Cashews and Conditionality: World Bank Policy and Mozambique’s Cashew Industry

Cashews and Conditionality:World Bank Policy and Mozambiques Cashew Industry

Submitted by Philip H. TroutmanSPO #1204

In Partial Fulfillment of the Requirements forMB765 Colonialism and Neo-colonialism

Dr. Michael Rynkiewich, professor

Asbury Theological SeminaryWilmore, KentuckyDecember 16, 2005

CONTENTS

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

I. Cashews and Colonialism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

II. Cashews and Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

III. Cashews and Conditionality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

IV. Implications for Christian Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Appendix: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

References Cited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Cashews and Conditionality

World Bank Policy and Mozambiques Cashew Industry

Introduction

In Mozambique, cashews are importantso important, in fact, that the 1997 national

census included the question, Do you have any cashew trees? (Hanlon 2000).

This paper explores a specific case of neo-colonialism in the form of the World Banks

structural adjustment policies regarding Mozambiques cashew industry. Although there are

many disturbing aspects of this saga, the key issue in the Mozambique cashew nut case, which

marks it so clearly as neo-colonialism, is the World Banks use of conditionality, the conditions

that international lenders imposed in return for their assistance (Stiglitz 2003:9). By the

conditions it imposed on Mozambiques sale of raw (unprocessed) cashew nuts, the World Bank

unwittingly crippled Mozambiques most export important industry in just two years. The

resultant job losses and suffering of thousands of Mozambican families has led to this case

becoming a cause celebre for the anti-globalization movement (Macmillian, et al 2002:1).

Our consideration of this case proceeds according to the following plan: First, we review

the history of the cashew nut and its rise to commercial prominence in Mozambique under

Portuguese colonial rule in the 20 century. Next, we see how the cashew industry fared from theth

time of independence until the mid-1990s. Thirdly, we look at the World Banks interference in

Mozambiques cashew industry, as the insistence on mindless trade liberalisation (Hanlon,

2001a) led to the cashew processing industrys near-total collapse. Finally, we explore some of

the implications of this case for the practice of Christian missions.

Troutman / MB765 Research Paper: Cashews and Conditionality / page 2

I. Cashews and Colonialism

The cashew (Anacardium occidentale), a tropical and sub-tropical evergreen related to

poison ivy, is not native to Africa, but rather to Central and South America. In the 16 century,th

Portuguese missionaries carried the tree from Brazil to Portuguese settlements in East Africa and

India. Growing conditions in eastern Africa were favorable, and the tree gradually spread

throughout the eastern African seaboard (The New Encyclopedia Britannica, 15 ed. 2:920). th

As was true of other European powers, Portuguese colonial policy was built on exploiting

the natural resources of its colonies. While Mozambique did not have great mineral wealth, it

did offer vast tracts of fertile land with abundant water. Among crops that grew well were

cashew trees. We know very little about the uses made of the cashew for several centuries after

its introduction into the area. But in the late 19 century, Portuguese companies made goodth

profits from kachasu, a distilled liquor made from sugar cane and/or cashew fruit, which was

sold and used for trade both inside Mozambique and in the Transvaal region of South Africa

(Vail & White 1980:83, 116, 126-127).

In the 20 century, cashews became an increasingly important export for Portugal inth

Mozambique, as the US and Europe developed a taste for the luxury nut. After World War II

caused the closure of sea lanes to Indiathe other major cashew producing country at that

timePortugal saw its chance to develop a cashew kernel processing industry in Mozambique.

In 1950, in Loureno Marques (Maputo) Caju Industrial opened the first commercial cashew

processing factory in Mozambique, and cashew production increased in the following decades.

The year 1965 was a banner year for cashews in Mozambique, with Cajuca de Machava (now

Mocaju), Procaju-Manjacaze and Procaju-Inhambane all opening. In addition, Anglo-American

Corporation opened a cashew subsidiary, Mocita (McMillan et al. 2002:55).


African peasant growers were aware of the increasing profits available from growing

cashews. In the Maganja da Costa area of Zambesia province, for instance, over 1,000,000 trees

had been planted by 1966 (Vail & White 1980:385). In 1969 more processing plants were

opened, by Antonio Eanes (later CC-Nacalas Angoche facility) and Socaju (later CC-Nacalas

Nacala facility). During the 1960s Mozambique produced up to half the worlds cashew nuts

(McMillan et al. 2002:1).

In 1971, two other processors opened: Cajuca de Angoche (now Angocaju), and CC-

Monapo. Finally, in 1973 the Inducaju processing factory was established. In all, 14 processing

factories were established between 1950 and 1973, able to process 150,000 tons of raw cashews

per year. Mozambiques production of raw cashews peaked in 1973 at 240,000 tons, and that

same year production of processed cashew kernels hit its all-time high with 149,800 tons

processed for export (McMillan et al. 2002:4).

Throughout the colonial era the cashew industry in Mozambique was heavily regulated by

the Portuguese to insure maximum profitability, with producer prices and market margins

controlled by the government (McMillan et al. 2002:4). However, starting in 1974 cashew

production in Mozambique went into a decline from which it has never recovered. Some of the

reasons for this are will become evident as we continue our study.

II. Cashews and Independence

After a military coup in Lisbon in April, 1974 led to the reversal of Portugals policy of

fighting to retain its colonies, in September of that same year the Mozambique Liberation Front

FRELIMO and the Portuguese government signed an agreement in Lusaka, Zambia, which

granted Mozambique full independence in July, 1975. The new government was led by


FRELIMO, and was a one-party state. From its founding in Tanzania 1962, FRELIMO had been

profoundly influenced by African Socialism, especially by Julius Nyereres concept of ujamaa

(Newitt 2002:189, 197). At its Third Part Congress in 1977, FRELIMO officially declared itself

as Marxist-Leninist (Newitt 2002:198). Mozambique was a member of the Non-Aligned

Movement (Newitt 1995:559), and it allowed black nationalist movements from South Africa

and Rhodesia to operate in its territory (Newitt 2002:208).

At the time of independence, Mozambiques economy, including the cashew processing

industry, was left in near-total disarray, as white Portuguese and South African owners,

managers, administrators and skilled laborers crucial to the operation of many enterprises

abandoned their stores, offices and factories, and fled the country. In an attempt to stave off

complete economic collapse, the FRELIMO-led government nationalized all industries and all

land ownership, and took over the day-to-day operation of abandoned enterprises. Hanlon (1996)

asserts that FRELIMO halted the economic collapse by 1977 . . . and returned the now planned

economy to pre-independence levels by 1981.

The cashew industry had already begun to decline during the war of liberation, as many

peasant growers, especially in the north of the country, fled their farms for the safety of towns

and cities. This slide in production was exacerbated by the loss of Portuguese capital and the

breakdown of the marketing networks the Portuguese had employed to export the cashews. In

order to protect the cashew industry from foreign competition, primarily from India, in 1978 the

Mozambican government banned the export of raw cashews, requiring local producers and

traders to sell only to the national processing industry. In 1979 the government created a state-

owned holding company, Caju de Moambique, incorporating the companies that had been

abandoned by their owners (McMillan et al. 2002:5, 55). However, the decline of the cashew


industry continued. The Antnio Eanes company went into receivership and SOCaju went

bankrupt; Caju de Moambique was forced to assume management of both.

Relations between Mozambiques FRELIMO government and the West had been uneasy

ever since independence, but they worsened after Mozambique and the USSR signed a friendship

treaty in 1977. This treaty did Mozambique little good economically, however; most of the aid

received from Eastern Bloc countries and Cuba was in the form of advisors and skilled personnel

such as medical doctors. But this alliance served to confirm the Wests fears, and the US and its

allies . . . began to look on Mozambique as another domino that had fallen to communism.

(Newitt, 2002:206). In the 1980s the Cold War intensified under the Reagan administration,

(Hanlon 1996) and South Africa, already angered by open FRELIMO support for the African

National Congress, began destablisation attacks on Mozambique (Newitt 1995:561-562).

In 1981, Anglo-American pulled out of Mozambique, and Caju de Moambique took over

management of the Mocita factory (McMillan et al. 2002:55).

In 1982, Mozambiques civil war began in earnest, as RENAMO rebels, with US and

South African backing, began a 10-year-long struggle against the FRELIMO government, which

was being aided by Soviet military advisors and arms. The war was an especially brutal one,

with horrific incidents of systematically orchestrated terror (Newitt 2002:185), resulting in one

million deaths out of a total population of 15 million (Hanlon 1996).

The civil war, which lasted until 1992, virtually destroyed the Mozambican economy, and

this was particularly evident in the cashew industry. Hundreds of thousands of peasant farmers,

many of them cashew growers, were forced to abandon their farms and seek shelter in refugee

camps in neighboring countries. Much of the cashew crop was not harvested, leaving factories

with no nuts to process; new trees were not planted to replace those that died; and a fungal


infection, Oidium anacardii, spread to cashew trees nationwide, greatly reducing yields from the

remaining trees.

By the mid-1980s, finding itself in need of urgent financial assistance, Mozambique

began a turn to the west, and in 1984 the FRELIMO government agreed to the conditions

necessary to join the IMF and World Bank. In 1987, in an attempt to curry the favor of the US,

who was seen as having the power to reign in the RENAMO rebels via their South African

support network, as well as to influence IMF and World Bank decisions, the Mozambican

government began limited structural adjustment with its Programa de Reabilitao Econmica

(Economic Rehabilitation Program), which included devaluing the currency, liberalizing markets,

and curbing government spending and tightening the money (credit) supply (Hanlon 1996).

Among other steps taken, the government-established producer price for cashews was increased

from 10 Mt /kg to 105 Mt/kg, which represented an effective decrease in the level of subsidy to

the processing industry.

In 1989, the Mozambican government initiated the process of privatizing all state-owned

enterprises, and in 1990, Mozambique accepted full-blown stabilization and adjustment packages

from the IMF and World Bank. By 1990, Mozambique was the biggest aid recipient in sub-

Saharan Africa, receiving more than $1 billion a year (Hanlon, 1996). Unfortunately, since

most of this money was in the form of loans, this aid had the effect of dragging Mozambique

further and further into debt.

Continuing with the structural adjustments required by the IMF, in the 1991-92 crop year

the export ban on raw cashews was lifted. In its place, a quantitative restriction (QR) was

established, limiting exports to a maximum of 10,000 metric tons per annum, with a 60% tax on

the difference between FOB (free on board) price and the factory gate price. While this tax was


still sufficiently high to discourage an explosive growth of exports, the slow collapse of the

cashew processing industry continued, as in 1991 Socaju was sold to CC-Nacala, and in the

following year, bankruptcy forced Antnio Eanes to be sold to CC-Nacala as well.

The year 1992 was a critical one for Mozambique: In October, the FRELIMO government

and RENAMO rebels signed, in Rome, the General Peace Agreement, which effectively ended

Mozambiques civil war. To stimulate the cashew sector into recovery, the government lowered

the export tax for the 1992-93 crop year to 30%, while the QR of 10,000 tons continued in effect.

For the 1993-94 crop year, the export tax remained at the same level, but the QR was loosened:

After 10,000 tons had been exported, licensed exporters could bid for two additional 5,000-ton

lots (McMillan et al. 2002:6).

III. Cashews and Conditionality

As part of its continuing privatization program, the sell-off of the state-owned Caju de

Moambique began in 1991, and by 1994 the Mozambican government had sold all the countrys

cashew processing plants to private investors. Some of the plants were purchased by foreign

investors, but most were bought by Mozambican firms (McMillan et al. 2002:7). Among the

foreign investors, Anglo-American re-entered Mozambique and partnered with the Italian agency

Oltremare to rehabilitate the Mocita processing factory.

The new or reorganized processing companies sought protection for their industry from

the Mozambican government while they modernized factories and renewed the planted base of

trees. The government responded by introducing a graduated export tax equivalent to about 30 -

32% of FOB export value. The tax was not intended to be permanent, but was set to diminish

progressively over a period of years. The Mozambican government did not forget the needs of


the growers: It raised the government-mandated minimum producer price from 700mt/kg to

1,500mt/kg, and also removed quantitative restrictions on export of raw nuts.

But the World Bank, with its extremist view of free trade, was not satisfied. In 1994 it

commissioned a study by Hilmar Hilmarsson, which was released in mid-1995. McMillan et al

(2002:5-6) explain:

Based on the comparison with other countries and the technology employed . . . [Hilmarssons report] concluded that the Mozambican processing industry, asstructured in 1994, was unviable. . . . It assumed that liberalization would increasethe producer share of the FOB price to 5070%, and increase cashew production,export value, and farmers income. . . . While the report outlined several policiesfor improving cashew production and increasing producers income, the WorldBank focused on eliminating the export tax on raw cashews.

In short, the World Bank saw the export tax as the governments subsidizing an

inefficient industry at the expense of poor peasant growers. So in 1995 World Bank required

Mozambique to liberalize cashew marketing and exporting in order to satisfy base case lending

conditions to receive $400 million in pending aid (McMillan et al. 2002:5).

The government resisted, noting that when it had privatized the processing factories it had

promised investors the processing industry would be protected for several years while it

modernized, lest the recovering enterprises be unable to defend themselves from competition

especially from India. Entrepreneurs, most of them Mozambicans, who had purchased the

processing factories were outraged, especially since the World Bank had actually carried out the

study before some of the factories were privatized, and without revealing this to potential

investors (Hanlon 2000). Another negative aspect the Mozambican cashew processors

highlighted was the danger of Mozambiques whole cashew production sector becoming

dependent on India, which was virtually a monopsony buyer (McMillan et al. 2002:2). But India

had a state policy of expanding its own cashew orchards so as to eliminate the importation of raw


nuts. When that happened, asked processors, Who will buy Mozambican nuts then if the

factories are already closed? (Hanlon 2000). The new factory owners threatened to default on

their loans and simply turn the factories back to the government. Since the government had

received only the first instalment of $850 thousand on the loans (McMillan et al. 2002:7), it was

extremely vulnerable to this threat.

But the pressure the World Bank brought to bear on the Mozambican government was of

the highest order. It made dropping the tax on the export of raw cashews a necessary condition

for certifying Mozambique for further IMF loans. Commenting about this, the Roman Catholic

Bishop of the northern city of Nampula, where cashew growing and processing was a major

source of income for thousands, stated:

Mozambique is threatened politically, economically and culturally. The mainthreat is the World Bank and IMF, who represent the rich countries the G7. . . .The international community is creating a new type of colonialism; we have gonefrom one colonialism to a much stronger one economic colonialism. At least theold colonialism had a face; this one does not (Hanlon 1996).

The cash-strapped Mozambican government had no choice but to yield to the World

Banks demands. In 1995 the trade in raw cashews was liberalized: In the 1995-96 crop year, the

export tax was set at 20%. For the 1996-97 crop year, the export tax on raw nuts was reduced to

14%. The lower tax rates encouraged the proliferation of both formal (i.e. licensed) and informal

(unlicensed) traders, who bought cashews from peasant growers in their villages and then resold

them to exporterswho shipped them to India!

The effects of the liberalization policy took some time to manifest themselves fully. The

environment for cashew producers was confused, as some factories closed in 1996-97, while at

least one company, INVAPE, started up its operation only in 1997. During 199798, the tax on

the export of raw cashews remained at 14%, but the rate was too low to prevent further decline in


the processing industry. Hobbled by debt incurred during their remodeling, unable to obtain

credit for operations (due to the IMFs insistence on tight credit policies inside Mozambique),

and above all, because they could not compete with Indias rapacious appetite for raw cashews,

Mozambiques cashew processors folded one by one. In1998, joint venture KMC (Korea-

Mozambique Cashews), established just three years before, was forced to close. Long-time

processing firm Procaju closed its plants in Inhambane and Manjacaze.1

In 1997 World Bank president James Wolfensohn (who had only become World Bank

president in 1995 , and thus was not responsible for the Banks previous hard line in

Mozambique) made a visit to Mozambique, during which he publically declared the World

Bank's commitment to a domestic cashew processing industry. In the face of growing evidence

that World Bank policy was having disastrous consequences for the cashew industry, while not,

in fact, helping the peasant growers, the World Bank commissioned an independent study of

cashew processing sector by Deloitte and Touch. Deloitte and Touchs report came out in favor

of protecting Mozambiques cashew processing industry for some time to come (McMillan et al.

2002:7). 2

Deloitte and Touch demonstrated that Hilmarssons original report on Mozambiques

cashew sector suffered from serious flaws. It was based on the 1993 harvest, which had been

poor, and on industry performance less than two years after the civil war ended, so the data used

in its analysis was not a fair representation of the industry. Projections of the percentage of FOB

price the growers would receive, and hence the amount they would benefit, had been grossly

unrealistic. In actual fact, on average each grower family received only about $5.30 more per year

(McMillan et al. 2002:2), an insignificant amount even in the poorest country in the world!

Instead, most of the benefits were absorbed by traders (licensed and unlicensed) who bought


from the peasant farmers at prices little higher than before, and then sold to export companies,

thus enriching themselves, not the growers (McMillan et al. 2002:2).

And besides these and other factors internal to Mozambique, the Indian government

subsidized its own cashew industry (Hanlon 2000), which made the export trade in cashews

anything but free. Hanlon (2001b) notes, The World Bank and IMF had forced Mozambique

to allow the free export of unprocessed nuts if India was prepared to pay a higher price than local

industry. As predicted, once the factories in Mozambique closed, the Indian price plummeted to

less than half the earlier price. In effect, India was using it monopsony position to control the

world price of cashews to its own advantage, to the detriment of Mozambiques cashew industry.

However, despite Wolfensohns assurances, no change in World Bank policy resulted.

By 1999, 8,500 of the former 10,000 cashew processing workers had lost their jobs, and only one

large cashew processing factory was still open, employing less than 1,000 workers (Hanlon

2000). Finally, in September, 1999 under pressure from trade unions, and factory owners, the

Assembly of the Republic (Mozambiques parliament) approved a law calling for export tax

between 18-22% for next five years. The export tax was initially set at 18% (Hanlon 2000).

The year 2000 saw some positive signs. The former KMC, now renamed Socaju,

resumed its operations. And in December Mozambique finally won a major concession from the

World Bank/IMF. In exchange for the governments allowing some of the least efficient

processing factories to close, the IMF Executive Board agreed to allow Mozambique to protect

its cashew industry. The protection was in the form of an 18% tax on exports of raw cashews,

as well as guaranteeing national processors the right of first refusal on the crop (Hanlon 2001a).

Having won this concession, in January, 2001 the Mozambican government felt

sufficiently emboldened to issue an indefinite-term ban on all raw cashew nut exports, pending


investigation of charges by the Customs service that exporters were guilty of underinvoicing

(stating a lower price than actually received) their sales by as much as fifty percent of their actual

market value (AIM Reports no. 200). Unfortunately, the IMF was furious, and forced the

Mozambican government to lift the ban again in two months time (Hanlon 2001b).

From 2002 through 2004, the only movement in Mozambiques cashew processing

industry was the opening of several small processing factories, such as one opened in May, 2002,

in the town of Namige, in Nampula province, with support from TechnoServe, a Norwalk,

Connecticut-based NGO (TechnoServe News Center 2002). By April 2004, TechnoServe had

helped to establish and was assisting seven small-to-medium-scale cashew processing plants in

Nampula Province, with a total projected annual processing capacity of 8750 tons of raw nuts to

be purchased from about 42,000 smallholders, and employing approximately 1100 workers.

All these processing plants extract the cashew kernels by hand, rather than by machine.

In 2005, on a positive note, the Mozambique News Agency reports the cashew nut

harvest from the 2004-05 growing season was the best in a quarter of a century. The National

Cashew Institute (INCAJU) reported total production of 102,000 tons. The planting of new trees

in recent years and the spraying of older tress to treat fungal infections contributed to the

excellent harvest. Sadly, 60% of this, approx. 60,000 tons, was still exported raw to India. Only

14,310 tons were sold to the small processing plants in Mozambique, yielding approximately

3,000 tons of processed nuts. Exported to the US, Europe and the Middle East, this produced

estimated earnings of only $11 million, or about $3,600 per ton (AIM Reports no. 304).3

Mozambiques cashew processing sector currently consists of 22 small plants, mostly in

the North of the country, employing between 2,000-3,000 workers. All plants process cashews by

hand. At most, these could process about 24,000 tons per year if that many nuts were made


available to them (instead of being exported). As for the large processing plants, AIM Reports

(no. 304) states bitterly, None of the large mechanised factories show any sign of re-opening.

IV. Implications for Christian Mission

The implications for Christian mission of the World Banks scandalous handling of the

Mozambique cashew industry are numerous, especially as this case is illustrative of the way

Western governments and institutions typically behave in the world today.

The most obvious implication for Christian mission arises from the increase of poverty

around the world, as rich nations continue to enrich themselves at the expense of poorer nations.

When government policies or the decisions of international financial institutions cause an

increase in poverty and suffering, the Westernand especially the Americanchurch has a

responsibility, firstly, to send aid to those who are suffering, in whatever form the local churches

and/or aid agencies operating in the country are best able to receive and distribute it.

By and large, Christians in the US are generous to give to those suffering due to disasters

such as earthquakes or drought. But many of us are essentially oblivious to the suffering caused

by the economic and foreign policies of our own government and/or the IMF and World Bank.

Christians in the US must educate themselves regarding the policies of our own government and

the international institutions we support, and the consequences those policies have for the

security and livelihood of the people and countries in whose affairs our government so often

meddles. And then we must seek to influence our nations policies through every means at our

disposal, whether letters, email, phone calls, visits, demonstrations, finally most importantly by

voting for legislator and presidents who will support policies which build up other countries

instead of tearing them down.


But it is not only Christians living in the US who have the responsibility to educate

themselves. My wife and I were in Mozambique from 1992 through 2003, precisely the years

when the World Bank was wrecking the cashew industry. I remember hearing about some

factories closing, and thinking, How tragic! Thats not right! Even though I would express

disgust toward the IMF and World Bank, I actually did nothing to inform myself about the

situation. My opinions were not backed up by any actual knowledge of the situation, even

though much was being written about it in the local press. I simply followed the standard line of

most conservative evangelical missionaries everywhere that, Its not our job (or place) to get

involved in local politics.4

Neither I nor the missionaries I worked with in the north of the country did anything

specific to address the suffering of those who lost their jobs. Neither did we encourage the

pastors and churches under our supervision to seek out and ministery to those in need of help.

So, we missed a wonderful opportunity to show Christs love to hurting people, and perhaps, to

win some of those unemployed cashews workers to Jesus. In fact, as I look back on it now, our

missions inactivitymy own inactivitywas a a real, if unintentional, denial of Christs love!

Returning once again to the consequences of poverty in the Two-thirds World: I have

seen first-hand how extreme poverty makes it difficult or impossible for Christians in poor

countries to support their own churches and pastors at even the most basic level, much less to

build churches or other buildings they need. So, while we work through political channels to

change government policies that impoverish their nations, on the church and personal level, we

have a responsibility to support financially our Christian brothers and sisters in the Two-thirds

World in the ways that will do the most good (and the least harm).

After 15 years in Lusophone Africa, the number one area in which I believe we should


support our Christian brothers and sisters in the Two-thirds World is in infrastructure. That is,

the US church should partner with local churches and jurisdictions in poor countries to provide

finances to enable the local people to construct situationally and culturally appropriate churches,5

parsonages, schools, clinics, workshops, etc. But these finances would have to be provided in

such as way as to preserve the dignity of the recipients, and so as to get them involved in their

own infrastructure development. Double or triple matching funds would a possibility.

Secondly, we can support the education of Christians, both lay persons and clergy,

through donating funds for bursaries and scholarships for study at all levels, from elementary

school to graduate studies. Again, care would need to be taken to involve the students in their

own support, for instance through work-study programs financed by US Christians.

Another implication of the behavior of the World Bank in Mozambique and elsewhere for

Christian mission and witness is in the area of the relationships of missionaries and their sending

agencies with the churches they serve. Western churches and mission agencies have had a neo-

colonialist or paternalistic attitude in their handling of money and leadership decisions. We

frequently are willing to give financial assistance only on the condition that we determine for the

recipients how they must spend it. Or, we are willing to send missionaries on the condition that

the missionaries maintain control over the projects they work on.

Just as the World Banks used conditionality to enforce its will on Mozambique in its

handling of raw cashew exports, thus undermining its national sovereignty; so I have personally

observed, and even been the agent of, our US-financed missions threatening to pull our funding

if the missions wishes were not carried out, thus undermining the sovereignty of the church and

district leaders to minister according as they believed the Holy Spirit was leading them. And just

as the World Bank was able to gain compliance because Mozambique desperately needed the


money, so our districts toe the mission line (usually!) because they feel they need our money to

minister to their own people.

All of this behavior brings up another implication of the misuse of conditionality, whether

by the World Bank, the IMF and the US government, or by US missions and missionaries: When

we abuse nations and their people by enslaving them with debt, we provide more grist for the

mill of anti-American and anti-Western sentiment. Thus we play right into the hands of radicals

and even terrorists who can, quite rightly, say, See how the West helps? They are evil! They

only want to exploit us. We must destroy them! Or, in the case of US or Western missions and

missionaries, our use of conditionality to ensure that the church is run according to our standards

and cultural preferences, plays into the hand both of those who cry, Missionary, go home! Or,

of those who cry, See how Christianity is? They only want to control you, just as their country

wants to control our country. Christianity is a Western, colonial religion! Embrace Islam

instead. Islam is the brown-skinned mans religion!

One final implication of the Mozambique cashew nut case for Christian mission, which I

mention briefly, regards American Christians patterns of consumption. As we inform ourselves

about the policies of our government, we should also inform ourselves about the behavior of US

and multi-national corporations and their abuse of the poor. In light of what we learn, we should

consider altering our consumption habits, to support fairness and justice by buying fair trade

products and investing in companies which observe just and fair business practices.

Further, since most of us American Christians are wealthy by world standards, we could

consider a simpler lifestyle, spending less on ourselves so we have more to give for the needs of

others. The price of one restaurant meal per month not eaten would pay to sponsor two or even

three children through World Vision, FHI, or Nazarene Compassionate Ministries.6


Conclusion

To conclude this paper, I return to the actual situation under study. The Mozambique

cashew nut case is without a doubt one of the most disgraceful incidents in the history of the

World Bank. Joseph Hanlon in his 2000 article, Power Without Responsibility: the World Bank

and Mozambican Cashew Nuts, exposes the heart of the matter:

The issue of free export or not is, in many ways, a side-show imposed onMozambique by the World Bank. Mozambique has never been able to have apublic debate and set its own cashew policy. The issue is extremely complex andneeds extensive discussion. But the 1995 change in policy was imposed in adictatorial fashion by a single person, . . . [the] World Bank country operationsdirector for Mozambique. There was no public debate. There was never aparliamentary hearing which tried to balance the interests of industry, workers,and peasant growers (indeed, the peasant voice has not been heard at all in thediscussion, so far). The World Bank never defended [its] policy to parliament orthe public, and simply imposed it. Once the policy had been imposed by theBank, the IMF joined in again without discussion. . . .

[I]t appears that the World Bank violates all the guidelines for goodgovernance that it tries to impose on developing countries. The result is anagency with overwhelming power, but whose decisions cannot be challenged and which takes no responsibility for its mistakes.

Stiglitz (2003:247) recognizes the blatant injustice of conditionality: Countries are

effectively told that if they dont follow certain conditions, the capital markets or the IMF will

refuse to lend them money. They are basically forced to give up part of their sovereignty . . .

But, he insists (247-248):

[C]ountries do have a choice, and among those choices is the extent to which theywish to subject themselves to international capital markets. . . . Becausealternative policies affect different groups differently, it is the role of the politicalprocessnot international bureaucratsto sort out the choices. Even if growthwere adversely affected, it is a cost many developing countries may be willing topay to achieve a more democratic and equitable society.

The question of the extent to which Mozambique, in the midst of the suffering caused by

a decade of war and years of natural disaster, could have chosen to refuse the World Banks


policy is one which we might debate forever. Mozambican leaders did what they felt they had to

do, but the cost was very high indeed. Whatever else we may learn from the World Banks

disastrous mishandling of Mozambiques cashew industry, one thing is unmistakably clear:

Cashews and conditionality dont mix!


Appendix A: Timeline of Mozambique Cashew Industry since 1950(Adapted from McMillan et al. 2002:55)

Date Event/Policy Change1950 Caju Industrial (now Polycaju) processing factory established in Maputo, as first

commercial cashew processing factory in Mozambique1965 Cajuca de Machava (now Mocaju) established; Anglo American establishes Mocita

processing factory in Xai-Xai; Procaju-Manjacaze and Inhambane processingfactories established

1969 Antonio Eanes processing factory (now CC-Nacala-Angoche facility) established;Socaju processing factory (now CC-Nacala -Nacala facility) established

1971 Cajuca de Angoche (now Angocaju), CC-Monapo processing factories established1973 Inducaju processing factory established1975 Mozambique gains independence from Portugal1975 Portuguese owners of Cajuca de Angoche, Cajuca de Machava, Polycaju, Procaju

Inhambane and Manjacaze abandon processing factories1975 FRELIMO Government intervenes in Cajuca de Angoche, Cajuca de Machava,

Polycaju, Procaju Inhambane and Manjacaze1978 Raw cashew exports banned1979 Government creates Caju de Moambique, a state-owned holding company, and

incorporates Cajuca de Angoche, Cajuca de Machava, Polycaju, Procaju Inhambane,Manjacaze into Caju de Moambique

1979* Antonio Eanes factory in receivership; Caju de Moambique assumes management1979* Socaju factory goes bankrupt; Caju de Moambique assumes management1981 Anglo-American pulls out of Mozambique1981 Mocita enters voluntary receivership and Caju de Moambique takes over daily

management1982 Civil war in Mozambique begins1984 Mozambique joins IMF and World Bank1987 Structural adjustment begins with the Programa de Reabilitao Econmica (PRE)1987/88 Government-established producer price increases from 10mt/kg to 105mt/kg1989 Program begins to privatize all SOEs (State Owned Enterprises)1991/92 Export ban on raw cashews lifted1991/92 QR (Quantitative Restriction) of 10,000 tons export of raw cashews and tax of 60%

on difference between FOB and factory gate price1991 Bankruptcy court sells Socaju to CC-Nacala.1992 Bankruptcy court sells Antnio Eanes to CC-Nacala1992 Civil war ends with the Acordo de Roma (The Rome Accord)1992/93 Export tax (on difference between export FOB and factory gate price) lowered to

30%; QR of 10,000 tons maintained1993/94 Export tax maintained at 30%; QR loosened: Initial QR maintained at 10,000 ton, but


two additional 5,000-ton lots are auctioned off to registered exporters1994 World Bank commisions study of cashew industry by Hilmar Hilmarsson1994 Cajeba processing factory established1994 Government sells Cajuca de Machava (Mocaju) to HAS-NUR Group1994 Anglo-American re-enters Mozmabique and partners with Oltremare to rehabilitate

Mocita processing factory1995 World Bank requires Mozambique to liberalize cashew marketing and exporting in

order to satisfy base case lending condition1995 Government enters formal agreement with World Bank to reduce export taxes1994/95 Government-established minimum producer price increased from 700mt/kg to

1,500mt/kg; QR on export of raw nuts removed; Government introduces graduatedexport tax equivalent to about 30 - 32% of FOB export value

1995 Adil-IC processing factory established1995 Government sells Polycaju and Procaju factories at Inhambane and Manjacaze1995 KoreaMozambique Cashew (KMC) begins operations1995/96 Export tax (on FOB value) of raw nuts set at 20%1995 Trade in raw cashews liberalized, allowing new traders, exporters to become involved1996 Cabo Caju processing factory established1996/97 Export tax reduced to 14%1997 CC-Nacala ceases operations1997 INVAPE processing factory begins operation1997 Wolfensohn visits Mozambique, announces World Bank's commitment to a domestic

cashew processing industry1997 World Bank commissions independent study of cashew processing sector by Deloitte

and Touch1997/98 Export tax remains at 14%1998 KMC ceases operations; Procaju/Inhambane and Manjacaze cease operations1998 Madecaju processing factory begins operation1998/99 Abt Associates perform study on cashew processing industry for the Mozambican

Ministry of Industry, Trade, and Touris1999 Sept. 30, Parliament approves law calling for export tax of 18-22% for next five years1999 Export tax raised to 18%2000 KMC renamed Socaju, resumes operations2001 January, 2001 Government temporarily bans raw nut export, pending investigation of

underinvoicing (stating a lower price than actually received) by exporters2001 Mocita factory closes2001 World Bank Consultant Jaikishan Desai completes study on cashew production and

marketing


REFERENCES CITED

2002 Cashew. The New Encyclopdia Britannica. 15th ed. Vol. 2. Chicago:Encyclopdia Britannica Inc.

Hanlon, Joseph1996 Strangling Mozambique: International Monetary Fund stabilization in the

worlds poorest country. Multinational Monitor [electronic edition]. Vol. 7,issues 7-8, July/August, 1996. Washington DC: Essential Information, Inc.Accessed Dec. 16, 2005 at http://multinationalmonitor.org/hyper/mm0796.06.html.

2000 Power Without Responsibility: the World Bank and Mozambican CashewNuts. Accessed Dec. 8, 2005 at http://www.jubileeresearch.org/analysis/reports/roape100400.htm

2001a Mozambique Wins Long Battles over Cashew Nuts and Sugar. AfricaAction, Africa Policy E-Journal. 010219 (Feb. 19, 2001). Accessed Dec. 14,2005 at http://www.africaaction.org/docs01/cash0101.htm.

2001b Mozambique Forced to Reverse Cashew Export Ban While World BankDefends Its Cashew Policy. Africa Action, Africa Policy E-Journal. 010405(April 5, 2001). Accessed Dec. 14, 2005 at http://www.africaaction.org/docs01 /wb0104.htm.

McMillan, Margaret, Dani Rodrik and Karen Horn Welch2002 When Economic Reform Goes Wrong: Cashews in Mozambique.

John F. Kennedy School of Government, Harvard University, FacultyResearch Working Papers Series RPW02-028. Accessed Dec. 13, 2005 athttp://ksgnotes1.harvard.edu/research/wpaper.nsf/rwp/RWP02-028/$File/rwp02_028_rodrik.pdf

Mozambique News Agency2001 Raw cashew exports banned. AIM Reports. No. 200, Feb. 7. Accessed

Dec. 15, 2001 at http://www.poptel.org.uk/mozambique-news/newsletter/aim200.html#story9.

Newitt, Malyn1995 A History of Mozambique. Bloomington, Indiana: Indiana University Press.


2002 Mozambique. A History of Postcolonial Lusophone Africa. Bloomington,Indiana: Indiana University Press.

TechnoServe2002 New Cashew Plant May Signal Rebirth ofCashew Processing Industry in

Mozambique. TechnoServe News Center. May 17, 2002. Accessed Dec.16, 2005 at http://www.technoserve.org/news/MZcashew0502.htm.

Stiglitz, Joseph2003 Globalization and Its Discontents. New York: W. W. Norton & Co.

Vail, Leroy and Landeg White1980 Capitalism and Colonialism in Mozambique: A Study of Quelimane District.

Minneapolis: University of Minnesota Press.


1. Almost unbelievably, one new processing company, Madecaju, still started operations in 1998!

2. Since then, two additional studies have been undertaken: In 1999 the Mozambican Ministry ofIndustry, Trade and Tourism commissioned Abt Associates to study the cashew processingindustry. And in 2001 Jaikishan Desai, a consultant working for the World Bank, completed ananalysis of cashew farmers. However, I was unable to find any reference to these studies actualfindings, which leads me to mention them only here in the notes.

3. The news article gave no indication whether this was gross or net earnings.

4. Working for the World Mission Dept. of the Church of the Nazarene, we signed a contract stating,among other things, that we would refrain from involvement in local politics. This sort of contractmade any involvement on our part problematic. But we have never protested this clause nor tried toget it changed. This reality has given me pause as I think about how one can be a Nazarenemissionary and a social-conscious witness to Christ and advocate of Gods justice in the world aspart of our working to make His Kingdom come, and His will be done in earth as it is in heaven.

5. I do not advocate simply giving a local church enough money to construct a building totallywithout their own involvement. The partnership pattern is the only viable one over the long term.

6. In fact, this is one area where my wife and I have made a decision. We still eat out some, butstarting in November we began to sponsor a child through NCM.

NOTES

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Cashews and Conditionality: World Bank Policy and Mozambique’s Cashew Industry