MOZAMBIQUE: WB destroys cashew industry

May 17, 2000
Issue 

BY NORM DIXON

The International Union of Agricultural, Food and Hotel Workers — which has 330 affiliated unions in 124 countries — has pledged to wage "a very strong" campaign on behalf the more than 9000 workers, mainly women, thrown out of work after the World Bank-imposed "reform" on the poverty-wracked African country's cashew nut processing industry.

Seemingly at odds with the mantra of the WB, and its soul mate the International Monetary Fund (IMF), that Third World countries must tailor their economic policies so as to concentrate on the export of cash crops, WB imposts have severely damaged Mozambique's second most valuable export industry.

Tens of thousands of Mozambican peasants who cultivate cashew trees have also been negatively affected. Workers in India, who are now doing the jobs lost by African workers, are processing cashews using methods that are hazardous to their health.

By the beginning of the 1990s, Mozambique's efficient state-owned cashew processing factories — employing more than 9000 workers — had developed an ingenious mechanised process to avoid the health problems associated with shelling cashew nuts. Cashew shells contain an acid which damages workers' fingers when shelled by hand.

The Mozambique government levied a 20% tax on the export of unprocessed nuts in response to the Indian government's subsidisation of its cashew processing industry.

The Indian industry was considered more "competitive" because it was based on the "cheaper" method of hand processing — cheaper because the costs of the damage to workers' health was not factored into the equation and because many of the shellers are children.

In 1994, at the insistence of the WB, the Mozambique government privatised the cashew processing factories. Contrary to WB expectations, local businesspeople bought the factories rather than Western corporations. The government agreed to maintain the export tax to allow the new owners time to modernise the factories.

The WB demanded that the government phase out the tax on the export of unprocessed cashews over three years. The government, the local processing companies and trade unions protested but the WB made the elimination of the export tax a "necessary condition" for aid as part of its 1995 "country assistance strategy". The 1996 joint IMF-WB "Policy Framework for Mozambique" did the same.

Paraphrasing the famous Mafia saying, Joe Hanlon, a noted researcher and opponent of the IMF and WB, pointed out in an October 1997 paper written for the Africa Faith and Justice Network, "A World Bank 'necessary condition' is an order which cannot be refused".

Hanlon reported that a Mozambique official revealed "The World Bank told us we must say this is our policy and to stop saying it is imposed by the bank. We know aid is conditional on World Bank approval, and now we must lie to get WB approval. And we will. But we remain totally opposed to a policy that will destroy our cashew industry."

In 1997, WB president James Wolfensohn ordered a study of the impact of the tax reduction — it then stood at 14% — and placed a moratorium on further forced reductions. In that year, more than half of Mozambique's cashews were exported to India unprocessed. By the middle of the year, around 7000 workers were unemployed, most of the country's 14 factories were closed and most of the Mozambican entrepreneurs who bought the factories had been bankrupted.

The study confirmed Mozambique's objections. It found that Indian government subsidies undercut Mozambique's more worker-friendly processing factories; peasants gained nothing from cashew export liberalisation; and that Mozambique earned an extra US$130 a tonne by processing its cashews in Mozambique. The report concluded that Mozambique should increase the cashew export tax.

However, the WB rejected its own study and the export duties were not restored. As Hanlon noted in a 1999 article, "The World Bank argued that the free market will impose efficiency and if children in India will work for less than women in Mozambican factories, then the factories should close".

In July, the Mozambican parliament was to have considered a new law to again increase export duty on unprocessed cashews to 20% to allow the cashew factories to reopen. However, the WB and IMF again stepped in.

Mozambique's qualification for debt relief under the "heavily indebted poor countries" initiative was conditional on completing a six-year IMF "enhanced structural adjustment facility". The ESAF agreement, signed in July, required Mozambique to introduce an anti-poor value added tax (like Australia's GST), to increase health service charges several-fold and to "not adopt new, or increase existing, general import surcharges or export taxes and restrictions".

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