III. ECONOMIC TRENDS AND OUTLOOK Best Prospects for U.S. Exporters Independent of overall economic conditions, two market segments with good prospects for U.S. exporters over the near term are mining equipment and foodstuffs, especially wheat. There are opportunities for U.S. equipment exporters since iron ore sales are denominated in US dollars, and SNIM, the iron ore mining company, prefers to purchase supplies from dollar-based suppliers. The enhanced prospects for wheat sales arise from the government's decision to eliminate the monopoly of the parastatal food importing company, SONIMEX. Private merchants began wheat imports in 1991, taking advantage of a high fixed floor price designed to encourage local grain production. In 1994 and 1995, the best opportunities for U.S. exporters are likely to be in the following market segments: - Mining equipment - Parts, accessories, tools - Agricultural machinery and commodities - Building equipment - Grain (wheat) and food products - Miscellaneous cosmetics products and toiletries (shampoo, face cream, hair cream, bath soap) - Medical equipment - Computers, hardware and software - Office equipment and supplies - Cigarettes - Foodstuffs, especially wheat - Well-drilling and irrigation equipment - Fishing vessels and fish processing equipment Future Prospects Given the state of Mauritania's economy and its dependence on donor assistance for increased purchases of imported goods, it is unlikely that U.S. companies can greatly expand exports outside those areas where they have traditionally made sales. The three areas where potential exists to increase U.S. exports are mining, maritime fisheries, and agriculture. Due to the creation of the Arab Maghreb Union (UMA) in 1989, trade in Mauritania may begin to reflect the trade policy of the UMA. The intention was to develop trade among the UMA's member countries (Algeria, Libya, Mauritania, Morocco and Tunisia) and to prepare the UMA as a whole to deal with the European Community's newly-unified market. Mauritanian imports from UMA partners increased sharply between 1990 and 1993. 1. Mining: While U.S. suppliers have improved their sales to SNIM, there continue to be other opportunities to replace non-U.S. suppliers. In 1993, Mauritania exported 9.539 million metric tons of iron ore (8.094 million metric tons in 1992). In 1992, a joint venture between an Australian minerals group and a consortium including the GIRM began to produce gold. In 1993, total gold production reached 1,200 kilograms. In mid-1993, the campaign of gold prospecting began, and some promising signs have been detected. 2. Maritime fisheries: Mauritania has some of the richest fishing grounds in the world. In 1993, the fishing sector was Mauritania's largest foreign exchange earner, and is the sector of greatest interest to foreign investors and suppliers of goods and services. This industry offers potential market opportunity for U.S. sales. As fishing companies expand or modernize their fleets, there may be more opportunities for American boat construction companies to break into what has traditionally been a European market. Direct participation in fishing ventures through joint ownership with a Mauritanian partner would also be possible. The Government views fisheries as a major source of future employment, foreign currency earnings, and nutritional resource. In 1993, Mauritania exported 312,614 metric tons of fish, earning USD 270.8 million. Given its central importance to the Mauritanian economy, the World Bank has targeted the fisheries sector for reform under the umbrella of a new private sector development project. The 1994/1995 macroeconomic strategy includes measures to upgrade Mauritania's fishing fleet and improve sector management. Some fishing companies are starting to apply the European and Japanese requirements regarding condition and packaging of food imports. Local representatives or expatriate technicians, inspect the product during processing and packaging to insure that health standards are met. 3. Agriculture: The Senegal River Valley region offers opportunities to the modern private sector and in recent years has attracted increasing numbers of local investors. American exporters of agricultural equipment could exploit this potential. Recent GIRM measures are aimed at stimulating and rationalizing agricultural production. The GIRM requested that donors make agriculture their highest priority, focusing on helping Mauritania move toward its long-term goal of self-sufficiency in food grains. Projects are focused on irrigated farming along the Senegal River Valley in conjunction with regional dam projects. This major development scheme backed by foreign donors involves Mauritania, Senegal, and Mali in the construction of dams in Diama (Senegal) and Manantali (Mali), navigation, and electrical power generation/distribution systems. The GIRM views agriculture as a priority sector to further growth and reduce dependency on food imports. 4. Petroleum: Mauritania is totally dependent on petroleum and gasoline imports, as there is no oil or natural gas production in Mauritania. The Algerian refining company and the GIRM parastatal SOMAGAZ hold monopolies, respectively, on oil and gas import and distribution in Mauritania. An American oil company conducted an exploration program in Mauritania in 1991 and 1992. As of this writing, there are no conclusive results from this exploration. Major Project Opportunities The Government of Mauritania is also seeking foreign partners for gold and oil prospecting to reinforce the existing prospecting efforts. The Direction of Mines and Geology is sponsoring the prospecting. The procurement of goods and services required by the projects financed by international institutions (World Bank, African Bank, Arab Development Fund) offers opportunities for U.S. business in the areas of construction, irrigation, energy production, and communications. Also, U.S. business may find opportunities to participate in a consultant capacity for major projects financed by these institutions. The following Mauritanian authorities are responsible for new and existing public projects: - Ministry of Plan - Ministry of Rural Development - Ministry of Fishing - Ministry of Health - Ministry of Mines and Industry - Ministry of Hydraulics and Energy Major Projects Underway The 1994 budget lists the following development priorities enjoying significant funding from donors and lenders: - Agricultural development - Water supply - Reforestation - Artisanal fishing sector and maritime monitoring - Reinforcement and extension of urban roads - Irrigation of agricultural perimeters - Electrification of urban centers Trade and Project Financing Mauritanian economic performance continues to be uneven, both by sector and from year to year. The country still remains highly dependent on financial flows from the World Bank, the European Union, the United Nations and other donors. In September of 1992, Mauritania reached agreement with the IMF and World Bank on an economic policy package to revive the economy over the next three years. The negotiations culminated in a series of important structural reforms: liberalization of the economy including encouragement of private foreign and domestic investment; privatization and restructuring of parastatals; liberalization of trade; and devaluation of the Mauritanian currency (ouguiya), coupled with a market-determined mechanism to set the exchange rate. These measures have enabled the GIRM to receive new development loans from a variety of lenders. In January 1993, Mauritania's Paris Club creditors cancelled 50 percent of its foreign debt service, with the remaining debt to these creditors--about US dols 250 million-- rescheduled over many years. This Paris Club agreement will significantly ease Mauritania's foreign exchange shortage. In 1993, the GIRM continued to follow the technical advice of the World Bank and IMF on privatization of inefficient parastatal enterprises. Considerable changes were made in the banking sector. For example, the GIRM sold its interest in three commercial banks, restructured the two joint venture banks, and liquidated the more inefficient commercial bank (Union des Banques du Developpement). In November of 1993, Mauritania initiated a new adjustment program covering the period 1994-1996. Included in this program were changes designed to stimulate GDP growth by 3.5 percent in 1995 and to encourage private sector initiative and commerce. Multilateral Development Banks for the region: A. The International Bank for Reconstruction and Development The International Bank for Reconstruction and Development (IBRD), a member of the World Bank group makes long-term loans at market- related rates primarily to developing nations. The International Development Agency (IDA), the soft loan window of the World Bank, lends to the poorest of the development countries. Both the IBRD and IDA work to promote broadly based economic growth and frequently focuses on structural adjustment, sectoral reform and individual project lending and operate under the same set of procurement guidelines. Typically the World Bank does not finance the entire cost of a project. Rather, it finances the components of a project purchased with foreign exchange, which on average is about 40 per cent of the total project cost. Each project may cover a wide variety of sectors and can involve anywhere from one to hundreds of separate contracts providing export business opportunities for suppliers worldwide. CONTACTS: U.S. Department of Commerce Liaison to the U.S. Executive Directors Office International Bank for Reconstruction and Development 1818 H. St., NW Washington D.C. 20433 Tele: (202) 458-0118 Fax: (202) 477-2967 Office of Multilateral Development Banks U.S. Foreign Commercial Service U.S. Department of Commerce Room H-1107 Washington D.C. 20230 Tele: (202) 482-3399 Fax: (202) 273-0927 B. The African Development Bank The African Development Bank (AFDB), headquartered in Abidjan, Cote d'Ivoire, is an international financial institution created by Africans in 1963 to promote the economic and social development of its member African countries. Founded with initial capital resources of USD 250 million, it has authorized capital today of over USD 22.3 billion. The bank belongs to the African Development Bank Group (ADBG) which also includes the African Development Fund (ADF) and the Nigerian Trust Fund (NTF). The AFDB makes loans to development projects in 51 countries in Africa. The ADB provides development financing on concessionary terms to the poorer African member countries. The NTF was established by the Government of Nigeria in 1976 to assist in the development efforts of the poorer ADB members. The ADFB has 21 non-regional members. The United States joined in 1982. CONTACTS: U.S. Department of Commerce Liaison Office to the U.S. Executive Directors Office African Development Bank Ave. Joseph Anoma 01 B.P. 1387 Abidjan 01, Cote D'Ivoire Tele: (225) 21-46-16 / Fax : (225) 22-24-37 Office of Multilateral Development Banks U.S. & Foreign Commercial Service U.S. Department of Commerce Room H-1107 Washington, D.C. 20230 Tele: (202) 482-3399 Fax: (202) 273-0927 Membership in International Organizations Mauritania is a member of the following international organizations: Arab Maghreb Union (UMA), Organization of African Unity, Arab League, African Development Bank, African Air Company, the United Nations. In late 1993 and early of 1994, Mauritania benefitted from considerable external financing. The majority of this financing was in the form of soft loans (long- term repayment at low market interest rates) which will ultimately be forgiven or converted to grants. Mauritania has also benefitted from a considerable number of loans from the European Union (EU), the World Bank and the African Development Bank.