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Cablegate: Angola Announces Paris Club Agreement Ahead Of

Published: Fri 7 Dec 2007 12:23 PM
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PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHLU #1225 3411223
ZNR UUUUU ZZH
P 071223Z DEC 07
FM AMEMBASSY LUANDA
TO RUEHC/SECSTATE WASHDC PRIORITY 4472
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHRL/AMEMBASSY BERLIN 0067
RUEHLI/AMEMBASSY LISBON 4041
RUEHFR/AMEMBASSY PARIS 0255
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC
UNCLAS LUANDA 001225
SIPDIS
SENSITIVE
SIPDIS
FOR AF/S
NSC FOR PITTMAN / LEO
E.O. 12958: N/A
TAGS: EFIN ECON AO
SUBJECT: ANGOLA ANNOUNCES PARIS CLUB AGREEMENT AHEAD OF
SIGNING
REF: A. PARIS 4622
B. LUANDA 1147 (NOTAL)
1. (SBU) Summary. The GRA has reached agreement with the
Paris Club on repaying interest in arrears (Reftel A). The
news punctuates several announcements of new lines of credit
offered as trade promotion vehicles by countries such as
China, Germany and Brazil. End Summary.
2. (SBU) On Friday, 30 November 2007, Angolan Minister of
Finance Joao Pedro Morais publicly announced that Angola had
agreed with the Paris Club on a schedule for paying its
outstanding interest arrears by January 2010. On December 6,
GRA Treasury Director Armando Manuel told us the agreement
has not yet been signed, but that Angola conveyed its offer
to the Paris Club and received a "verbal agreement" from the
Club. According to Manuel, the Angolan Council of Ministers
has approved the Angolan offer, a critical step in budgeting
the payments.
3. (SBU) Fin Min Morais described the following repayment
schedule during his public presentation (Note: The initial
USD 900 million payment represents 2.6 percent of the
proposed 34 billion USD national budget for 2008):
Jan. 2008 USD 900 million
Jan. 2009 USD 700 million
Jan. 2010 USD 400 million
------------------
Total USD 1,800 million
Renegotiation and New Lines of Credit
-------------------------------------
4. (SBU) In the wake of Angola,s Paris Club announcement,
Manuel said, Angola is busily renegotiating the terms of its
bilateral lines of credit, presumably increasing the amounts
and lowering the interest rate. Manuel would not say which
lines of credit Angola is re-negotiating, but public
announcements have been made concerning new or existing
agreements with Brazil, China, Germany, Portugal, India,
Japan and South Korea. The GRA keeps the terms of the
agreements under close wraps, and local embassies have been
unwilling to provide details beyond those already made public.
5. (SBU) Most, if not all, bilateral credit lines require
Angola to use the funds to procure goods and services from
the lending country. Trade promotion through a creditor,s
window allows these lending countries to absorb virtually all
transaction risk and pass the significant cost savings on to
their beneficiary companies.
6. (U) A survey of recent information concerning Angola's
current and recently proposed bilateral lines of credit
reveals:
China USD 6 billion
Brazil USD 1.7 billion
Germany USD 2.1 billion
Portugal USD 1.1 billion
Spain USD 600 million
EU USD 200 million
India USD 50 million
7. (SBU) The Paris Club agreement, an improved ICRAS
rating, and continued good credit record should positively
affect Angola's eligibility for expanded access to USG medium
term credit facility. The USG has already extended short
term credit, as well as medium-term credit for Angola's
national airline, TAAG, to lease-purchase Boeing airplanes.
8. (SBU) Comment: Angola,s agreement to clear its Paris Club
obligations will bring cheaper credit to a country focused on
accelerating its post-conflict rebuilding efforts. Depending
on the specific terms of each credit agreement, bilateral
lines of credit may be beneficial to both Angola and the
lending country, but will further squeeze nascent domestic
lending facilities and delay the development of indigenous
businesses that could eventually compete against foreign
firms. U.S. companies may be at a disadvantage until Angola
qualifies for full export bank cover.
MOZENA
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