Mozambique wins long battles over cashew nuts and sugar.

MOZAMBIQUE BANS RAW CASHEW EXPORTS AFTER IMF ALLOWS CASHEW AND SUGAR PROTECTION

Mozambique has banned the export of unprocessed cashew nuts, ending a five-year battle with the World Bank and International Monetary Fund. Meanwhile, the IMF has allowed Mozambique to protect its expanding sugar industry; IMF directors overrode opposition from their own staff.

Allowing Mozambique to protect its two most important agro-industries is a remarkable reversal by the international financial institutions. It results from intense pressure from the Mozambican government, trade unions and business, taken up by international campaign groups.

Cashew became a symbol of mindless trade liberalisation when in 1995 the World Bank forced Mozambique to allow the unrestricted export of unprocessed cashew nuts to India. The World Bank argued that peasant producers would gain higher prices from the free market. But it did not happen -- as a monopoly buyer, India pushed down the price; transfer pricing also lowered the price paid to Mozambique; and traders within Mozambique pocketed larger margins. So the peasants lost out, while nearly 10,000 industrial workers (half women) became unemployed.

For five years Mozambique has campaigned against the ban. Finally, on 18 December the IMF Executive Board agreed a policy under which some cashew factories will be closed, but the rest will be protected. The protection is two-fold, an 18 percent export duty on unprocessed cashew nuts, plus the local industry given the right of first refusal -- to purchase nuts before they are exported. In light of this, the government banned the export of raw cashew nuts in mid- January.

Clippings reproduced below set out the recent events. The long history of the cashew saga was published last year in "Review of African Political Economy" no 83, pages 29-45. The article is also on the web, at http://www.jubilee2000uk.org/policy_papers/roape100400.html

Meanwhile, the IMF Executive Board rejected a demand from its own staff, and agreed that Mozambique can protect its sugar industry, which is now being rehabilitated with major foreign investment. IMF staff had argued that since Mozambique could import sugar cheaper than producing it, it should allow duty-free import of sugar. Investors had demanded protection and were backed by the government. On 18 December, the IMF board agreed with the government and not its own staff.

Cashew and sugar are both about similar issues: Mozambique wants to create and protect tens of thousands of industrial jobs (cashew and sugar are the country's two largest industries). On the other hand, the international financial institutions (IFIs) argue that free trade and globalisation will bring more long-term benefit, outweighing the cost and disruption of massive unemployment. The IFIs believed they could impose their policies, but the international outcry over cashew made them rethink, and accept that they had to listen more closely to elected national government.