Cablegate: Mozambique Awash in a Sea of Counterfeits

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RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHTO #0847/01 2481211
ZNR UUUUU ZZH
R 041211Z SEP 08
FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 9293
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHLO/AMEMBASSY LONDON 0227

UNCLAS SECTION 01 OF 03 MAPUTO 000847

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: KIPR ETRD ECON PGOV PREL MZ
SUBJECT: MOZAMBIQUE AWASH IN A SEA OF COUNTERFEITS

1. (SBU) SUMMARY: Econoff and visiting CommOff canvassed a
wide spectrum of stakeholders in regards to intellectual
property (IP) from August 13-21. Mozambique is making some
headway, as the issue is gaining some attention at the
highest levels--President Armando Guebuza made two public
statements in support of IP protection and against
counterfeit goods in the past two months. Most interlocutors
indicate that the Government of Mozambique's (GRM) IP laws
are sufficient, but enforcement is virtually non-existent.
Several instances of counterfeit good sales in Mozambique
have involved forgeries of brands sold by U.S. companies. In
two cases, the trademark of U.S. companies has been
registered by local business persons intent on selling
counterfeit versions of U.S. products in Mozambique, despite
protests from U.S. companies. Several companies have also
complained of unfair competition against genuine products
smuggled from neighboring countries that avoid tariffs and
VATs. END SUMMARY.

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WHERE ARE THE COUNTERFEIT GOODS COMING FROM?
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2. (SBU) Mozambique is awash in a sea of counterfeit goods.
Visitors need only to sit for a few seconds at sidewalk
cafes before they are approached by hawkers selling pirated
DVDs, fake watches, counterfeit sunglasses, and knock-off
pens. The sale of counterfeit goods extends to the formal
retail sector as well, with counterfeit goods featuring in
even the most up-market malls of Maputo. While the majority
of counterfeit goods in Mozambique are from China, others
have been sourced from India, Indonesia, Nigeria, Pakistan,
and South America. Still other products, such as pirated
DVDs, CDs, and liquid dish soap appear to be packaged and
produced domestically by Chinese businessmen with a knowledge
of counterfeiting. Several sources noted that a few
unscrupulous but well-connected Mozambicans appear to be
importing and selling a wide variety of counterfeited
products, particularly shoes, apparel, and sports equipment,
with the knowledge of senior members of the government and
ruling party.

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WHAT'S THE GRM MISSING?
-----------------------

3. (SBU) As part of a broader Department of Commerce
initiative designed to strengthen IP enforcement efforts in
Africa and assist adversely affected U.S. companies operating
on the continent, visiting ITA/MAC CommOff and Econoff met
with a wide range of Government of Mozambique (GRM)
officials, foreign investors, entrepreneurs, legal experts,
and members of the donor community August 13-21. All
interlocutors called for greater IP enforcement under
existing laws. Several IP lawyers pointed out that
Mozambique has yet to draft laws on competition, and an
authority to monitor competition is needed. Others explained
that current IP laws, which were revised in June, 2006, do
not adequately centralize enforcement powers, but instead
provide for an unhappy marriage between Customs and the
Ministry of Industry and Commerce (MIC) which share the
responsibility. Still others comment that the institutional
framework is not in place to handle IP issues, particularly
in the judiciary, where the Administrative Court has made
only two decisions on IP-related cases in 8 years. The
administrative courts were described as under-trained and
inexperienced by nearly all our contacts.

4. (SBU) The GRM Director of Customs Audit, Investigations,
and Intelligence division explained that Mozambique's 1,500
customs officers constitute the first line of defense against
counterfeit goods, but do not have the capacity to easily
identify counterfeit goods, nor do they have the authority to
confirm counterfeit cases and provide expert testimony in
Mozambican courts, under current laws. A
second shortcoming of the current laws is that Customs has no
authority of seizure should goods be produced locally, or
intercepted outside of the ports. Customs officials called
for expanded information sharing on counterfeit goods
interceptions, and additional training of officers across
Customs and MIC, as well as the judiciary, as a means of
building capacity on IP issues.

5. (SBU) Businessmen and industry analysts alike pointed to
the absence of a qualified Bureau of Standards in Mozambique
as a significant problem for the GRM. A qualified Standards
Board would be able to provide expertise to determine not
only the quality of products, but also differentiate between
counterfeit and genuine goods. Several interlocutors
discounted the capabilities of the current equivalent body,
INOC, in the Ministry of Trade, which has not shown the

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capacity or technical expertise to develop standards for more
than a handful of products. Lack of standards in Mozambique
not only allows for counterfeit goods, but also hurts the
country's ability to export to exacting markets like the U.S.
and E.U. Kekobad Patel of the quasi-governmental business
development association CTA commented that Mozambique
struggles to export products other than raw materials under
AGOA because of an inability to conform to standards required
by the U.S. consumer.

--------------------------------------------- -------
INTELLECTUAL PROPERTY INSTITUTE - A POSITIVE EXAMPLE
--------------------------------------------- -------

6. (SBU) The director of the Intellectual Property
Institute (IPI), a semi-autonomous group under the Ministry
of Trade, explained that in a developing country like
Mozambique that it was difficult to get both the business
community and the government to focus on IP issues. IPI has
had some success with raising public awareness on trade mark
and patents since it began registrations in 1999 and
Mozambican companies accounted for only 3 percent of
registered companies. Today 41 percent of registered trade
marks are for domestic companies, with 90 percent of the
2,709 trade marks
registered last year being issued to companies in Maputo
province. The director also explained that intra-agency
cooperation is increasing, with monthly Customs Enforcement
Taskforce meetings, in which all GRM stakeholders share
intelligence on counterfeit goods.

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HOW HAVE MULTI-NATIONAL COMPANIES BEEN AFFECTED?
--------------------------------------------- ---

7. (SBU) Unilever has seen several assaults on its products
over the past few years. OMO, its clothing detergent brand
saw a 30 percent loss in market share due to competition from
Chinese counterfeit versions of its product. Its liquid dish
soap brand Sunlight has also been pressured by the presence
of counterfeiters who collect and recycle used bottles,
filling them with locally-sourced liquid soap of unknown
quality. A third Unilever product, Rajah Spices, was
counterfeited using bulk spices sourced from Pakistan, and
packaging produced in Maputo. Other U.S. companies have seen
attempts to register trademarks in Mozambique under names
such as Arley-Davidson, Skechers, and Timberland in an effort
to "legitimately" sell counterfeit goods in the domestic
market.

--------------------------------------------- ------
HP EXPOSES FAKE TECH AND GOV,T PROCUREMENT PROBLEMS
--------------------------------------------- ------

8. (SBU) Consultrajin, Hewlett-Packard,s representative in
Mozambique, highlighted concerns with government procurement
of computers and computer parts from vendors who are sourcing
counterfeit goods. While statistics are unavailable, the
company held a press conference on the 24th of July raising
its concerns that the GRM, one of the largest buyers of IT
products in Mozambique, continues to procure counterfeit
computers and accessories. As a result, providers of genuine
products cannot compete for government contracts.
Consultrajin representatives also pointed out that due to the
poor quality of the counterfeited products, the government
often ends up replacing these computers and components with
greater frequency, eventually costing more than the genuine
article. Since over 50 percent of the GRM budget is
supported by a consortium of EU donors called the G19,
Consultrajin argued that the G19 is supporting the
counterfeit computer industry in Mozambique.

--------------------------------------------- ---------
COMMENT: NO POLITICAL WILL TO TACKLE COUNTERFEIT GOODS
--------------------------------------------- ---------

9. (SBU) Several interlocutors discounted President
Guebuza's July 11 comments condemning piracy and
counterfeit goods as "cancers" in Mozambican society,
pointing to historical inaction by the GRM in the area of
enforcement. However, an August 21st public statement by
Guebuza expressing concern about counterfeit goods and the
damage they do to consumers, the economy, and the GRM's tax
revenues on IP--the second such statement in as many
months--may mark a change in the GRM's approach. Some
contacts suggest that Guebuza's close relationship with China
and broad-based corruption throughout the country mean that
counterfeit goods will continue to enter Mozambican ports
with relative ease. Nonetheless, a majority of
non-governmental contacts confirmed that the GRM does not, as
yet, have the political will to provide rigorous IP

MAPUTO 00000847 003 OF 003

enforcement and rid its markets of counterfeited goods.
Highly price-sensitive consumers, and a merchant class
dominated by traders willing to source counterfeit products
without fear of prosecution suggest that the problem of
counterfeit goods is unlikely to be resolved in Mozambique in
the near term. In the meantime, the Embassy is pressing the
government to commit to using only legal computers and
software, and we are collaborating with Commerce, USPTO, and
other stakeholders to leverage training resources from the
United States, southern Africa, and Mozambique to build local
capacity and continue to raise awareness on IP issues.
Chapman

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