November 13, 2000
An Oct. 18 news story claims that the World Bank forced Mozambique to adopt policies that exploit the poor. The bank's mission is just the opposite: poverty reduction. By the mid-'90s, Mozambique's cashew-processing industry was too inefficient to be viable.
The export tax made Mozambican nuts expensive on the world market, forcing farmers to sell cheaply to domestic processors. The tax depressed the incomes of about a million poor farmers to protect 10,000 jobs in the processing industry. It also discouraged farmers from improving an increasingly unhealthy and low-yielding tree stock.
By reducing the tax, the government put more money into farmers' hands. Prices for raw nuts, after inflation, rose from 10 cents per pound in 1994 to 18 cents this year. Moreover, by reducing the tax gradually, the government is giving the industry time to adjust.
Several small processors already are competitive. Others are being helped to adopt new technologies and improve management practices to become competitive. Higher prices also are encouraging farmers to better care for their trees, increasing supply to the industry. The current policy thus helps increase farmers' incomes and restore prosperity to the industry - an outcome that everyone desires.
DARIUS MANS
Country Director for Mozambique
The World Bank.
More Information on the World Bank
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