC, the government 
and middlemen is particularly suspect: middlemen (who are 
reportedly close to government officials) benefit enormously 
by the BCC's decision to keep prices paid in the field low 
thus keeping their margins fat when they sell to 
multinationals, who are in turn barred from contracting with 
farmers and cooperatives directly.  Cooperatives play their 
role in squeezing farmers; of the 400 CFA/kg they get from 
middlemen, they pay the farmers themselves 250 to perhaps 300 
CFA/kg.  After fees, producers are left with not much more 
than 200 CFA/kg.  Between 200 and 300 CFA/kg (up to 40% of 
the world price) in the form of taxes and registration fees 
paid by exporters (multinationals are exempted 94 CFA/kg) go 
directly to government coffers. 
 
¶6.  (C)  Comment.  The cocoa sector is a cash cow for the 
government and has played that role for many years, and it 
appears that little if anything has changed. The lack of 
transparency in the cocoa industry has been a long-standing 
concern for the international community; the IMF was unable 
to audit the sector in 2003 due to the lack of cooperation on 
the part of the government.  As mentioned to Econ Chief by 
World Bank representatives and others (septel), a similar 
lack of transparency plagues the oil and gas sector.  In 
light of the continuing squeeze on official government 
revenues affecting the Ministry of Finance (septel), it 
appears likely the President's faction controlling these 
quasi-state bodies will not give up the benefits they provide 
easily.  End Comment. 
Hooks