Maputo — The liberalisation of the trade in cashew nuts, imposed on Mozambique by the World Bank in 1995, was supposed to guarantee that peasant farmers would earn more from their harvest of nuts.
The theory was that, by making it possible to export raw nuts en masse to India, the exporters would compete with the local processing factories and the result would be increased prices for the peasants.
But reality has refused to follow the free trade script. The drastic reduction in protection for the processing industry has forced most of the Mozambican factories to close their doors. Thus for most farmers the only people likely to buy their nuts are the exporters. And far from producer prices rising, they are currently falling.
Back in 1995, it never seemed to cross the World Bank's mind that international prices for raw cashew nuts (which essentially means the price the Indian handshelling industry is willing to pay) might collapse.
But that is what has happened: in the space of six years, the average export price of unprocessed cashew nuts has almost halved. According to statistics from the Mozambican National Cashew Institute (INCAJU), the average price in 1995/96 was 781.14 US dollars per tonne. It fell to 679 dollars a tonne in 1998, recovered to 708 dollars in 2000, but then crashed to 411 dollars a tonne in 2001. This seriously affects Mozambique's export earnings, and the price paid to the peasant farmers. The following chart shows the decline: Year Tonnes of raw nuts exported Export earnings (in US$) 1995/96 35,000 27,000,000 1996/97 16,600 12,000,000 1997/98 32,000 21,000,000 2000/01 27,000 11,400,000 In other words, unprocessed nuts earned Mozambique less foreign exchange in 2001 than four years previously, despite the great increase in the number of nuts exported.
This should not be particularly surprising. The market is overwhelmingly dominated by just one country, India, and India has never hidden its intention to increase its own cashew orchard so that it is less dependent on importing nuts.
For the last seven years, the Mozambican cashew industry has been warning of the dangers of relying on the Indian market for unprocessed nuts. The Association of Cashew Industries (AICAJU) warned that, if the local processing industry was snuffed out, there was no guarantee that India was going to buy all of Mozambique's nuts at a decent price for ever.
Indeed, the Indian industry itself has gone into crisis.
INCAJU says that currently many of the Indian cashew units have suspended their activities, waiting for an upturn in world demand (and prices) for processed kernels.
In its shrunken and debt-ridden state, the Mozambican industries have been unable to offer much of an alternative to the low export prices. The few factories still functioning only purchased 6,000 tonnes of nuts from farmers in 2001 - slightly more than 12 per cent of the total marketed production.
This is a far cry indeed from the high hopes of 1995, when the factories bought 25,000 tonnes (41 per cent of marketed production for that year). Then the state cashew company had been broken up, and its nine component factories all sold off to private Mozambican businesses: they were planning fresh investments and major expansion - all of which was ruined when the government, at the World Bank's behest, began stripping the industry of protection, and encouraging the export of raw nuts to India.
As the factories closed, so the export of processed cashew kernels declined - from 5,000 tonnes in 1998, to 2,000 tonnes in 1999, to 946 tonnes in 2001.
The world market price for kernels has also been unstable, declining from between three to four dollars per kilo to the current two dollars. Even so, kernels are still a more valuable commodity than raw nuts, and Mozambique would have earned considerably more in recent years, had its factories remained open.
