Tuesday, April 30, 2002

Helen Epstein has an interesting piece on Mozambique in the New York Review. The ostensible subject is AIDS. (It turns out that a lot of the preconceptions of social workers turned out to be just wrong; women in the villages who aren't promiscuous --- or rather, as it turns out, don't report it --- actually have a higher rate of infection than the prostitutes). But other details about that part of the world filter in, particularly the economic state of the country; "although people in Southern Mozambique are facing a terrible plague, what they wanted to talk about instead was money".

Mozambique is often cited as a development success story, and according to the World Bank, its economy is growing strongly. However, most of this growth is confined to Maputo, the capital city. Rural incomes have been rising far more slowly, if at all. Agriculture, which supports most Mozambicans, grew by only 1 percent in 2000. The construction industry and a single aluminum smelting plant in the southern region account for most of the nation's recent growth. Money earned illegally may also be contributing to Mozambique's ostensibly remarkable economic growth. For example, Joseph Hanlon, a writer and expert on southern Africa, estimates that a ton each of cocaine and heroin pass through the ports of Mozambique every month on their way to the US and Europe.

Some of this, to be sure, is the fault of local politics; Mozambique used to have much more productive industry, but it was hurt badly by the departure of Portugese managers who left after decolonialization, and ruined by the subsequent civil war. But the World Bank and IMF also bear some responsibility:

Mozambique's banks also became notorious for illegal foreign exchange deals, money laundering, and other criminal activities. Since 1997, two executives and one journalist investigating the banking system in Mozambique have been murdered, and several others have been shot at, but not killed. While government officials were ultimately responsible for Mozambique's banking crisis, the World Bank and IMF may also bear some responsibility, because they put pressure on the government to privatize the banks quickly, before regulatory and accounting systems that might have reduced the risks of fraud could be put in place.

As I've pointed out in the past, this seems to fit a pattern; critics of the IMF and World Bank have long faulted them for rushing to privatization without the putting in place regulatory structures needed to actually have a functioning market. (See, for instance, this extensive critique of privatization in Russia, written by Joseph Stigltiz while still at the IMF).

In the meantime, local economic opportunity goes unserved, due in part to the lack of available credit, which is to say, local banks which are actually doing their job:

Mr. Uamusse wanted me to go back to America and find people to invest in southern Mozambique. "Now see here," he said, "we have been driving for nearly two hours, and we have not passed a single town. Why don't they put a town here?" I said I thought that was a good question. "Why don't they put up a factory in this area? We have mangoes, cashews, coconut.... We could make jam, we could make oils? oils for cooking, oils for beauty.... We could use the clay to make bricks...."


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