VZCZCXRO3964
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHYD #0428/01 1231151
ZNR UUUUU ZZH
R 021151Z MAY 08
FM AMEMBASSY YAOUNDE
TO RUEHC/SECSTATE WASHDC 8835
INFO RUEHZO/AFRICAN UNION COLLECTIVE 0144
RHMFISS/HQ USAFRICOM STUTTGART GE

UNCLAS SECTION 01 OF 03 YAOUNDE 000428 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE ALSO FOR EEB/TPP/ABT/ATP JANET SPECK 
 
E.O. 12958: N/A 
TAGS: EAGR ECON EINV EFIN CM
SUBJECT: RESPONSE: IMPACT OF RISING FOOD/COMMODITY PRICES - 
CAMEROON 
 
REF: STATE 39410 
 
¶1.  (SBU)  Summary.  Cameroon's civil unrest in February 
highlighted the risk of political volatility caused by rising 
food prices.  Cameroon's high food prices are mostly caused 
by poor economic planning and management over the long-term. 
Blessed with enormous agricultural potential, Cameroon could 
reap tremendous benefits from rising global demand for food. 
However, food production has not responded sufficiently, 
largely because of pervasive corruption, especially in key 
agricultural and planning ministries, a stifling business 
climate, the high-cost of inputs (especially gas), and the 
lack of necessary infrastructure (especially farm-to-town 
roads).  The Government of Cameroon (GRC) has responded with 
a series of short-term measures, suspending taxes and 
pressuring retailers.  In our conversations with Cameroonian 
interlocutors, we continue to focus on the need to improve 
governance and economic planning.  Post encourages Washington 
to match the USG's short-term response to the immediate 
crisis with policies to address the long-term factors 
underlying the problem.  These could include: redoubled 
pressure for good governance and fighting corruption, 
policies to reduce the price of gas and encourage new energy 
technologies, creative ways to foster food production in 
underperforming countries, and USG funding for infrastructure 
developments (especially for roads).  End summary. 
 
Demand 
====== 
 
¶2.  (U)  The GRC's Ministry of Economy and Planning 2007 
household survey concluded that rice is "by far, the 
principal food for Cameroonians."  The Food and Agricultural 
Organization's 2004 statistics show Cameroon imported 300,000 
MT of rice at a total value of $85 million, its top import 
item.  Wheat was the second most important import, with 
260,000 MT valued at $69 million.  Other essential 
commodities in Cameroon's food economy include vegetable oil 
(especially palm oil), sugar, fish, corn, plantains, sorghum, 
yams, beans, potatoes, and cassava.  The prices for all food 
and other commodities in Cameroon have increased 
substantially in the last twelve months, especially in the 
last four months.  Although Cameroon is a net agricultural 
exporter, the preponderance of agricultural exports is 
non-food products like coffee and cocoa and Cameroon is a net 
food importer.  Rural communities have been less affected 
than urban populations because they are more self-sufficient 
in food.  Demand for food in Cameroon is magnified by 
consumers in neighboring countries who shop in Cameroon 
because prices are relatively cheaper. 
 
Supply 
====== 
 
¶3.  (SBU)  The World Food Program classifies Cameroon as a 
Low-Income Food Deficit Country.  In 1980, Cameroon's 
coverage of domestic food needs stood at 96 percent; by 2003, 
it had fallen to 80 percent, illustrating that the food 
crisis in Cameroon is systemic and long-term.  Although the 
GRC has announced new spending programs to boost agricultural 
production, there is little evidence that domestic production 
will respond adequately.  Corruption and mismanagement 
promises to misdirect much of the new funding, and many 
obstacles to increased production -- substandard 
infrastructure (especially roads), poor distribution systems, 
insufficient access to credit and other agricultural inputs, 
and prohibitive transportation costs -- will require greater 
planning and a more sustained response.  The press has 
carried some announcements of prospective new investments in 
industrial agriculture and post has noted an up-tick in 
American entities seeking investment opportunities in this 
sector, but most of these projects remain in planning stages. 
 Recent media reporting indicates Chinese companies are 
exploring large-scale rice production in Cameroon.  Most 
Cameroonian production is done by small-scale farmers who do 
not possess the capacity to store their production, and as a 
result many crops are sold at harvest time, when prices are 
already relatively low. 
 
¶4.  (U)  Processing delays in Douala port (which serves 
Cameroon, Chad and the Central African Republic), and 
pervasive corruption are important bottlenecks to increased 
production and more effective use of imported goods. 
Cameroon is receiving a growing number of proposals to 
convert agricultural land into the production of non-food 
crops like bio-fuels.  According to the IMF, food prices in 
Cameroon are especially affected by fuel prices because 
poorly developed infrastructure means fuel costs constitute 
 
YAOUNDE 00000428  002 OF 003 
 
 
an abnormally high percentage of food prices. 
 
Political Impact 
================ 
 
¶5.  (SBU)  Higher food and fuel prices played a major role in 
the violent protests that shook dozens of Cameroonian cities 
and towns during the week of February 25 and which, according 
to official figures, left 40 dead.  The GRC was able to exert 
effective control over the troubled areas within several 
days, but many observers agree that the rare display of 
social unrest revealed fundamental threats to Cameroon's 
stability.  The problem of high food prices is magnified by 
other problems in the country -- widespread discontent about 
President Biya's recent decision to amend the constitution 
and eliminate term limits, about his long tenure and 
authoritarian style, about the economy's weak growth and high 
unemployment -- which could combine with continued food and 
oil prices to spur further unrest in the future.  In the 
midst of the unrest, there were some isolated statements by 
public officials that risked igniting ethnic tension. 
However, although ethnic divisions in Cameroon are still 
worrisome, the mantra of ethnic divisiveness was roundly 
condemned by more vocal appeals to reason.  Comments from a 
number of Post's interlocutors suggest that some Cameroonian 
decisionmakers would be open to considering biotech products. 
 
Economic Impact 
=============== 
 
¶6.  (U)  Official inflation statistics reflect growing 
pressure on prices, but the impact is reportedly moderate. 
However, anecdotal evidence suggests that the impact on the 
average pocketbook is higher than official statistics 
indicate.  The impact of higher food prices, exacerbated by 
higher oil prices, will probably be felt more strongly in the 
coming year.  Cameroon's fiscal position will be negatively 
affected by government decisions to suspend import duties and 
taxes on basic commodities (and concurrent decisions to raise 
civil service wages). 
 
Environmental Impact 
==================== 
 
¶7.  (U)  Post is currently unaware of a direct impact on 
Cameroon's environment, but the growing number of proposals 
to produce biofuels and other products suggest that more land 
will be consumed by agriculture (and not necessarily for food 
crops) in the coming years. 
 
Government Policy Response 
========================== 
 
¶8.  (U)  The GRC has temporarily suspended import duties and 
other taxes on basic food stuffs.  There have been no quotas 
or restrictions on exports.  There have been no 
nationalizations or redistributions of farms or industries. 
The Central African Bank (BEAC) that controls monetary policy 
for Cameroon and the Central African Economic and Monetary 
Union (CEMAC) zone has not announced any special measures to 
curb inflation.  The GRC, through the Ministry of Commerce, 
has negotiated with wholesalers to set new, reduced prices 
for many commodities.  Anecdotal and press reports, however, 
suggest that few retailers are adhering to the price 
guidelines.  A 50 kg bag of rice that cost 10,000 CFA in 2006 
is now selling for between 15,000 and 20,000 CFA, with some 
analysts predicting 30,000 by December 2008. 
 
¶9.  (SBU)  Government official concede that these measures 
can only address food prices in the very short-term, 
acknowledging that the longer term solution has to focus on 
boosting agricultural production.  The Ministry of 
Agriculture and other government entities have announced a 
series of new assistance programs for agricultural producers. 
 In the past week, the GRC held an urgent Cabinet meeting to 
discuss food prices and ways to improve agriculture. 
However, given the GRC's poor track record with such programs 
in the past and the persistence of barriers like poor 
infrastructure and high fuel prices, there is scant reason to 
believe these programs will have much impact.  There has not 
been any impact on relations with neighboring countries, and 
the GRC is likely to avoid confrontation, but high and rising 
demand for Cameroonian food from oil-rich Nigeria, Equatorial 
Guinea, Gabon and Chad could enflame nationalist resentments 
among Cameroonian consumers. 
 
Impact on Post Programs 
======================= 
 
YAOUNDE 00000428  003 OF 003 
 
 
 
¶10.  (U)  Mounting pressure on the GRC to increase domestic 
food production has helped remove long-standing bureaucratic 
bottlenecks to a stalled food-production component of the 
USDA's FY03 Food for Progress program.  A proposed 
rice-husking factory in the northern Lagdo region had been 
stalled by political opposition within the GRC.  Informal 
reports from contacts in the GRC and published minutes from 
Prime Minister Ephriam Inoni's April 24 meeting with the 
cabinet suggest that the GRC plans to fast-track final 
approval for the project. 
 
Policy Proposals 
================ 
 
¶11.  (U)  For the GRC:  In our conversations with Cameroonian 
interlocutors, we continue to focus on the need to improve 
governance and economic planning.  Cameroonians are demanding 
meaningful action from the GRC; we may be able to leverage 
this domestic political pressure (partly, but not fully, 
resulting from rising food prices) to press for greater 
movement on broader economic reform and efforts to attract 
investment. 
 
¶12.  (U)  For the USG:  Post encourages Washington to match 
the USG's short-term response to the immediate crisis with 
policies to address the long-term factors underlying the 
problem.  These could include: redoubled pressure for good 
governance and corruption fighting, policies to reduce the 
price of gas and encourage new technologies, creative ways to 
foster food production in underperforming countries and 
USG-funded infrastructure developments (especially for 
roads).  We could also urge countries like Cameroon to keep 
more accurate, up-to-date data on agriculture to help with 
better planning. 
GARVEY