VZCZCXRO7614
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHTO #0231/01 0780638
ZNR UUUUU ZZH
R 180638Z MAR 08
FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 8662
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHLO/AMEMBASSY LONDON 0132

UNCLAS SECTION 01 OF 02 MAPUTO 000231 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAGR SENV EINV ENRG PGOV TBIO MZ
 
SUBJECT: Mozambique's Agricultural Sector Ripe for U.S. Investment 
 
REF: 07 MAPUTO 01341 
 
¶1.  SUMMARY:  Only 12 percent of Mozambique's arable land is under 
cultivation.  Mozambique's agriculture minister is actively courting 
international agricultural investment.  U.S. agribusinesses are 
ramping up operations in Mozambique.  The GRM is reviewing a 
national biofuels strategy, and the country's climate is conducive 
to production of several biofuel crops.  U.S. Department of 
Agriculture assistance focuses on comprehensive rural health, 
nutrition and education, including the creation of an agricultural 
university.  USAID programs address constraints to agricultural 
productivity, rural enterprise development, and trade 
competitiveness.  Mozambique's untapped agricultural potential 
offers interesting opportunities for U.S. investors.  END SUMMARY. 
 
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AG SECTOR STILL AT A NASCENT STAGE 
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¶2.  Mozambique, approximately twice the size of California, only has 
12 percent of its arable land under cultivation.  While agriculture 
contributes about 22% of the country's GDP, close to 80 percent of 
the country's population is involved in agricultural production. 
Cotton, sugar, tobacco, cashews, and other cash crops, together with 
fishing and aquaculture, are the backbone of the agricultural 
economy.  Currently, U.S.-Mozambique bilateral trade in agricultural 
products is relatively small, totaling approximately $31 million in 
¶2007. 
 
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AG MINISTER: GRM PROMOTES FOREIGN INVESTMENT 
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¶3.  On December 11, 2007, Mozambican President Armando Guebuza swore 
into office the country's new Agriculture Minister, Soares Nhaca. 
The Minister of Agriculture was formerly governor of the central 
province of Manica where Universal Company's Mozambique Tobacco Leaf 
Company has operations.  Nhaca has said publicly that the GRM is 
committed to developing Mozambique's agriculture and is encouraging 
further foreign investment in the sector. 
 
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U.S. AG COMPANIES RAMPING UP INVESTMENT 
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¶4.  U.S. investors, led by Chiquita Banana, Dunavant Cotton, and the 
Universal Company are ramping up operations in Mozambique.  Chiquita 
selected Mozambique as the headquarters for its Africa operations 
last year.  Chiquita has signed a services agreement with a local 
investor to market production from 3,000 hectares under the Chiquita 
label.  Dunavant is engaged in cotton production through agreements 
with more than 30,000 smallholder farmers in Central Mozambique and 
yields currently average 520 kilograms per hectare.  Universal, 
working with 90,000 smallholders, has increased tobacco production 
in the province of Tete from 15,000 tons of tobacco three years ago 
to 28,000 tons today, and is now diversifying into foodstuff 
production.  These U.S. successes have not gone unnoticed, as other 
major U.S. agricultural companies have told Emboffs they intend to 
invest in Mozambique in the near future. 
 
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MOZAMBIQUE AND BIOFUELS: U.S. TECHNOLOGIES HAVE AN 
EDGE 
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¶5.  Mozambique has the potential to become a leading producer of 
biofuels, due to its significant tracts of undeveloped land and 
climate conducive to biofuel crops.  This potential led a U.K. 
company, Central African Mining & Exploration Company (CAMEC), to 
sign a USD 510 million deal with the Government of Mozambique in 
¶2007.  In addition, Mozambique and Brazil signed a cooperation 
agreement on biofuels in 2007, making Mozambique a strong candidate 
for further USG-Brazil cooperation on biofuel production.  Chinese, 
Canadian, Italian, Portuguese, and Brazilian companies are already 
active in the biofuel sector in Mozambique.  A South African company 
with a bio-diesel (jatropha) concession in Inhambane province is 
using U.S.-technology and equipment exclusively in its production 
facility. 
 
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USG ASSISTANCE CREATES OPPORTUNITES: USDA EXAMPLE 
--------------------------------------------- ---- 
 
¶6.  Agricultural projects funded by the USG in Mozambique are 
improving the agricultural environment and enhancing the positive 
bilateral relationship and the already welcoming environment for 
U.S. investors.  One striking example is the Humana People to People 
Project, one of several Food for Progress programs funded by the 
U.S. Department of Agriculture (USDA).  This project consists of a 
comprehensive rural health and education program that establishes 
Farmer Clubs to increase rural income, reduce the transmission of 
 
MAPUTO 00000231  002 OF 002 
 
 
HIV/AIDS, train rural primary school teachers, and provide soy-based 
meals to undernourished persons.  These projects have benefited 
approximately 7,500 people living with HIV/AIDS, 7,200 pregnant 
women, and 19,800 orphans.  Humana is currently constructing One 
World 
University, funded by USDA, which will train teachers to not only be 
effective educators but leaders in their communities.  The proposed 
date for the dedication of One World University is May 30, 2008. 
 
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USG ASSISTANCE CREATES OPPORTUNITIES: USAID LEADS WAY 
--------------------------------------------- ------- 
 
¶7.  USAID is addressing constraints to agricultural productivity, 
rural enterprise development, and trade competitiveness.  USAID 
programs provide leadership in sector planning and monitoring, 
improving the investment climate, creating new job opportunities, 
and developing high impact agricultural value chains (cashew, 
horticulture, oilseeds, poultry, and forest products).  USAID is 
working through a range of public/private partnerships to leverage 
additional funding, transfer technologies and management skills, and 
develop markets.  PL 480 Title II activities are well-integrated 
into the overall program, promoting productivity-enhancing 
technologies, deepening rural marketing networks, and addressing the 
root causes of chronic malnutrition in Mozambique.  Through 
improvements in the trade and investment climate and agricultural 
sector productivity, USAID is assisting the most vulnerable rural 
families to mitigate environmental risks, produce enough food, and 
make better decisions about food utilization enabling them to move 
more rapidly from subsistence to surplus and marketable production 
that leads to higher family income.  In FY07, USAID's programs 
resulted in over $12.2 million in agricultural sales from farmers 
and enterprises receiving assistance:  137,677 rural households, 760 
producer associations, and 160 agricultural firms benefited from 
USAID assistance. 
 
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COMMENT: UNTAPPED POTENTIAL OFFERS EXCITING 
POSSIBILITIES 
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¶8.  COMMENT:   There are many constraints to the promotion of 
foreign direct investment in agriculture in Mozambique.  These 
restraints include the small size of the regional market, the 
relatively high transport costs of getting products to lucrative 
markets in the United States and Western Europe, and a 
sometimes-difficult business environment.  Nonetheless, 
USG-supported development projects have helped create an atmosphere 
of goodwill; and the interest by major U.S. companies is telling: 
there are additional opportunities for growth including biofuels, 
seed, fertilizer, storage facilities, low-cost projects, and staple 
foods with long shelf lives.  Investment and trade pportunities in 
agriculture are worth further investigation by growth-oriented 
agribusinesses, and the untapped potential in arable land suggest 
that Mozambique's agricultural trade profile with the United States 
and other trading partners could increase considerably.