VZCZCXRO3562
PP RUEHTRO
DE RUEHTU #0143/01 0310921
ZNR UUUUU ZZH
P 310921Z JAN 07 ZDK
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 2603
INFO RUEHAD/AMEMBASSY ABU DHABI PRIORITY 0851
RUEHAS/AMEMBASSY ALGIERS PRIORITY 7412
RUEHLO/AMEMBASSY LONDON PRIORITY 1257
RUEHNK/AMEMBASSY NOUAKCHOTT PRIORITY 0851
RUEHFR/AMEMBASSY PARIS PRIORITY 1716
RUEHRB/AMEMBASSY RABAT PRIORITY 8313
RUEHTRO/AMEMBASSY TRIPOLI PRIORITY 0044
RUEHCL/AMCONSUL CASABLANCA PRIORITY 4057
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 TUNIS 000143 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/MAG (HARRIS) AND EB/CIP (GIBBS) 
STATE PASS USTR (BELL), USPTO (ADLIN AND ADAMS), USAID (MCCLOUD) 
USDOC FOR ITA/MAC/ONE (NATHAN MASON), ADVOCACY CTR (JAMES), AND CLDP 
(TEJTEL) 
CASABLANCA FOR FCS (ORTIZ) 
LONDON AND PARIS FOR NEA WATCHER 
 
E.O. 12958: N/A 
TAGS: ECON ETRD ENRG EPET BEXP ECPS EAID TS
SUBJECT: TUNISIA ECONOMIC HIGHLIGHTS: Dec. 16 - Jan. 15 
 
REF: A. 06 TUNIS 2749 
 
¶B. 06 TUNIS 2464 
¶C. 06 TUNIS 629 
 
¶1. (U) This cable contains highlights of recent economic 
developments in Tunisia on the following topics: 
 
¶A.  Tunisia and Libya Announce Reciprocal Exchange Convertibility 
¶B.  ALTEK Opens Plant in Tunisia 
¶C.  Gasoline Prices May Increase Three Times in 2007 
¶D.  Tunisia Repays External Debt Ahead of Schedule 
¶E.  Exports and Imports Up For 2006 
 
------------------------------------- 
Tunisia and Libya Announce Reciprocal 
Exchange Convertibility 
------------------------------------- 
 
¶2. (U) On December 26, Tunisia and Libya agreed to allow exchange 
convertibility of their two currencies from mid-January 2007. (Note: 
Currently, the Tunisian and Libyan dinars may not be directly 
exchanged.  The two countries rely on the USD or the Euro for 
bilateral transactions. End Note.)  The Tunisian Central Bank stated 
that a bilateral commission is still finalizing the details for the 
implementation of convertibility.  In order to facilitate increased 
trade, the two countries have also agreed to provide national 
treatment for certificates of origin.  According to the Center for 
the Promotion of Exports (CEPEX), bilateral trade continues to grow 
between Tunisia and Libya, with more than 980 million USD in trade 
in 2005, up from 750 million USD in 2004. 
 
¶3. (SBU) Comment:  Although trade between Libya and Tunisia is duty 
free, there are still many formalities which impede trade between 
the two countries.  Reciprocal convertibility of their two 
currencies will help to facilitate trade and will also benefit the 
Tunisian tourism sector, which welcomed over 1.4 million Libyan 
tourists in 2006.  Libyans visit Tunisia in greater numbers than 
tourists of any other nationality.  End Comment. 
 
---------------------------- 
ALTEK Opens Plant in Tunisia 
---------------------------- 
 
¶5. (U) In December 2006, American shoe manufacturer ALTEK 
inaugurated a 18,000-square meter plant in the Menzel Bourguiba 
industrial zone in northern Tunisia.  The plant represents an 
investment of roughly 22 million USD and will provide 760 jobs. 
According to Patricia Colombo, ALTEK co-manager, these figures are 
expected to rise to 2,400 jobs and 30.35 million USD in investment 
by late 2007.  ALTEK will produce work boots and safety shoes for 
export, primarily to Europe.  ALTEK is owned by Bahamas-based US 
venture capital group Danigre and Danizer.  ALTEK is the second 
major shoe manufacturer to open a plant in Tunisia.  EVOL, purchased 
by US investors from an Italian firm, also produces work boots and 
safety shoes for export.  EVOL has a staff of 4,000 and is the 
largest employer in Tunisia. 
 
--------------------------------------------- --- 
Gasoline Prices May Increase Three Times in 2007 
--------------------------------------------- --- 
 
¶6. (U) During the Tunisian parliamentary budget debates, Tunisian 
Minister of Finance Rachid Kechich declared that if oil prices 
remain above 58 USD per barrel in 2007, the GOT may raise gas prices 
up to three times.  (Note: Gasoline prices are fixed by the GOT. 
End Note.)  Since 2004, the GOT has increased gasoline prices eight 
times, subsidizing only 50 percent of the total cost increase.  High 
oil prices have had a serious and negative impact on the growth of 
the Tunisian economy, increasing the trade deficit but also 
affecting the GOT budget through its subsidy program (Ref A). 
 
¶7. (SBU) Comment: Although the original level of the GOT subsidy is 
not public, the increases in gas prices represent an effort to 
slowly remove gas subsidies and bring prices more into line with the 
market value.  Notably, the GOT has not lowered gas prices in 
 
TUNIS 00000143  002 OF 002 
 
 
response to lower oil prices.  This allows the GOT to reduce the 
share of subsidies in the budget, an IMF recommendation.  End 
Comment. 
 
--------------------------------------------- ----- 
Tunisia Repays External Debt Ahead of Schedule 
--------------------------------------------- ----- 
 
¶8. (U) The Tunisian Central Bank announced that during 2006 Tunisia 
repaid over 630 million USD of its external debt ahead of schedule. 
The GOT also postponed disbursal of the fourth tranche (144.4 
million USD) of an Economic Competitiveness Adjustment Loan (ECAL 
IV) financed by the World Bank, the European Union and the African 
Development Bank to support economic reforms.  In 2006 Tunisia did 
not resort to international capital markets for 228 million USD, as 
forecast in the 2006 GOT budget.  In a December 2006 speech, Prime 
Minister Mohamed Ghannouchi stated that external debt had dropped to 
46.1 percent of GDP.  A June 2006 IMF report calculated that 
external debt was equivalent to 68 percent of GDP in 2005. 
 
¶9. (SBU) Comment: Although Tunisia has an excellent borrowing 
record, the external debt to GDP ratio is extremely high relative to 
countries at a similar level of development.  Tunisia's early 
repayment of existing loans and avoidance of new loans represent an 
overall effort to reduce the level of external debt, per IMF advice. 
 The early repayment of external debt has largely been possible due 
to the privatization receipts, 2.25 billion USD, from the July 2006 
sale of a 35 percent stake in Tunisie Telecom (Ref C).  End 
Comment. 
 
------------------------------- 
Exports and Imports Up For 2006 
------------------------------- 
 
¶10. (U) GOT trade figures for 2006 showed exports up 12.6 percent, 
but imports outpacing exports by 15.5 percent over 2005 figures. 
The trade deficit for 2006 has grown to 3.38 billion USD (roughly 11 
percent of 2006 GDP), compared to 2.69 billion USD in 2005. 
Mechanical and electrical industry exports were up 22.9 percent over 
2005 and agricultural and food exports increased 28.6 percent. 
Textile exports remained relatively stable despite fears that the 
end of the Multifiber Agreement would prove disastrous (Ref B).  The 
rise in imports was generated by significant increases in the value 
of energy (26.1 percent), equipment (19.9 percent), and farming and 
basic food product imports (18.5 percent) since 2005. 
 
¶11. (SBU) Comment and Background: During 2006, the high cost of oil 
had a major negative impact on Tunisia's trade balance, but 
fluctuation in the dinar also impacted trade.  In 2006, the dinar 
depreciated 5.6 percent against the Euro and appreciated 4.6 percent 
against the USD.  Roughly 80 percent of Tunisia's trade is with the 
EU.  While the weak dinar may have increased exports to Europe, 
Tunisians also paid higher prices for imported goods.  End Comment 
and Background. 
GODEC