VZCZCXRO4061
RR RUEHMA RUEHPA
DE RUEHAB #0279/01 1231402
ZNR UUUUU ZZH
R 021402Z MAY 08
FM AMEMBASSY ABIDJAN
TO RUEHC/SECSTATE WASHDC 4193
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHRC/DEPT OF AGRICULTURE WASHDC
RUEHGV/USMISSION GENEVA 0614
RUEATRS/DEPT OF TREASURY WASHDC
RUEHRC/USDA FAS WASHDC 0132
RUEHRN/USMISSION UN ROME 0017

UNCLAS SECTION 01 OF 04 ABIDJAN 000279 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR EEB/TPP/ABT/ATP JANET SPECK 
TREASURY FOR R.HALL, D.PETERS 
USMISSION ROME FOR US REPRESENTATIVE TO FAO 
DAKAR FOR FAS R.HANSEN 
ACCRA FOR USAID/WARP KMCCOWN 
 
E.O. 12958: N/A 
TAGS: EAGR EAID ETRD ECON PGOV PREL
SUBJECT: IMPACT OF RISING FOOD PRICES IN COTE D'IVOIRE. 
RICE IS A MAJOR PREOCCUPATION 
 
REF: A. SECSTATE 39410 
 
     ¶B. ABIDJAN 00214 
 
ABIDJAN 00000279  001.2 OF 004 
 
 
¶1.  (SBU) Summary.  The global price rise in basic foodstuff 
commodities is having a serious impact on Cote d'Ivoire, 
particularly the rise in rice prices.  Imported rice has 
become substantially more expensive compared to its local 
competition in the past 18 months.  The government has 
attempted to stem the impact on consumers, as well as mollify 
demonstrators during an election year, by cutting consumption 
taxes (reftel b).  While there is a substantial supply of 
substitute foodstuffs (cassava), considerable portions of the 
populace are already in or face a situation of "food 
insecurity."  Rice remains far and away the most important 
commodity consumed in Cote d'Ivoire that is affected by the 
global economic situation, and is the subject of intense 
efforts by the government and international community to 
boost production in the coming two-three years.  Embassy has 
been asked to help facilitate the import of U.S. rice, if 
feasible, to ease supply concerns.  End Summary. 
 
Ivoirians Pay More for Food Due to Global Market 
------- 
¶2.  (U) The rise in global food prices and commodities has 
had a definite impact on the price of basic foodstuffs and 
consumer products in Cote d'Ivoire.  Prices on basic consumer 
products have risen - 50 kg sacks of locally grown rice are 
now USD 39.50 versus USD 54.75 for imported (whereas in early 
2007 locally grown rice was 30 percent more expensive, 
according to a February USDA GAIN report on West African Rice 
Production and Consumption).  Consumers note that locally 
grown potatoes have risen 43 percent in price since April 
2007, while imported flour has seen a 28 percent price rise 
in the past year. 
 
Supply Substitute - Cassava 
------- 
¶3.  (SBU) Cote d'Ivoire has a relatively plentiful, 
locally-grown alternative to imported grains (cassava) which 
can minimize the pressure on low and very low income families 
in the case of continued high rice and flour prices.  Cassava 
prices in the past year and a half, according to a regional 
internet-based commodities trading system sponsored by 
USAID/WARP (www.tradenet.biz), have not varied.  Cassava's 
new importance is reflected in the heightened appeals from 
Ministry officials, consumer groups and major donors to 
reduce the impact of military, police and gendermerie 
roadblocks and racketeering which add unnecessarily to the 
cost of commodities.  These roadblocks persist around the 
country, nearly a year after the President publicly declared 
the long civil strife and the division of the country to be 
over.  Indeed, the World Bank's local staff has stated in 
recent months that the cost of road transport in Cote 
d'Ivoire is the highest, per kilometer, in the world. 
 
Domestic Political Impact, Impact on Food Security 
------- 
¶4.  (SBU) The increase in food prices sparked demonstrations 
in Abidjan in early April.  In response, the government 
quickly promised to cut import and VAT taxes on rice, 
powdered milk, tomato paste, fish and cooking oil by 50 
percent.  This promise helped calm the situation but consumer 
groups remain vigilant and are prepared to call for renewed 
demonstrations.  The IMF representative has expressed concern 
about the implications for Cote d'Ivoire's budget due to the 
anticipated reduction in tax revenue (reftel b). 
 
¶5.  (SBU) Econoff spoke to Mr. Comoe of the National 
Consumers Union (reftel b) about his organization's 
perspective on the efficiency of the government's promise to 
reduce prices and his group's plans in the case the actions 
are ineffective.  Comoe said his group "shut down" small 
traders in the greater Abidjan area for three days from April 
22-24 as a warning to the government to fully implement its 
planned tax holiday and to demonstrate its promised results. 
Anecdotal evidence indicates his tactics (which he himself 
described as "menacing") were partially successful in the 
latest action.  The demonstrations certainly captured public 
and government attention but did not inspire vendors to 
 
ABIDJAN 00000279  002.2 OF 004 
 
 
change their prices.  If prices do not decline as the 
Consumer Union expects by May 9, the group says it will again 
take to the streets, but this time "shut down the entire 
commercial sector" including the major outlets and 
supermarkets. 
 
¶6.  (SBU) Econoff spoke to the Ministry of Finance's Director 
du Cabinet, Koffi Ahoutou, (effectively the Ministry's number 
two official) about the political ramifications of the rise 
in basic foodstuff prices.  Ahoutou indicated the government 
is prepared to implement the tax cuts for three months, and 
that they will cost USD 20-25 million in foregone tax 
revenues.  Ahoutou said the government has asked the IMF to 
send a team to help evaluate the full fiscal impact of these 
emergency measures and to devise a politically acceptable 
plan to recover the tax revenues from less 
politically-painful sources.  Ahoutou also asked Econoff for 
USG help in facilitating the exports of what he believed to 
be newly price competitive U.S. rice.  Econoff is working 
with the regional FAS attache in Dakar to identify potential 
exporters and local partners. 
 
Impact on Food Security 
------- 
¶7.  (SBU) During an April 18 conference call including, inter 
alia, the FAO, the Ministry of Economy and Finance, the 
Ministry of Agriculture, the Ministry of Planning, the WFP, 
UNDP and the World Bank, The WFP said some 9 percent of 
Ivoirian households already live in conditions of "food 
insecurity" while 20 percent live at risk of falling into 
that condition.  The 2006 FAO/WFP study on which these 
estimates were based looked at 10 of the country's 18 
departments, mostly located in the former rebel-held north, 
center and west, and extrapolated to include such households 
in the greater Abidjan areas and other regions in the south. 
These derived estimates indicate some 1.6 million households 
are either at risk of or actually live in conditions of "food 
insecurity."  In households already suffering from food 
insecurity, some 60 percent of income is used to purchase 
food.  No studies have yet been done to measure the impact of 
the recent price rise on these and other consumers. 
 
Government, International Policy Response 
------- 
¶8.  (SBU) The rapid and sustained rise in basic food costs 
resulted in demonstrations as mentioned in paragraph 4, which 
brought about a rapid political decision to reduce VAT and 
import taxes on rice, powdered milk, cooking oil, fish and 
tomato paste.  According to Ministry of Finance sources, 
while flour, a basic product that is entirely imported, was 
considered for similar treatment, the government decided to 
concentrate on rice and cooking oil and fish, along with the 
relatively low volume powdered milk and tomato paste that are 
consumed primarily by wealthier consumers (Note:  By 
contrast, petrol prices, perhaps just as if not more 
politically sensitive than food prices, have not budged in 
over four years from the government-subsidized price of USD 
1.47 per litre, despite the fact that the national refinery 
is operating now at a significant deficit.  End Note) 
 
¶9.  (SBU) The rapid rise in international food commodity 
prices is forcing the international donor community in Cote 
d'Ivoire to take a new look at its programs.  Activities have 
been focused largely on helping Cote d'Ivoire resolve the 
country's political crisis, not manage a potential economic 
one.  A prime example is a USD 120 million World Bank Post 
Conflict Assistance Package (PCAP), approved in July 2007, 
which was designed to support demobilization, health care, 
infrastructure and educational goals, and support the 
political steps needed to ensure credible elections and the 
related task of identification of the citizenry.  The PCAP 
program has been delayed due to significant disagreements 
between the Prime Minister's office and Bank staff and the 
funds have not been tapped.  Now that food prices have become 
an urgent issue, the Bank is considering how to use some 
portion of the USD 120 million to "mitigate the impact" on 
those in or facing food insecurity.  FAO, notably, opposes 
consumer subsidies as a discouragement to farmers and is 
actively advocating taking measures to expand local output, 
 
ABIDJAN 00000279  003.2 OF 004 
 
 
particularly of rice. 
 
Impact on Post Programs 
------- 
¶10.  (U) None. 
 
Environmental Impact 
------- 
¶11.  (U) None yet measured or described. 
 
Rice - Supply, Demand, Policy Considerations 
----- 
¶12.  (SBU) Rice is far and away the most politically 
sensitive product affected in Cote d'Ivoire by the world-wide 
rise in prices and export restrictions by major producing 
countries.  According to the 2008 GAIN rice report, Cote 
d'Ivoire produced 728,000 metric tons of rice in 2007, and 
imported 980,000 more for a total of 1,615 million metric 
tons.  Cote d'Ivoire has a relatively high rice consumption 
rate of 66 kg per capita per annum, higher than all countries 
in the region except Senegal (70) and Guinea (69).  Ivoirian 
consumption of rice rose by 7.5percent in the past five 
years.  At present, natonal rice stocks stand at 200,000 
tons.  The govrnment generally does not take steps to 
"guard" o conserve the national stocks, but is considering 
such measures given the international market sitution. 
 
¶13.  (SBU) The FAO is taking the lead amog local NGOs and 
international organizations on ice.  It is recruiting a team 
of three internatioal experts to write an action plan by May 
¶2.  Tht plan includes elements of subsidized distributio of 
seeds, fertilizer and some reorganization ofthe sector.  FAO 
notes that Cote d'Ivoire in yeas past used to be a 
large-scale rice exporter, bu that poor national policies 
skewed the country owards becoming a major importer.  With 
proper iplementation, the FAO believes that Ivoirian rice 
production can rise to 2.3 million tons in 2010.  The African 
Development Bank, the World Bank and bilateral donors 
(including the U.S.) are being asked to fund the effort.  FAO 
envisions the World Bank and other major donors using some 
funds currently designated for post-conflict "reinsertion of 
youth" to support this project, as many of these young men 
and women being demobilized from the country's two armed 
forces will return to rice-growing regions and need to be 
engaged in a productive activity.  FAO also reports that the 
West African Regional Development Bank (BOAD) is planning to 
invest approximately USD 238 million to boost regional 
agricultural production, particularly of rice.  No details of 
this planned program were available at the time of the FAO 
meeting, however. 
 
 
Post Policy Proposals 
------- 
¶14.  (SBU) Post plans to work closely with international 
organizations, NGOs, bilateral donors and others through 
multilateral coordination mechanisms to promote increased 
agricultural output, particularly in rice, and reduce 
barriers to internal trade, which should benefit cassava 
trade.  Post will recommend to the host government and 
international partners a measured, modest approach to any 
plans to subsidize consumption, and to target such efforts 
through school feeding programs and other interventions that 
will not counteract the domestic supply stimulus farmers are 
receiving in the form of higher prices.  Post also supports 
the idea of reorienting multilateral economic, development 
and demobilization support towards supporting expansion of 
agricultural output. 
 
 
¶15.  (SBU) Comment.  The spike in international food 
commodity prices has had an important impact on Cote 
d'Ivoire.   With its relatively high per capita rice 
consumption, which is concentrated in the affluent and 
politically key capital city of Abidjan, the political 
ramifications are serious.  Medium and long-term efforts to 
boost production are welcome, and have a good chance of 
succeeding if prices remain relatively high for a sustained 
period of time.  However, the short-term impact has 
 
ABIDJAN 00000279  004.2 OF 004 
 
 
substantial potential to generate additional political 
turbulence as well as cause fiscal dislocations.  End Comment. 
NESBITT