VZCZCXRO8558
RR RUEHMA RUEHPA
DE RUEHBP #0340/01 1531543
ZNR UUUUU ZZH
R 021543Z JUN 09
FM AMEMBASSY BAMAKO
TO RUEHC/SECSTATE WASHDC 0378
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS SECTION 01 OF 02 BAMAKO 000340 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EINV ECON EAGR ECIN EIND ML
SUBJECT: MALI'S COTTON SECTOR STRUGGLES FOR SURVIVAL 
 
¶1. (SBU) Summary:  Tiena Coulibaly, Director of the parastatal 
Malian Textile Development Company (CMDT) and former Director of 
Mali's Cotton Privatization Agency provided the Embassy a sobering 
account of Mali's flailing cotton sector.  Heavily saddled with debt 
and unable to fund Mali's upcoming cotton season without as yet 
unrealized international assistance, the CMDT's precarious financial 
position has been further exacerbated by the recent drop in global 
cotton prices.  Nevertheless, Coulibaly claimed that the CMDT's 
perpetually delayed privatization process continued to advance and 
said a public offer for CMDT shares was slated for July 2009.  In a 
May 18 presentation to the international donor community in Mali, 
International Monetary Fund (IMF) African Department Deputy Division 
Chief Xavier Maret said the World Bank would likely allocate a hefty 
sum to stabilize the sector.  With the CMDT approximately USD 50 
million in debt, however, even a World Bank bailout may not be 
enough to save Mali's once proud cotton sector. End summary. 
 
------------------------------------ 
Cotton Yields Unravel as Debt Builds 
------------------------------------ 
 
¶2. (SBU) Director of Mali's cotton parastatal company (CMDT), Tiena 
Coulibaly, a U.S. trained agricultural economist with a Ph.D. from 
Purdue University, told the Embassy that Mali's cotton sector 
continued to decline over the 2008/9 harvest season, producing the 
lowest output in 20 years (201,000 tons).  CMDT has also not 
received payment for much of the cotton fiber already delivered to 
neighboring ports in fulfillment of prior contracts with buyers.  Of 
the 85,000 tons of fiber produced in 2008/9, 36,000 tons are sitting 
at port as merchants refuse to pay the 2008 prices to which they 
previously agreed.  Instead, merchants are insisting on paying the 
lower current prices, effectively defaulting on their contracts. 
Coulibaly lamented that CMDT had little legal recourse, and was 
forced to wait in hopes that prices would increase or that merchants 
would honor their contracts. 
 
¶3. (SBU) Saddled with debt, CMDT was unable to pay cotton producers 
for the 2008/2009 harvest.  The Malian cotton industry relies on 
credit, with CMDT and the government of Mali underwriting input 
credits provided to producers, which are deducted from payments to 
farmers for their seed cotton.   The CMDT markets and gins the 
cotton, helps to transport it, trains producers, and fixes the price 
before the harvest begins.  A decline in production has increased 
the average cost of production of fiber, and the decline in world 
market prices means that CMDT continues to produce at a loss - as it 
has for over three years.  Coulibaly said banks were now lending 
only the amount for which the banks' own lending was insured.  This 
meant that farmers have received only 39 percent of payments due for 
the 2008/9 harvest.  CMDT is currently unable to finance the inputs 
needed for the 2009/10 growing season. 
 
-------------------------------------- 
CMDT's Optimistic Forecast for 2009/10 
-------------------------------------- 
 
¶5. (SBU) Coulibaly emphasized the strategic importance of Mali's 
cotton industry, arguing that cotton farming has a multiplier effect 
on the economy and that any decline in cotton production was 
accompanied by a decline in the production of other cereals, as 
farmers used the same inputs for their co-located crops. 
Illustrating this point, Coulibaly said in 2006/7 cotton production 
was 415,000 tons and the production of other cereals reached 
1,800,000 tons.  In 2008/9, cotton production was 201,000 and the 
production of other cereals declined as well, to 1,200,000 tons. 
Coulibaly said two million head of cattle in the cotton growing zone 
would also be affected by any decline in the cotton sector. 
 
¶6. (SBU) The Malian Finance Ministry has organized a series of 
meetings with international donors aimed at rescuing the atrophying 
cotton sector.  CMDT hopes to stem this decline in 2009/10 and is 
forecasting a harvest of 330,000 tons.  USDA, on the other hand, is 
forecasting Mali's cotton production for 2009/10 to decline below 
200,000 tons due to eroding farmer incentives and uncertainty over 
the future of the CMDT.  Coulibaly said the CMDT hoped to reach its 
optimistic 2009/10 target of 330,000 tons by again subsidizing 
inputs - a move that would require funding from international 
donors.  The Finance Ministry initially estimated it would require 
CFA 42 billion (USD 84 million) to finance the 2009/10 harvest. 
This figure has subsequently been pared down to what Coulibaly said 
reflected the realities of the global economic crisis.  The final 
sum requested by the Finance Ministry was CFA 23 billion (USD 46 
million).  Of this, CMDT planned to use CFA 6 billion (USD 12 
million) to shore up its cotton processing plants for the upcoming 
campaign, postponing other necessary upgrades until additional 
funding became available.  Coulibaly praised the USAID funded West 
Africa Cotton Improvement Program (WACIP), stating that such support 
had been instrumental to the survival of Mali's cotton sector, and 
expressed hope that this support would continue. 
 
¶7. (SBU) Coulibaly said plans for privatizing CMDT were "continuing 
normally" even though the deadline for privatization has been pushed 
 
BAMAKO 00000340  002 OF 002 
 
 
back to 2010.  The World Bank (WB) began working with the GOM to 
privatize CMDT in 2001.  Coulibaly said a public offering for CMDT 
shares was scheduled to begin in July.  In the meantime, CMDT is 
taking steps to prepare for privatization by establishing an office 
to classify the quality of cotton produced. The CMDT also 
established a committee of agronomists and producers to regulate 
input costs and cotton prices. 
 
¶8. (SBU) In a May 18 presentation to Mali's international donor 
community, International Monetary Fund (IMF) African Department 
Deputy Division Chief Xavier Maret said the IMF was working with the 
Malian government to stabilize the decline in the cotton sector.  In 
the short term, Maret said government subsidies were needed to stem 
job losses and underwrite the 2009/10 cotton campaign.  World Bank 
Senior Agricultural Economist Agadiou Dama told the Embassy on June 
2 that the WB was finalizing a USD 70 million allocation to Mali's 
agricultural sector, including cotton, though he did not specify how 
much of this would be earmarked for cotton. 
 
------------------------------------------ 
Comment: 200,000 Tons and What Do You Get? 
------------------------------------------ 
 
¶9. (SBU) Rescuing Mali's declining cotton sector is a top priority 
for both the Malian government and the IMF, which regards the 
privatization of Mali's cotton parastatal as a central tenet of the 
GOM's poverty reduction strategy framework.  International donors 
may well contribute to this goal, however, this funding, including 
the amount allocated by the WB, may not go far enough toward solving 
the structural issues that have plunged CMDT into debt.  Given the 
CMDT's current inability to pay cotton producers and declining 
global prices that reduce cotton growers' profitability even 
further, finding private investors willing to gamble on Mali's 
unraveling cotton sector will become increasingly difficult.  End 
comment. 
 
LEONARD