I. Commercial Overview Burkina Faso is a small, landlocked Sahelian country with nearly 90 percent of its 9.5 million people dependent on subsistence-style agricultural production for survival. While the Burkinabe economy is growing at an annual rate of roughly 3.5 percent, population is keeping pace, increasing at an estimated 3 percent per annum. The average per capita income is USD 320 (176,000 devalued CFA Francs), which ranks Burkina Faso among the poorest countries in the world. The January 1994 fifty percent devaluation of the CFA Franc has fundamentally altered the Burkinabe economy. Prior to devaluation, most CFA countries experienced relatively low rates of inflation due to the inherent stability and the convertibility of the currency. In Burkina Faso, the current rate of inflation is 35 percent, a major increase over the historic average. While the devaluation is expected to ultimately increase Burkina Faso's economic potential, the short term negative effects of the devaluation continue to dominate the local agenda. Many local businessmen as well as foreign investors appear to be taking a wait-and-see attitude. A. Overview of Import Market As Burkina Faso must import the bulk of its consumer and manufactured goods and equipment from abroad, the country suffers from a chronic trade imbalance which averages minus 65 billion CFA annually (approximately USD 118 million). Its largest trading partner among european countries is France but it also imports goods from Cote d'Ivoire, Nigeria, USA, Japan, and Taiwan. Cotton and livestock are its principal exports. However, in 1987, gold replaced livestock as the second leading export product. Within Burkina Faso, commercial activities are dominated by import-export businesses and a large informal sector. B. Brief Synopsis of Commercial Environment In 1991, Burkina Faso adopted a structural adjustment program (SAP) which was converted to an enhanced structural adjustment facility (ESAF) in 1993. In response to the recommendations of the imf and the World Bank (IBRD), the country embarked on a market liberalization program. To date, import controls on forty products have been lifted. The landmark January 1994 devaluation of the CFA franc has, predictably, had an immediate impact on all 14 African member countries of the CFAf zone, not only Burkina Faso. Management of the negative effects of the monetary adjustment has led Burkina Faso to temporarily retain price controls on certain products deemed "essential" (see section on conversion and transfer policies, below). Special authorization, issued by the Ministry of Commerce, is required to import tobacco, mineral fuels, and liquid and gaseous hydrocarbons. The Ministry of Health authorizes the importation of pharmaceutical products and the Ministry of Defense approves the importation of weapons, ammunition, and explosives. A technical visa, issued by the national office for telecommunications, is required for the importation of communications equipment. A new investment code, adopted in June, 1992 with the specific goal of "mobilizing national savings and external capital," permits one hundred percent foreign ownership of investment projects except in areas considered relevant to national security. In June 1994, the Prime Minister promised a further revision of the code to stimulate investment. Burkina Faso offers a limited but good infrastructure for business. In addition to trade and business associations, an active chamber of commerce and a system of trade unions provide support for all types of business activities. A well-established financial sector consisting of three large commercial banks [Banque Internationale pour le Commerce, l'Industrie, et l'Agriculture du Burkina (BICIA- B), Banque Internationale du Burkina (BIB), and Commercial Banque du Burkina (CBB)], two small commercial banks [Arab/Libyan Bank, and Banque Nationale pour Investissement (BNPI)], and three credit institutions provides credit for investment and commercial transactions. While the banking sector suffered from a degree of laxity in its management practices in the past, it is currently undergoing reorganization. The transport infrastructure includes 400 miles of railway and 10,000 miles of road, 1,000 miles of which are paved. Ouagadougou is linked to both Bobo-Dioulasso (Burkina Faso's second largest city and a key commercial center) and Abidjan (Cote d'Ivoire) by paved road and railway. Abidjan is one of two major ports used by Burkina Faso for bulk imports and exports. International freight forwarders and express mailing agencies are established in Burkina Faso. International air service is provided by Air Afrique, Air France, Air Algerie, and Aeroflot, with service by Sabena to begin in November, 1994. Air Ivoire and Air Burkina provide regional service to the capitals of most neighboring countries. Burkina Faso also offers direct-dial satellite telecommunications to Europe and America. Service is expensive but reliable. Electricity, which is also expensive, is generated by diesel turbines and hydro-electric dams. Occasional shortages occur at peak hours, especially during the March-June hot season. Burkina Faso, currently undertaking a transition to a fully democratic form of government, boasts a favorable commercial environment largely due to a stable political and social climate. However, the favorable commercial environment of this land-locked nation is inextricably linked to the continued stability of its neighbors, notably Cote d'Ivoire and Togo. Instability in those countries would have a direct, negative impact on the Burkinabe economy. C. Host Country Business Attitude toward the U.S. As evidenced by a modest but increasing share of the Burkinabe import market captured by U.S. Firms from year to year, the country is favorably disposed towards U.S. products. Similarly, the government welcomes interest on the part of U.S. mining firms in order to develop and extract Burkinabe mineral resources. Given newly-established relations with South Africa, American businesses already operating in that country may have a competitive edge in exploring opportunities in Burkina. D. Major Business Opportunities The World Bank (IBRD), the European Union (EU), the African Development Bank (AFDB), and other donors are all actively engaged in Burkina Faso. Total aid, including concessionary loans, amounts to approximately USD 200,000,000 per annum. The U.S. Foreign Commercial Service maintains a regional office at the U.S. Embassy in Abidjan, Cote d'Ivoire, which tracks new opportunities for U.S. business interests. U.S. firms are encouraged to submit competitive bids in the following areas: - Burkina Faso's telecommunication market (see the Africa Telecommunications Marketing Guide soon to be published by the Office of Telecommunications, Department of Commerce, in Washington, D.C.). - Consulting services and supply of necessary equipment and products for an urban water development project. The budget for the internationally funded project is expected to total CFA 100 billion (about USD 166.6 million). - A waste management project planned for Ouagadougou, and similar urban development projects yet to be determined. - Consulting services for natural resource development projects in the agriculture sector. - Mineral exploration projects. The Canadian company, Interstar, developed a new Manganese mining operation in northern Burkina Faso at Tambao and is currently exploring the purchase of trucks for transporting excess ore to the coast. (Fyi, production estimates point to the need to supplement current railroad transport capacity). The Swedes are also contemplating start-up of a Zinc mining concession at Perkoa. Moreover, several U.S., South African, and other mining companies have made visits to Burkina Faso in the first half of 1994 to study possible gold mining operations. - Regional electrical projects with Ghana and Cote-d'Ivoire will also offer opportunities. Post will report on opportunities and major projects as they are determined. U.S. firms are not barred from competition as many of the above mentioned projects will be funded by multilateral development banks. U.S. firms will face competition from both local and third country firms. Some foreign firms, primarily consulting agencies and building and engineering contractors from the E.U., have already established local offices in Burkina Faso but such a step is not required in order to do business within the country. The 1994 devaluation of the CFA Franc offers new opportunities for U.S. and other foreign firms insofar as some product prices have become competitive relative to French products which traditionally dominate the Burkinabe market.