VZCZCXRO1955
RR RUEHMR RUEHRN
DE RUEHLU #0621/01 1721344
ZNY CCCCC ZZH
R 211344Z JUN 07
FM AMEMBASSY LUANDA
TO RUEHC/SECSTATE WASHDC 4083
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHTN/AMCONSUL CAPE TOWN 0332
RUEHSAJ/AMCONSUL JOHANNESBURG 0461

C O N F I D E N T I A L SECTION 01 OF 02 LUANDA 000621 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR AF AND EB; 
JOHANNESBURG AND CAPE TOWN FOR FCS 
STATE PASS TO USAID - AFR/SA ELOKEN, IMCNAIRN; AFR/AA WNORTH 
 
E.O. 12958: DECL: 06/21/2016 
TAGS: ECON EFIN EPET PGOV OVIP CH AO
SUBJECT: ANGOLA: OIL BOOM FUELING ECONOMIC GROWTH AND 
ATTRACTING US INVESTORS 
 
REF: A. LUANDA 250 
 
     ¶B. LUANDA 326 
     ¶C. LUANDA 358 
 
Classified By: Amb. Cynthia Efird for reasons 1.4 (b) and (d) 
 
¶1. (C) Summary: Deputy Prime Minister Aguinaldo Jaime 
described Angola,s efforts to manage its exceptionally high 
economic growth to A/S Jendayi Frazer, noting the creation of 
a stabilization fund to manage oil price fluctuations on the 
budgetary process; programs to increase Central Bank and 
Finance Ministry capacity, and the creation of a development 
bank to jump start the non-petroleum sector.  Frazer and 
Jaime discussed the Chinese-Angolan commercial relationship 
and potential for trilateral US-Angolan-Chinese cooperation 
on a future project.  A/S Frazer, in an address to the US 
business community in Luanda, stressed the deepening of the 
US-Angolan commercial relationship and USG efforts to help 
Angola develop its non-petroleum related industries; she 
announced a USTDA grant to study hydropower generation and 
distribution.  End Summary. 
 
¶2. (C) This cable covers bilateral meetings held in Luanda on 
May 31, 2007, between Assistant Secretary Frazer and Deputy 
Prime Minister Aguinaldo Jaime, and a business lunch 
sponsored by the US-Angola Chamber of Commerce.  Political 
and defense issues; election-related meetings and visits, and 
bilateral assistance, including public-private partnerships, 
are reported in septels.  Ambassador Frazer was accompanied 
by Ambassador Efird and a notetaker for each meeting/event. 
Angolan Ambassador to the United States Josefina Pitra 
Diakite also attended the meetings, as well as GRA staff. 
 
Using Oil Revenues to Benefit All Angolans 
------------------------------------------ 
¶3. (C) Deputy Prime Minister Aguinaldo Jaime was visibly 
upbeat about the strength of the Angolan economy (in 2006, 19 
percent real growth overall, 15 percent in the non-petroleum 
sector).  He described GRA efforts to use its oil wealth 
wisely to tackle infrastructure problems and to develop 
further the non-mineral economy effectively.  For example, 
Angola has created a stabilization fund financed by oil 
revenues and managed by the National Bank of Angola (BNA) to 
provide a cushion should the price of oil fall below USD 50 
per barrel.  He added that the BNA also has received 
technical capacity building assistance from the World Bank 
and other institutions, including USAID.  Jaime noted the 
World Bank recently approved new loans to Angola with terms 
of 4 percent interest and 25 years grace period on 
repayments.  While not soft terms, he noted the terms remain 
easier than those of commercial credit.  Although Angola 
decided this year not to enter into a formal agreement with 
the IMF, IMF Article IV consultations and expert help 
continue (ref A). 
 
¶4. (C) To spur non-mineral sector development, the GRA has 
established the Angolan Development Bank (BDA) to finance 
integrated projects embracing the entire production chain 
from the farmer,s field to the store shelves.  Jaime 
conceded the IMF and the World Bank were concerned about the 
terms and inflationary impact of a BDA, fearing the choice of 
sectors targeted for development would be influenced by 
non-economic considerations.  However, he felt that the GRA 
was countering the concerns by hiring financial experts in 
key management roles of the bank. 
 
The Challenges of Managing the Economy 
-------------------------------------- 
¶5. (C) Jaime also commented that the GRA has improved its 
budget process by more accurately forecasting its revenues. 
He said the GRA currently faces a challenge in downsizing the 
number of people on the government,s payroll, noting that 40 
percent of the GRA budget goes for salaries.  However, he 
expected civil service reform to be slow, with the GRA 
reducing the public sector only as more jobs were created in 
the private sector, so as not to increase unemployment.  The 
GRA is also hoping to bring the informal economy into the 
mainstream economy.  Jaime noted that street vendors, who 
form a large part of the non-mineral economy, pay no taxes 
and receive almost no government services.  The GRA wants to 
offer more stability, government services, and reliable basic 
services ) water, electricity, drains, roads -- so that 
paying taxes and doing business out of a fixed address will 
become more appealing to small entrepreneurs. 
 
¶6. (C) Jaime said that the GRA is trying to regularize its 
 
LUANDA 00000621  002 OF 002 
 
 
complicated accounting for oil revenues.  For example, 
Sonangol, the national oil company, sells imported fuel to 
the GRA below cost and the GRA subsidizes the cost of 
gasoline at the pump.  He said the GRA is trying to pay 
Sonangol directly for the money it loses on fuel sales to the 
government and collect the taxes Sonangol owes for oil 
production.  In response to A/S Frazer,s urging that Angola 
join the Extractive Industries Transparency Initiative 
(EITI), Jaime said that Angola had already taken all required 
steps except for establishing the required joint 
governmental-civil society monitoring group.  A commission 
had been formed and was now studying how such a body would be 
constituted under Angolan law. 
 
Expanding Chinese-Angolan Cooperation to include the U.S. 
--------------------------------------------- --------- 
¶7. (C) A/S Frazer told Jaime that she and her Chinese 
counterpart agreed to explore cooperation between China and 
the United States on an agricultural development project in 
Angola (Ref B).  Ambassador Efird related her meeting with 
China,s Ambassador to Angola Beisan Zhang, in which she 
suggested working out concepts for joint projects.  She said 
that Ambassador Zhang had interest in the prospect of 
cooperation and referred the matter to Beijing, where it 
remains under consideration.  Jaime explained that China 
provides the largest single foreign source of financing for 
development work and the GRA directs most of that money to 
infrastructure projects, especially roads, railroads and 
government buildings.  While the conditions of the Chinese 
line of credit obligate Angola to rely largely on Chinese 
contractors, up to thirty percent of the value of each 
project must go to Angolan businesses. 
 
¶8. (C) Assistant Secretary Frazer closed by emphasizing the 
U.S. interest in working with the GRA to improve its ability 
to manage resources and expenditures.  She expressed 
disappointment that an agreement with the IMF had not been 
reached but encouraged continued IMF and World Bank technical 
cooperation.  Jaime noted his appreciation for USG 
(especially USAID) assistance to the Finance Ministry and the 
National Bank of Angola and indicated an interest in 
continued cooperation, including the signing of a Trade & 
Investment Framework Agreement (TIFA). 
 
Expanding U.S.-Angola Commercial Ties 
-------------------------------------- 
¶9. (C) During a well-attended lunch sponsored by the 
U.S.-Angola Chamber of Commerce, Frazer delivered formal 
remarks on the deepening US-Angola bilateral relationship, 
which encompasses activities such as capacity building on 
financial sector reforms, military cooperation and health 
programs.  A/S Frazer described the continuing American 
investment in the petroleum sector and the need to encourage 
more U.S. investment in the non-oil sectors of the economy. 
She highlighted that Angola could encourage more US 
investment by lowering the number of days it takes to 
register a company and signing a TIFA.  As part of 
non-petroleum sector development, A/S Frazer announced a 
grant from the United States Trade and Development Agency to 
study hydropower generation for two Angolan provincial 
municipalities, which could serve as a model for future 
energy generation throughout the country.  She expressed USG 
willingness to continue to work with the GRA to make Angola 
more attractive to investors, especially by initialing a TIFA 
with Angola.  She urged the U.S.-Angola Chamber of Commerce 
to continue its work, noting the recent success of Angola 
week in the U.S. 
 
¶10. (C) Comment: Deputy Prime Minister Jaime, as always, 
presented the government of Angola,s economic reform efforts 
comprehensively and with polish.  Even he, however, admits 
the great challenges the high economic growth rate poses to 
an economic team with little competent backup and weak 
follow-through.  In this meeting with the Assistant Secretary 
and in other meetings GRA officials were uniformly positive 
about signing a TIFA.  Concrete movement, however, has yet to 
catch up with the good will. 
 
¶11. A/S Frazer has approved this cable 
EFIRD