VZCZCXRO8753
RR RUEHMA RUEHPA
DE RUEHRY #0176/01 1291251
ZNR UUUUU ZZH
R 081251Z MAY 08
FM AMEMBASSY CONAKRY
TO RUEHC/SECSTATE WASHDC 2495
INFO RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 CONAKRY 000176 
 
DEPT FOR AF/W 
DEPT FOR EB/IFD/OMA 
DEPT PLEASE PASS TO USTR FOR LAURIE ANN AGAMA 
DEPT PLEASE PASS TO COMMERCE FOR SALIHA LOUCIF 
TREASURY FOR OFFICE OF AFRICAN NATIONS 
 
SIPDIS 
 
E.O. 12598:  N/A 
TAGS: ECON EPET PGOV GV
SUBJECT: REGIONAL PRICE SURVEY - INSIGHTS INTO REGIONAL TRADE 
 
REFTEL: CONAKRY 0064 
 
¶1.  (U) SUMMARY. An inter-Embassy regional price survey of select 
necessities in Guinea and its neighboring countries shows that while 
there is a rough parity in prices, significant differences remain. 
With respect to Guinea, the data illustrates why the GOG's newly 
imposed export ban is bad economic policy.  The apparent differences 
in prices from country to country for specific goods, especially 
rice and fuel, suggest opportunities for cross-border trade and/or 
smuggling.  END SUMMARY. 
 
¶2.  (U) Embassy Conakry conducted an informal survey of regional 
prices for staple good, in coordination with our embassies in Mali, 
Senegal, Cote d'Ivoire, Liberia, Gambia, Guinea-Bissau, and Sierra 
Leone, during the week of April 14.  The survey covers gasoline, 
domestic and imported rice, potatoes, and flour.  (NOTE: The 
production figures mentioned herein may not be reliable as they are 
reported by the GoG, whose data collection is haphazard at best. 
END NOTE.) 
 
-------- 
GASOLINE 
-------- 
 
¶3.  (U) Gasoline ranges from 1.05 USD per liter in Monrovia to 1.63 
USD per liter in Dakar, with a rough median around 1.55 USD per 
liter.  All reported prices are within one standard deviation, 
except for outlier Liberia.  (NOTE: Standard Deviation is a 
statistical measure of dispersion of data points around the mean.  A 
smaller number indicates less dispersion.  END NOTE.) 
 
¶4.  (U) Prior to terminating a gasoline subsidy which resulted in a 
gasoline price increase on April 1 (REFTEL), Conakry had the 
cheapest gas in the region at about .95 USD per liter.  This price 
reportedly spurred rampant gasoline smuggling from Guinea into 
neighboring countries.  For example, the local World Bank 
representative told Econoff that prior to the end of the subsidy and 
subsequent price increase on April 1, Siguiri, a town of about 
50,000 people near the Malian border, consumed the same amount of 
gasoline as Conakry, a city of two million. 
 
¶5.  (U) According to the survey it now appears that Liberia has the 
lowest price for a liter of gasoline, suggesting that Guineans may 
start looking to import fuel from Liberia, if they are not already 
doing so. Guinean gas is still .25 USD cheaper than that sold in 
Sierra Leone, suggesting continued opportunity for smuggling out of 
Guinea, although probably less than before. 
 
------------- 
DOMESTIC RICE 
------------- 
 
¶6.  (U) The survey indicates that prices for domestic rice range 
from 17 USD per 45 kg sack in Liberia to 56.12 USD for a 50 kg sack 
next door in Sierra Leone.  All reported prices are within one 
standard deviation, except for outliers Sierra Leone and Liberia. 
 
¶7.  (U) In Guinea, domestic rice is reported to be preferred to 
imported rice.  However, because imported rice is cheaper, it is in 
greater demand.  The interesting phenomenon is that the price for 
domestic rice rises in lock-step with imported rice, even though 
little of the domestic rice is legally exported. The World Bank 
reports production of domestic rice is five times the quantity of 
rice imported.  President Conte grows rice on his private 
plantations, most of which is reportedly exported, although exact 
information is not available.  It is rumored that the president's 
rice shipments are not subject to export controls. 
 
¶8.  (U) For domestic rice, this rapid price increase could be a 
result of one of the provisions of the tripartite agreement settling 
the general strike in early 2007, which set the price of rice set at 
87,500 Gnf per 50 kg sack.  The arbitrary price control was 
insupportable in the open market, leading to corrective market 
adjustments.  (NOTE: That agreement reduced the price initially for 
several months, and then gradually allowed the sellers to adjust 
prices according to the market rates.  END NOTE.) 
 
------------- 
IMPORTED RICE 
------------- 
 
¶9.  (U) The survey indicates that prices for imported rice range 
from 30 USD per 45 kg sack in Liberia to 54.74 USD for a 50 kg in 
 
CONAKRY 00000176  002 OF 003 
 
 
Cote d'Ivoire.  All reported prices are within one standard 
deviation, except for outlier Cote d'Ivoire.  The price of imported 
rice in Cote d'Ivoire is more than two standard deviations from the 
mean. 
 
¶10.  (U) In 2007, according to official government figures, Guinea 
produced domestically about one million three hundred thousand (1.3 
million) tons of rice; while importing about three hundred thousand 
(300,000) tons.  The Government of Guinea reports that India was the 
main supplier of rice for 2007, with China a distant fourth. 
However, even with a drop-off in rice imports from China during 
2006-7, for the period 2001 to 2007, China supplied 1/3 of all rice 
imported to Guinea. 
 
¶11.  (U) In Guinea, the price of imported rice appears to drive the 
price of domestically produced rice, although the correlation is not 
exact.  In November 2007, imported rice cost 27.90 USD per sack, 
while domestic rice cost 34.88 USD.  That 7 USD difference has now 
shrunk to about 2 USD per sack, but both prices have increased to 
the 42 to 44 USD range. 
 
---------- 
POTATOES 
---------- 
 
¶12.  (U) The survey indicates that prices for a 50 kg sack of 
potatoes range from 10.53 USD in The Gambia to 60.82 USD in Cote 
d'Ivoire.  The price of potatoes has the widest spread of all prices 
surveyed.  This wide disparity in price could be a result of taste 
preference, rather than other economic forces at work. 
 
¶13.  (U) Guineans prefer rice to potatoes, even though the Fouta 
Djalon region produces significant amounts of high quality potatoes. 
 Contacts have asserted that Guinea produces nine thousand tons of 
potatoes domestically, but only consumes five thousand tons.  These 
potato producers reportedly export their product to other 
surrounding countries.  The significant price differential between 
rice and potatoes reflected in the survey for Guinea (approximately 
30 USD) is greater than that for any other country surveyed, save 
the Gambia, and could reflect the preference of Guineans for rice 
over potatoes.  The evidence of a substitution of potatoes for 
increasingly expensive rice could show up as an increase in the 
price for potatoes. 
 
----- 
FLOUR 
----- 
 
¶14.  (U) According to the survey, flour ranges from 41.05 USD in the 
Gambia to 71.77 USD in Cote d'Ivoire. Only Cote d'Ivoire is outside 
of one standard deviation from the mean. 
 
¶15.  (U) In Guinea during December 2007, the price of local flour 
and imported flour were the same, at about 36 USD per 50 kg sack. 
Currently, there is a 5 USD difference between local flour and 
imported flour, but the prices have risen to between 45 USD and 50 
USD.  This difference equates to a 38% increase in the cost of 
domestic and imported flour over the last 5 months, while the cost 
of bread has risen about 20% so far this year.  The difference in 
increases may be explained by unconfirmed local press reports of 
pressure by the government on bakers not to raise prices too much 
because the population is reportedly very sensitive to the price of 
bread. 
 
------- 
COMMENT 
------- 
 
¶16.  (U) COMMENT:  The regional price survey provides some useful 
data as to price trends in the region.  With respect to Guinea, the 
data illustrates why the newly imposed export ban of the government 
of Guinea is unlikely to succeed, and may have unintended 
consequences for Guinea.  For example, the current interdiction of 
the export of potatoes could force producers out of business since 
the domestic potato market cannot support a significant increase in 
supply without a corresponding price decrease in an already 
inexpensive product, without an increase in demand. 
 
¶17.  (U) The data also illustrates why Guinea's previous subsidized 
pricing of its gasoline at .95 USD per liter reportedly led to 
massive smuggling since there was a more than .50 USD difference per 
liter between Guinea and its neighbors.  The recent increase in fuel 
prices in Guinea means that fuel smuggling out of the country will 
 
CONAKRY 00000176  003 OF 003 
 
 
likely taper off, but there may still be an interest in smuggling 
into Sierra Leone.  There may also be increased interest in 
smuggling fuel in from Liberia, where it is sold for .50 USD less 
than in Guinea. 
 
¶18.  (U) Given the relatively low prices for rice and gas in 
Liberia, Guinea could experience an influx of cheap rice and gas 
from Liberia, thus increasing supplies of these staples.  Similarly, 
if the current export restrictions on potatoes stay in place, Guinea 
could experience an increase in potato smuggling to neighboring 
countries.  Contacts report that most of the prices of substitute 
goods for these staples are also rising, leading little left but 
potatoes once rice become unaffordable, assuming the export ban on 
potatoes has not driven the producers out of business first. 
 
¶19.  (U) The market mechanism for prices is complex.  For example, 
if Guinea's export ban is successful in bringing down the price of 
domestic rice in Guinea, the resulting affordability could encourage 
an increase in rice smuggling to neighboring countries to take 
advantage of the differential, thereby driving up demand and thus 
price.  This would nullify the purported justification for the 
export ban. 
 
¶20.  (U) Embassy thanks Wallace Bain for Senegal and Guinea-Bissau, 
Brian Bachman for The Gambia, Amantchi Beugre for Cote d'Ivoire, Amy 
LeMarr for Sierra Leone, Lucy Abbott for Liberia, and Glenn Fedzer 
for Mali who willingly collected the data from each of their 
respective posts.  END COMMENT. 
 
          Senegal  Guinea   Guinea-Bissau  Cote d'Ivoire 
Gas        1.63      1.55       1.56             1.49 
Dom.Rice  48.66     44.44      42.58            39.53 
Imp.Rice  42.57     42.22      36.50            54.74 
Potatoes  31.63     13.33      21.90            60.82 
Flour     53.53     50.00      43.80            71.77 
 
 
          Liberia   Sierra L.    Mali         Gambia 
 
Gas        1.05       1.30       1.54           1.57 
Dom.Rice  17.00      56.12      42.16          42.11 
Imp.Rice  30.00      40.82      38.93          39.47 
Potatoes  15.00      32.32      31.93          10.53 
Flour     45.00      44.22      52.92          41.05 
 
Notes: 
All prices are in USD 
Gas is priced per liter 
All other quantities are for 50 kg, except Liberia at 45 kg 
Prices are for week of April 14 
 
CARTER