allafrica.com OPINION February 7, 2003 Posted to the web February 9, 2003 Adrian Njau

TANZANIA has the most abundant natural wealth in the world, and yet is among the poorest nations of the world. Among the natural resources it has are arable land, excellent tourist attractions, a variety of minerals, geographical position and inexpensive labour.

All these offer tremendous investment opportunities; yet the country has failed to attract significant investments to ease the abject poverty in which its people live. Join allAfrica's Discussion: How to Wage the War on AIDS >>

The incidence of poverty is worsening with the relentless march of globalisation that entails stiff competition all round. This is a definite threat that is making Tanzanians even more marginalised.

While the country has shown commitment in fighting poverty under the Government's Poverty Reduction Strategy (PRS), the most important thing now is how the country can become competitive in the new global dispensation. On paper, at least, the Government targets to reduce poverty by 50 per cent by the year 2025!

Reduction of poverty under the PRS can be attained if, and only if, the country would record a higher broader-based annual economic growth of between 8 and 15 per cent for the remaining 22 years to 2025.

To attain such an economic growth, Tanzania has two options to focus on: either to continue expanding primary exports, or to rely on expansion of the manufacturing sector.

As it is evident now, Tanzania has opted for the former strategy: expansion of primary exports, leaving the manufacturing sector out of its priority sectors needed to fight poverty.

Although the Government has not specifically formulated a Primary Export Strategy (PES), it is nevertheless clear from its Poverty Reduction Strategy Paper (PRSP) that the agriculture sector has been singled out as priority in its poverty reduction efforts.

The manufacturing sector is not considered as a priority sector toward poverty reduction under the PRS.

There is a wide consensus among Tanzanian economists and business analysts on the rationale of taking agriculture as the priority sector in the crusade against poverty.

They argue that Tanzania can easily become a successful exporter of primary goods than of manufactured goods. This is because the country has an abundance of natural resources such as fertile land, livestock, fish, minerals - and, more important, cheap labour.

Another rationale for choosing agriculture as a priority sector in poverty reduction is because agriculture is the mainstay of Tanzanias' economy. Over 80 per cent of Tanzania's labour force is employed in the agriculture sector, which alone contributes over 50 per cent of the Gross Domestic Product (GDP).

However, efforts in the past to fight poverty through primary exports has had very negligible or no fruits at all. This is due to the fact that, unlike many other countries, Tanzania's agriculture is geared on exports of unprocessed goods.

The best primary export strategy that has sustainable impact on national development is the one that concentrates on exporting processed products and not unprocessed exports.

Unprocessed primary resources face an unpredictable future in the world market due to its price instability and inelastic demand. Over the years, primary agricultural products such as sisal, coffee, cotton and tea have been experiencing continued decline in prices in the world market.

For Tanzania at least to gain from agriculture, it needs to shift from exporting unprocessed agricultural products to processed ones after adding some value to them.

Success in poverty reduction depends heavily on how best Tanzania can shift from a country of comparative advantages to one of competitive advantages.

While during the old days of comparative advantage, countries were relying on abundant natural resources and cheap labour, countries have today embraced new paradigms of competitive advantage where countries are making strategic choices in global markets.

Under the current situation in the global markets, abundant natural resources, inexpensive labour and fertile soil - which are the basis for comparative advantage argument -are no longer sufficient as an engine of growth.

For example, Venezuela and Nigeria, even with abundant natural resources of oil reserves, have failed to fight poverty altogether through using their oil. Starting commercial drilling in 1914, Venezuela became the world's No 1 oil exporter in 1928 - and the fastest growing economy in the world between 1920 and 1980. Oil still accounts for a third of the country GDP; yet Venezuela remains among the poorest countries in the world!

It is beyond doubt that excess dependence on natural resources prevents diversification. The fluctuations of unprocessed agricultural product prices in the world market has resulted in huge exchange rate fluctuations in those countries - including Tanzania - that heavily rely on exporting unprocessed exports.

Large exchange fluctuations make investment unpredictable, pushing up interest rates to a point at which no legitimate business can afford to borrow.

The average lending rate in Tanzania is above 20 per cent, while the deposit rate is average below four per cent - too wide a gap!

Exchange rate fluctuations are even worse, with the Tanzania shilling depreciating year after year. While the shilling was traded at Tsh917 per US dollar in January last year, it depreciated to Tsh1000 per dollar on May 20, 2002. It now averages out at Tsh985 per dollar.

This situation teaches us that Tanzania has to move away from the old world of comparative advantage and embrace the new world of competitive advantages. We should not be exporting today what we were exactly exporting in the early 1960s. We need to diversify our exports over time, regardless of how much we are earning from it. This should not only be the practice in agriculture, but also in other sectors such as mining and tourism.

What we are earning from mining now (especially in gold exports) can be reinvested in other sub-sectors because we know for sure mining (of gold and other minerals) is not sustainable.

We can learn from what is happening to Zambia now after its earnings from copper started to decline. The same happened to Ghana with its gold. Currently, gold accounts for about 50 per cent of Tanzania non-traditional export earnings. But, despite heavy investments in the mining sector, many Tanzanians do not receive any significant benefits from the sector!

We must also turn our comparative advantage in agriculture into a competitive one. It is high time we focused on exporting processed agricultural products and not raw produce. Adding value to agricultural produce will make our goods more competitive rather than just exporting them in raw form.

Article written by Nicaraguan reporter German Novelli for Tal Cual newspaper. It speaks for itself.   This may happen (From my exile)

On January 10th. 1978 Pedro Joaquin Chamorro Cardenal, director of newspaper La Prensa and martyr of public freedom was assassinated in Nicaragua. A year later, in the Riguero neighborhood of Managua, two US reporters, from the ABC news team, were detained by National Guard troops. The cameraman managed to stay back half a block away and, hidden behind some bushes, taped one of the most negative images of the war that would completely wipe out Somoza. Reporter Bill Stewart was forced by a guardsman to lay face down on the pavement and, without any type of compassion, he was shot by two rifle bullets in the head.   The attacks by Anastasio Somoza began with sanctions against the printed media that was denouncing the abuses. Later he arrested the Editor of the newspaper la Prensa, who suffered, before being assassinated, jail, tortures and exile. Somoza had as his motto:” To my friends, the honors, to the indifferent, the stick, to my enemies, the bullets”

As to the televised media, Stewart was assassinated as revenge for showing on the screen the horrors that the regime was imposing on the people. The intimidating visits to Venezuelan TV stations, the threat that there will be no dollars for newspapers to buy newsprint, the Content Law that will be discussed by the National Assembly and the repeated announcements by Hugo Chavez to shutdown TV stations are the first steps. Afterwards, more abuses will come. It would not be strange if Gustavo Cisneros is detained for treason and Miguel Henrique Otero assassinated. Neither that the deaths of Virgilio Fernandez and Jorge Tortosa (reporters killed while covering demonstrations) will be followed by those of others.

They are notes of history. A history that is repeating in Venezuela. Chavez, just like Somoza, argues Constitutional reasons to stay in power, just like Somoza, ignoring the majority that rejects him. Hugo Chávez, just like Somoza, has turned the National Guard into his storm troopers to quiet their voices and run over defenseless women.   Chavez, just like Somoza, has proven that he is not willing to leave stone over stone in the places where the opposition lives. Then, gentlemen of the media, my fellow reporters: Known things are silenced and because they are silenced they are simply forgotten.   Germán Novelli

www.fortune.com FORTUNE Tuesday, January 21, 2003 By Jerry Useem

"Ten years from now, 20 years from now, you will see," former Venezuelan Oil Minister and OPEC co-founder Juan Pablo Perez Alfonzo predicted in the 1970s, "oil will bring us ruin." It was an oddball statement at a time when oil was bringing Venezuela unprecedented wealth--the government's 1973 revenues were larger than all previous years combined, raising hopes that black gold would catapult Venezuela straight to First World status. But Perez Alfonzo had a different name for oil: "the devil's excrement."

Today he seems a prophet. When it hit the jackpot, Venezuela had a functioning democracy and the highest per-capita income on the continent. Now it has a state of near-civil war and a per-capita income lower than its 1960 level.

Far from an anomaly, Venezuela is a classic example of what economists call the "natural resource curse." A 1995 analysis of developing countries by Jeffrey Sachs and Andrew Warner found that the more an economy relied on mineral wealth, the lower its growth rate. Venezuela isn't poor despite its oil riches--it's poor because of them.

How could that be? For the same reason so many entertainers go bankrupt. Showered with sudden windfalls, governments start spending like rock stars, creating programs that are hard to undo when oil prices fall. And because nobody wants to pay taxes to a government that's swimming in petrodollars--"In Venezuela only the stupid pay taxes," a former President once said--the state finds itself living beyond its means.

A cycle begins. The economy can't absorb the sudden influx of money, causing wages and prices to inflate and the nation's currency to appreciate (by an average of 50%, according to a World Bank economist's study). That makes it harder for local manufacturers to compete. Incentives, meanwhile, become wildly distorted. When free money is flowing out of the ground, people who might otherwise start a business or do something innovative instead busy themselves angling for a share of the spoils. Why slog it out in a low-margin industry when steering some oil business toward a contact could make you a millionaire? Thus a doubly deadly dynamic: a ballooning public sector, a withering private one.

Eventually you're 16th-century Spain. It, too, once struck it rich on gold (not the black kind) from the Americas. Its monarchs spent like loons, expanding the army 15-fold, creating an elaborate patronage system and sending conquistadors in search of El Dorado. (Spanish gold also financed Columbus's discovery of Venezuela.) While inflation and currency appreciation slowly killed industry and agriculture, a parasitic class of noblemen lived off gold money (think of Saudi Arabia's idle princes), waiting for the next ship to come in. By the time ships stopped coming, Spain wasn't able to feed itself, forcing it to declare bankruptcy eight times and finishing it as a world power.

But the Midas myth dies hard. "This is a country that can never, ever sustain itself on oil," Terry Lynn Karl, author of The Paradox of Plenty: Oil Booms and Petro-States, says of Venezuela. "But everyone from the President to the poor believes it can." And therein lies the trap. President Hugo Chavez rode popular rage into office by focusing on corruption. But what neither he nor anyone else will face up to is this: Oil is not an economy. Creative economic activities have spillover effects that become self-sustaining. Oil spills only into a barrel--and from there usually into the hands of a favored few. That's the real reason Venezuela's productivity growth has been roughly half the Latin American average.

Can the curse be avoided? A few smaller countries--Malaysia, Norway, Mauritius--curbed its worst effects by spending slowly and using the money to diversify their economies. In Venezuela oil still accounted for 80% of exports before a devastating strike made even that scarce. As a 16th-century Spanish economist said of his homeland, "What makes her poor is her wealth"--a suitable lament for Venezuelans who have been waiting so long for their ship to come in. From the Feb. 3, 2003 Issue

www.globeandmail.com By PAUL KNOX

Wednesday, February 5, 2003 – Page A17

CARACAS -- A major thrust of Canadian foreign policy during the 1990s was aimed at giving Ottawa a stronger presence in the affairs of Latin America and the Caribbean. It culminated in the 2001 Summit of the Americas in Quebec City, where a timetable for hemispheric free-trade talks was approved and where Prime Minister Jean Chrétien proudly dubbed the 34 member countries a gran familia.

Nearly two years later, the family is struggling. Economic growth in Latin America is at a standstill, and the region continues to frighten mainstream investors. On the social side, Latin Americans are disillusioned with the harsh market-friendly policies that appeal so strongly to the hemisphere's free-traders. They are turning to politicians who offer at least the promise of relief.

Where is Canada now that times have got tough? A lot less visible than it was in Quebec City, even through the tear gas. "The profile we had developed by the time we finally got to Quebec City is starting to dissipate," says John Graham, a retired diplomat and veteran of postings in Latin America. He chairs the Canadian Foundation for the Americas, an independent (though largely government-funded) policy and research group in Ottawa known by the acronym FOCAL.

Two important presidential inaugurations in South America last month were attended not by Mr. Chrétien or Foreign Affairs Minister Bill Graham or any other cabinet minister, but by relatively low-level parliamentary representatives. In Brasilia, on New Year's Day, it was House of Commons Speaker Peter Milliken who watched as Luiz Inacio Lula da Silva took office. Two weeks later, Canada dispatched Senate Speaker Daniel Hays to Quito for the inauguration of Ecuador's Lucio Gutierrez.

So what, you say. Who cares about formal ceremonies? Don't we take care of business in other ways?

Yes and no. The usual practice among the Latin republics is for the president to attend such events. Actual political business often gets transacted and, if you're not there with a dance card, you don't get out on the floor. "For the Latin Americans, it's hugely important the level at which you turn up at these things," Mr. Graham says.

A higher level of representation might have stopped Canada from being sidelined in activity regarding the acute political crisis in Venezuela. At talks in Quito led by Mr. da Silva, leaders agreed to form a six-nation group known as Friends of Venezuela to offer support to talks between the embattled government of President Hugo Chavez and a broad opposition coalition. This is the kind of thing Canadians are good at. In 2000, Canada played a key role in defusing a political crisis in Peru, and it seemed natural to offer to do so again.

"We had made our desires known," a senior Canadian official says. "We would have been willing to serve." Yet when the white smoke emerged in Quito, the group turned out to consist of Brazil, Mexico, the United States, Chile, Spain and Portugal. (That's right, Portugal.)

Mr. Graham's spokeswoman, Isabelle Savard, says that, under the rules of diplomatic protocol, parliamentary speakers are considered senior to cabinet ministers, and that Mr. Milliken had productive meetings with several Brazilian ministers. But several experienced Latin America hands have told me that protocol is one thing, and possessing the authority or credibility to take part in intense political talks is quite another.

At this point, it's not clear how important the six-nation support group for the Venezuelan talks will turn out to be. But Venezuela aside, Canada needs to be higher on Mr. da Silva's radar screen -- if only to ensure that the ongoing Canada-Brazil dispute over export subsidies for commuter-jet aircraft is managed without ill will.

In an unusually strong editorial in its current monthly bulletin, FOCAL says Ottawa blew it in Brasilia. "The Canadian government squandered a wonderful opportunity to repair a fractured relationship with one of the most important governments in the hemisphere," it says, adding that "if Canada wants to be included in the decisions that are reshaping a continent, it needs to get into the trenches, attend the high-level events and show the respect that the powers and the aspiring powers of the Americas deserve."

There is great uncertainty this year in Latin America. Venezuela and Argentina are swimming in economic difficulties, Colombia's internal armed conflict has escalated and the bloom is off the presidency of Mexico's Vicente Fox.

It's hardly the time for fair-weather friendship. When you're adopted into a gran familia,it's supposed to be a lifelong deal. pknox@globeandmail.ca

www.globeandmail.com

By STEVEN CHASE Wednesday, February 5, 2003 – Page A13

OTTAWA -- Prime Minister Jean Chrétien is lobbying heads of state across the Western Hemisphere to hold a special Summit of the Americas this year to bring a dozen newly elected leaders into the fold, most notably Brazil's Luiz Inacio Lula da Silva.

The next regular Summit of the Americas is not expected to take place until 2005, in Argentina. Federal officials said Mr. Chrétien, chairman of the Summit of the Americas process until June, wants an extra meeting of leaders this year to rekindle enthusiasm for hemispheric co-operation and integration.

Twelve new leaders have been elected among the 34 member countries involved in summit talks since the last official Summit of the Americas in April, 2001.

"It's an occasion for the hemisphere to regroup because a lot of things have happened," a senior Canadian official said. "When we left Quebec City, the hemisphere was in good shape, but the year 2002 was a tough year for the hemisphere."

Argentina and, to some degree, Brazil have been buffeted by financial chaos, while Venezuela's economic downturn has been worsened by the battle between President Hugo Chavez and opponents.