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Mozambique’s independence from Portugal in 1975 was followed by nearly two decades of civil war and a decade of one party Marxist-Leninist government. In 1992, Mozambique achieved peace and adopted a new constitution including a multi-party system of democracy. Since then, the country's transition to a market-led democracy has been progressing at a steady pace.
Elections in 1994 and 1999 returned the ruling Frelimo party to power. Long-serving President Joaquim Chissano stepped down after 18 years, allowing voters to elect a new president in December 2004. Although all ten provinces have president-appointed governors, thirty-three municipalities have elected mayors and city councils. In the second municipal elections in Mozambican history, held in November 2003, Frelimo won all but five municipal contests. During both the 2003 municipal elections and 2004 national elections, Mozambique demonstrated the capacity to conduct free and fair elections.
The Government of the Republic of Mozambique (GRM) is characterized by a strong executive branch, a parliament dominated by political wrangling between the two main parties, Frelimo and Renamo, and a judiciary that is short on skills, under-staffed, under-funded, and corruptible. Government institutions are weak but generally improving. They suffer from a shortage of skilled personnel due to low salaries and the country’s extreme shortage of trained citizens. A legacy of Portuguese colonial and post-independence command-and-control economic systems is gradually giving way to a more private-sector friendly environment, although much remains to be done to control corruption.
Mozambique’s economic growth record since the end of the civil war has been outstanding. Gross Domestic Product (GDP) growth has averaged 8% per year over the last ten years. In 2003 inflation dropped to 13.8% and is projected at 11% in 2004. Although Mozambique is still one of the world’s poorest countries, with 2004 GDP per capita of $290, it is on an upward development trajectory. There is however a long road ahead: over 60% of the population remains without access to health care in a country with 650 doctors serving a population of 18 million; the projected HIV prevalence rate for 2004 is 14.9%; maternal mortality, despite a sharp decline from a minimum of 1000 deaths (1997) to 408 deaths (2003) per 100,000 live births, remains high.
Poverty reduction is the central focus of the GRM’s development plan. Mozambique’s Poverty Reduction Strategy Paper, known by its Portuguese acronym PARPA, is under revision and will cover the 2006-2010 period. Poverty reduction results were better than anticipated under the first five-year PARPA. Household consumption survey results show a 15.3 percentage point drop in the incidence of poverty. The number of households in poverty declined from 69.4% in the 1996-97 survey to 54.1% in the 2002-2003 survey. The PARPA goal was to reduce the incidence of poverty to 60% by 2005 and to 50% by 2010, so Mozambique is clearly making progress on this front.
The economy is graded by the International Monetary Fund (IMF) to be very open to foreign trade. Total exports have risen dramatically due to large investments in an aluminum refinery and a natural gas pipeline to South Africa. Growth prospects are considered favorable, with several major mega-projects on the horizon, including development of the coal mines at Moatize, exploitation of titanium sands at Moma in the north and Chibuto in the south, and a hydro-electric dam at Mphanda Nkuwa to meet the power deficit in the Republic of South Africa. Two American companies have made substantial agro-processing investments. Other large projects planned for the near future include the highway bridge over the Zambezi River and the reconstruction of the Beira-Moatize railway. Traditional exports, e.g. cotton and cashews, have experienced almost no growth. The average (unweighted) tariff rate is 11%. The top rate - except for a few sensitive items - is 25%, and is scheduled to come down to 20% in 2006. Mozambique is committed to the Southern African Development Community (SADC) free trade protocol and the inherent policy is to extend these concessions to all SADC countries on a most-favored nation basis.
Mozambique’s debt service situation improved considerably when the country achieved the "enhanced completion point" under the Highly Indebted Poor Countries Initiative (HIPC) in 2001 after implementing key policy reforms, maintaining macro-economic stability, and implementing the PARPA. Mozambique's status for maintaining a manageable debt service is now considered “sustainable” by the IMF. After the peace agreement of 1992, banks and other businesses were privatized. State-owned infrastructure monopolies have proven harder to privatize, generally because of market conditions, but competition does exist in telecommunications due to the entry of new private firms.
Mozambique’s agenda for further policy reform in the near future is ambitious. Included are steps to remove a number of obstacles to private sector development, such as simplifying the still complex regulations and procedures that increase the cost of doing business; relaxing the labor code which limits the formal sector’s competitiveness in export industries; modifying the regulatory environment to bring market forces into play in the allocation and trading of urban land and to allow land to be used as collateral; and improving the functioning and integrity of the judicial system.
Mozambique was one of three countries the Millennium Challenge Corporation (MCC) determined to be eligible for Millennium Challenge Account (MCA) funding even though they did not fully meet the selection criteria. The MCC Board determined that, although Mozambique's rating against MCA criteria was at or below the median in relation to other candidate countries, Mozambique’s progress and achievements were not adequately reflected in the indicators. Mozambique’s primary education completion rates have been rising. This positive trend is backed by the fact that enrollment rates have increased to over 90% in 2000, from 60% in 1995; girls’ primary school enrollment rates increased by 60% between 1995 and 2000. Recent improvements in fighting corruption - due in part to joint USAID-State Department assistance - pushed Mozambique’s scores well above the median.
Mozambique is an essential link to global markets for several landlocked neighboring countries and has substantial growth potential in its economic ties to the industrial heartland of South Africa. These facts underscore how vital the country’s successful economic, political, and social transitions are to U.S. national interests of peace, stability, and economic growth throughout southern Africa. As a rapidly growing economy, Mozambique is increasingly a potential market for U.S. exports and U.S. investment.
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