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The task is to understand how the World Bank policies destroyed the cashew industry and how government intervention has revived the industry and what can be learnt about the struggle for economic development.
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hours
Introduction:
When a country is poor it is very hard to implement independent policies. The example of the cashew industry in Mozambique is a clear example of how devastating the interference of international institutions can be for the development of a poor country like Mozambique.<br /> Mozambique was in 1974 the world’s largest exporter of processed cashew nuts while also exporting raw cashew nuts to India. The value of processed nuts is 6-10 times greater than the value of raw nuts.<br /> After the devastating civil war and two years with huge floods, the economy of the country was shattered. The government was therefore forced to seek economic help from the World Bank and IMF (International Monetary Fund). To get the economic help Mozambique were ordered to follow the SAP (Structural Adjustment Program) which required the government to privatize public assets. The result was that 1,200 industries were privatized. One third of these industries are now closed or produce at very low levels.<br /> As part of the requirements to get a World Bank loan, the government was in 1995 forced to abandon the existing high export tariffs on cashew nuts, which had made it profitable to process the cashew nuts in Mozambique. The government tried hard to resist and make the World Bank officials understand what affects this policy would have. The World Bank officials however did not listen and argued that it was better for the country to export raw nuts to India than trying to process the nuts with inefficient companies. They also claimed that the cashew farmers would receive better prices.<br /> The result of this change was that most of the cashew nuts were now exported to India, and that the factories no longer had raw material for their production. 90% of the workers in the cashew industry - 10,000 people - became unemployed.<br /> The farmers did not gain either. The prices did not go up, and the Indian companies only purchased cashew nuts in the periods when they lacked Indian nuts. With the factories closed and therefore no local market, the farmers were worse off than before. By 2002, the average cashew farmer earned only US$ 5 annually from selling their nuts.<br /> This is a clear example of a World Bank policy that was not beneficial for the development. Instead of assisting Mozambique to establish an efficient cashew processing industry and facilitate export to India, when there were excess nuts, the World Bank’s requirements destroyed the industry, and numerous farmers are still suffering from this lack of market. The Indian traders became the ones who could decide the prices, because there were very few alternative outlets.<br /> What could have become a step in developing small-scale industries in rural areas was set back 10 years. Only very recently has new processing started up in some parts of the country.
Directive:
1. Read the chapter<br /> 2. Write two pages about what lessons can be learnt from the Cashew story in relation to Mozambique struggle for economic independence and about the policies and influence the World Bank has on countries like Mozambique<br /> 3. Send your work to your tutor
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