OPTIMISTIC ABOUT ECONOMIC RECOVERY IN 2017

Signs of recovery in the Mozambican economy allow some optimism for the coming year, according to Prime Minister Carlos Agostinho do Rosario.Speaking on Wednesday in the Mozambican parliament, the Assembly of the Republic, where he introduced the government’s Economic and Social Plan for 2017, Rosario gave, as an example of recent stabilization, an improvement in the exchange rate of the Mozambican currency, the metical.In October the metical had fallen to around 80 to the US dollar, but by this week it had recovered to 73 meticais to the dollar. At the same time the draining of Mozambique’s net international reserves seems to have halted. Between October and the first week of December, the reserves increased by 60 million dollars, said Rosario, due mainly to the sale of foreign exchange by the commercial banks to the Bank of Mozambique.

Rosario admitted that there had been a sharp slowdown in the economy earlier in the year, which he blamed on a combination of drought, the armed attacks by the Renamo rebels on some of the country’s main roads, the fall in international commodity prices, reduced flows of foreign direct investment, and the suspension of direct budget support by some of Mozambique’s main foreign partners.

Donors and funding agencies cut their support to Mozambique in the wake of the scandal of well over a billion dollars of loans to the security-related companies Proindicus and MAM (Mozambique Assets Management) that were illicitly guaranteed by the previous government, headed by President Armando Guebuza. Those loans and guarantees were not disclosed, either to the Mozambican public, or to the International Monetary Fund (IMF) and other foreign partners, and have made the country’s foreign debt unsustainable.

Rosario said that annual economic growth in 2016, far from reaching the target of seven per cent, was only four per cent in the first three quarters of the year. The cost of living soared as the average 12 monthly inflation rate reached 15 per cent in September. (According to the Bank of Mozambique, the accumulated inflation rate from January to December is likely to reach 30 per cent).Rosario said the government had acted by revising the 2016 budget to adjust public expenditure to the real capacity to raise revenue, and had restructured the state business sector “to minimize fiscal risk and promote economic and financial efficiency.Important steps had been taken in exploiting the country’s natural resources, he added, including the plans for a floating liquefied natural gas plant operated by a consortium headed by the Italian energy company ENI, above the Coral South gas field, in the Rovuma basin off the coast of the northern province of Cabo Delgado. In the south, investment plans had been approved for expanded exploitation of natural gas and light oil in the Pande and Temane region of Inhambane province.

Such projects opened good prospects for the coming year, said Rosario, “which will be expressed in the creation of more jobs and business opportunities”.To restore international confidence in Mozambique, he added, the government was committed to an independent international audit of Proindicus, MAM and the Mozambique Tuna Company (Ematum). Between them the loans to these three companies added 20 per cent to Mozambique’s foreign debt.At the same time, Rosario said, the Assembly itself is holding its own inquiry into the public debt, and negotiations with creditors are under way to restructure the debt, in order to make it sustainable.These steps, the Prime Minister said, were regarded positively by the IMF, which had decided to start talks with the Mozambican authorities for a new programme of financial assistance. An IMF mission arrived in Maputo a week ago to begin these negotiations.The government, Rosario said, believed that a new programme with the IMF, “together with the fiscal and monetary adjustment measures under way, will contribute to the consolidation of macro-economic stability and the relaunching of sustainable economic growth in the medium term”.

EMBRAER BRIBE SCANDAL

A document from the Federal Public Prosecutor’s Office in Brazil has named the former chairperson of the board of Mozambican Airlines (LAM), Jose Viegas, as involved in taking an 800,000 US dollar bribe from the Brazilian aircraft manufacturer, Embraer.The scandal came to light in October, when US Assistant Attorney General Leslie R. Caldwell announced that Embraer had agreed to pay a fine of more than 107 million US dollars in connection with schemes involving the bribery of senior officials in Mozambique, the Dominican Republic, India and Saudi Arabia. Under questioning, Embraer admitted that its executives had bribed foreign government officials and had falsified records in connection with aircrafts sales in several countries. The Mozambican connection was a bribe of 800,000 dollars paid via what the Justice Department describes as “a false agency agreement with an intermediary designated by a high-level official” in Mozambique Airlines (LAM). The purpose of the bribe was to secure LAM’s agreement to purchase two aircraft from Embraer for approximately 65 million dollars. The full cost to Embraer of these cases is much higher – the company has also reached a settlement with the US Securities and Exchange Commission (SEC) which will cost it over 98 million dollars, and it will pay the Brazilian authorities 20 million dollars.The documentation on the case from the US Justice Department and the SEC gives details of how the bribe was paid, but gives no names. The Brazilian prosecutors are less reticient. Their document, dated 6 October this year, and signed by both prosecutors and senior Embraer officials names Viegas as the LAM official involved and the intermediary (or “Agent C” as he is referred to in one of the US documents) as Mateus Zimba. 

Zimba was not an employee of LAM. For many years he was the Mozambican manager of the South African petrochemical giant, SASOL, and is currently the regional director of the US company General Electric.According to the Brazilian document, Embraer sales director Patrice Candaten had been trying for three years to sell aircraft to LAM and on 22 May 2008 formalised a proposal for the sale of two aircraft for 32 million dollars each, with an option to purchase a further two at the same price.But on 11 August 2008, Candaten sent an e-mail to Luis Fuchs, Vice-President of Embraer-Europe, saying that he had been approached by Mateus Zimba, who had played no part in the sales negotiations.

Zimba wanted to work as “a consultant” in the deal, and Candaten proposed that Embraer “create some margin for commissions” for Zimba.Fuchs sent a message to Candaten two days later saying he had spoken to Zimba who told him that, although Embraer had not expected to deal with any consultant, “we would like to have ‘a gesture’ on delivery of the first plane”. Fuchs suggested that this “gesture” could be between 50,000 and 80,000 dollars.He added that he had told Zimba how to set up a company to which Embraer could send payments for the supposed “consultancy services”. This company “should not be based in a tax haven”, Fuchs warned.Another senior Embraer official, Jose Molina, approved the offer of 50,000 dollars to Zimba for each of the first two planes with “a margin of negotiation” that could reach 80,000 dollars.But when Zimba received this “offer”, Fuchs soon understood that he was expecting much more, and hinted that unless the “offer” was increased, LAM might buy its planes from some other manufacturer.Viegas then phoned Fuchs, who briefed Candaten on the conversation in an e-mail of 25 August. He said that Viegas had received reactions from unnamed other people who regarded the Embraer offer “as an insult, and to some extent it would have been less offensive to offer nothing at all”.
When Fuchs asked what he would find acceptable, Viegas suggested a million dollars, but eventually settled on 800,000. Funchs told him that Embraer did not have that sort of money for “consultancy servces”, and so Viegas suggested increasing the price of the aircraft. So on 15 September 2008, LAM and Embraer signed an agreement whereby LAM would buy two Embraer E-190 aircraft for 32.69 million dollars each. Viegas was one of the LAM executives who signed the agreement.On 22 April 2009, Embraer signed a commercial representation agreement with the company Xihevele, set up by Zimba, and registered in Sao Tome and Principe. This company was to promote the sale of E-190 aircraft to LAM, even though LAM had already signed the purchase agreement.Xihevele had not existed during the negotiations between LAM and Embraer. The Brazilian document noted that the contract with Zimba’s company falsely stated that its sales promotion work began in March 2008.Although Zimba had provided no services at all to Embraer, the Brazilian company accepted two invoices from him each for 400,000 dollars, and dated 15 August 2009 and 24 September 2009. The money was paid into a Xihevele account in Portugal, and Embraer explained the payments in its own accounts as “sales commissions”.The independent television station STV asked Viegas about the Brazilian account. He replied that he had nothing to say, because a long time had passed, and there are things he no longer remembers. STV attempted to contact Zimba, but he did not answer the phone. According to the Zitamar News Service, Zimba has refused to comment on the matter. Senior Mozambican lawyers believe that the Public Prosecutor’s Office should act. The former chairperson of the Bar Association (OAM), Gilberto Correia, cited in the daily paper “O Pais”, said Mozambican prosecutors should have begun an investigation when the US Justice Department issued its statement.He noted that LAM had been prejudiced because it paid more than it should have for the planes. Correia called for criminal and civil suits against those involved, to oblige them to compensate LAM. 

Teodoro Waty, a former chairperson of Mozambique Airlines (LAM), has said that he did not notice any irregularities in the management of the company when he took over from Jose Viegas in 2011. Viegas has been implicated in the scandal of an 800,000 US dollar bribe paid to LAM by the Brazilian aircraft manufacturer Embraer in 2009.Asked by the independent television station STV for his reaction to the scandal, Waty said “Newspapers are not courts, I have no proof that what is said is true. I trust my predecessor. When I was there, I saw no signs of what has been reported”.Waty seems unaware that the source of the accusation against Viegas is not any media report, but a document signed by Brazilian federal prosecutors and by officials from Embraer itself. Embraer was accused of bribing officials, not only in Mozambique, but also in India, Saudi Arabia and the Dominican Republic. It reached a settlement both in Brazil and in the United States, which involved paying total fines of around 225 million US dollars, and giving full details of the bribes.Despite his apparent trust in Viegas, Waty also hoped that prosecutors in Mozambique will investigate the case. “We hope that Mozambican justice plays its role”, he said. “I believe that it will intervene and that it will be impartial, equidistant, just and speedy to clear up what happened”.A representative of the Mozambican Bar Association (OAM), Filipe Sitoe, told STV “the judicial bodies should do their work, and with full respect for the rights of the suspect”.A second person named in the Brazilian document is Mateus Zimba, who at the time was the manager in Mozambique for the South African petrochemical giant, Sasol, and is now regional director of the US company, General Electric.Zimba was allegedly a middleman in the bribe, setting up a fake company, named Xihevele, and registered in Sao Tome and Principe, which received the money from Embraer in an account in Portugal.The independent newssheet “Mediafax” caught up with Zimba on Thursday at a conference on natural gas held in Maputo’s Joaquim Chissano Conference Centre and tried to ask him about the scandal.According to Friday’s issue of the paper, Zimba replied “There’s nothing I can say. I have a great deal of respect for your work”.When the reporter tried to insist, Zimba simply said “Thank you very much”.

BALTAZAR DENOUNCES ELECTORAL CRIMES

The former chairperson of Mozambique’s Constitutional Council, the body that is the final arbiter on matters of constitutional and electoral law, Rui Baltazar, on Monday demanded that people who commit electoral crimes should be treated in exactly the same way as any other criminalBaltazar is one of the most experienced and respected jurists in Mozambique. As a young lawyer he defended political prisoners in the colonial courts, and after independence he was justice minister and later finance minister in the governments of the country’s first president, Samora Machel. He was the first chairperson of the Constitutional Council, between 2003 and 2009.At a Maputo seminar on the country’s electoral legislation on Monday, Baltazar expressed his anger at the failure of the country’s legal system to punish people who violate the election laws. Despite well attested cases of fraud, and of violence during election campaign, very few people have ever been brought to trial for such offences. Baltazar had direct experience of fraudulent behaviour when would-be presidential candidates presented the Constitutional Council with documents that were obviously forged. One requirement for any presidential candidate is a list of at least 10,000 supporters, whose signatures must be verified by a notary.

Baltazar noted that, in the 2009 elections, one of the would-be candidates presented just ten valid signatures. At the time the Council noted that several candidates from minor political parties presented lists of names that had obviously just been copied from an electoral register, and that signatures had been added that were clearly by the same person. Although forging documents is a serious offence, the Public Prosecutor’s Office took no action against these fraudulent candidates Repeatedly, the media have reported on dishonest polling station staff deliberately invalidating votes (usually for opposition candidates) by adding another mark to ballot papers during the count. This type of fraud was denounced in 2009 by both the National Elections Commission (CNE) and by the Constitutional Council, but no action was taken.“The more electoral offences are committed, the more this behavior becomes normal, banal, and the less seriousness can we expect from our elections”, warned Baltazar”.“Something must be done to put an end to this impunity”, he declared. “It is a crime as serious as any other crime. We must regard the people who commit these electoral offences as criminals, as delinquents, regardless of what party they may belong to”.While it is true that political parties exist to compete for power, said Baltazar, that power should be used to serve the people, and not for personal gain.“Fight to win elections, yes”, he added, “but in order to develop the country, and improve the living conditions of our people, and not for personal benefit. Our political parties should be ashamed of having members or sympathizers who commit electoral crimes, and they should be the first to denounce them, however painful that may be”.He attacked the shift in attitudes away from collective solidarity towards personal benefits. “The philosophy that power exists to serve the people has been replaced by the belief that we must reach power in order to obtain privileges and benefits”, he accused.Political parties ought to be inspired by “ideals of solidarity, of sacrifice for the common good. But this is being lost in our country, if it ever existed, and power is being viewed fundamentally as a source of benefits”.