VZCZCXYZ0011
RR RUEHWEB

DE RUEHCL #0048/01 0831043
ZNR UUUUU ZZH
R 241043Z MAR 09
FM AMCONSUL CASABLANCA
TO RUEHC/SECSTATE WASHDC 8329
INFO RUCNMGH/MAGHREB COLLECTIVE
RUEHMD/AMEMBASSY MADRID 3848
RUEHFR/AMEMBASSY PARIS 0694
RUEHRB/AMEMBASSY RABAT 8551

UNCLAS CASABLANCA 000048 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/MAG 
STATE PLS PASS TO COMMERCE FOR NATHANIEL MASON 
 
E.O. 12958: N/A 
TAGS: ECON MO PGOV PREL
SUBJECT: MOROCCO'S MIDDLE CLASS PART II: THE STAGNATION OF 
MOROCCO'S MIDDLE CLASS 
 
REF: CASABLANCA 36 
 
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Summary 
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¶1. (SBU) While the bustling markets that line the streets of 
Casablanca might suggest that Morocco's middle class is 
thriving, many of our contacts note that growth within this 
segment of society has stagnated in part due to the rising 
cost of living and the country,s poor fiscal policies. 
Middle class families are increasingly one major incident ) 
a sudden illness or a car accident - away from falling out of 
middle class status altogether. This is the second of a 
three-part cable series on Morocco,s Middle Class. The first 
(reftel) looked at what, exactly, constitutes the middle 
class in Morocco today. The third will discuss private and 
public initiatives to develop that segment of society. 
 
---------------------------------------- 
The Stagnation of Morocco's Middle Class 
---------------------------------------- 
 
¶2. (SBU) While the bustling markets that line the streets of 
Casablanca might suggest that Morocco's middle class is 
thriving, our contacts argue that in reality this sector of 
the population is struggling.  Recent marketing studies by 
Procter and Gamble (P&G) point to a stagnating middle class - 
defined as a family of four generating between USD 625 to 
2125 per month.  The external affairs director for P&G, Nawal 
Elaidaoui, said that although the absolute number of middle 
class households has grown, the percentage as it relates to 
Morocco,s population has not. In fact, P&G's marketing home 
visits illustrate a deteriorating quality of life for middle 
class families. 
 
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The Rising Cost of Living 
------------------------- 
 
¶3. (SBU) To explain the cause of this stagnation, Elaidaouri 
points to inflation which has badly eroded middle class 
earning power over the past five years. This price pressure 
is only partially captured by official Moroccan statistics, 
which do not fully reflect key increases in such areas as 
housing and education costs.  Elaidaoui uses the story of 
Mustapha Ihsane, who works at a French bank in Casablanca and 
once dreamed of sending his children to private school, to 
illustrate her argument. "We're not middle class anymore; 
we're at the poverty level", said Ihsane. He has a Master's 
degree from France and earns just less than USD1200 a month. 
His salary used to be more than adequate to support his 
family and be called middle class, and until recently he was 
even able to set aside more than a quarter of his salary for 
his parents. But rising prices have changed all that, he 
said. Now he has taken a second job teaching English on 
weeknights to support his wife and three children. Unable to 
buy a car, he takes public buses from his two bedroom 
apartment just outside Casablanca to work. He can no longer 
send anything to his parents. "I have to live day by day", he 
told Procter and Gamble. 
 
¶4. (SBU) Ihsane's case has become the rule rather than the 
exception for Morocco's middle class, and even official 
statistics are showing higher cost of living. After several 
years of low inflation, recent studies by the High Commission 
for Planning (HCP) show that the cost of living has increased 
by four percent since July 2008. Onions rose to 90 cents a 
pound from about 22; medical care jumped about 20 percent; 
private schooling is up 30 percent, says Bekouchi of Hassan 
II University. Middle class families are increasingly one 
major incident - a sudden illness or a car accident - away 
from falling out of the middle class altogether, he added. 
 
¶5. (SBU) Most critically, the urban real estate market in 
increasingly out of the middle class reach. According to 
market surveys, the cost of an apartment in Casablanca has 
risen 43 percent, 45 percent in Rabat, and 92 percent in 
Marrakech in the last four years.  Priced out of the urban 
housing markets, middle class families have turned to social 
housing units which were originally constructed for more 
economically disadvantaged families. (Note: The purchase by 
the middle class of these units is contrary to law and thus 
often requires the payment of a bribe. End Note) 
 
----------------------- 
Morocco's Fiscal Policy 
----------------------- 
 
¶6. (SBU) In addition to the costs imposed by inflation, 
financial experts also attribute the stagnation of the middle 
class to the government's poor fiscal policy, specifically 
its imposition of high marginal tax rates on salaried 
workers. Indeed, our contacts in business and academia, such 
as Youssef El Hadi of the Casablanca Stock Exchange, agree 
that far from promoting the emergence of a middle class, 
government policy has historically penalized it. 
 
¶7. (SBU) For example, Moroccans making over 10,000 MAD (or 
almost USD 1250) per month are subject to individual income 
taxes that amount to 42 percent of their salary, which 
decreases the purchasing power of many middle class families. 
Moreover, at 30 percent the corporate tax rate for small and 
medium businesses, overwhelming owned by middle class 
families, is among the highest in the Maghreb region. 
MILLARD