Ouattara Ivory Coast Bond Rally Hinges on Managing Former Gunmen
April 07, 2011, 2:53 AM EDTBy Franz Wild
April 7 (Bloomberg) -- Alassane Ouattara’s handling of his political foes and their gunmen will determine whether he can attract investors after the prospect of civil war victory sparked a rally in Ivory Coast’s international bonds.
The former International Monetary Fund director inherits a banking system shuttered by a four-month civil war, a cocoa industry in danger of losing its dominance of the global market and a treasury that defaulted on a $2.3 billion bond in January. The country is also riven by the ethnic and political divides that fueled 10 years of conflict.
“He’s certainly a president with strong credentials in the international community,” said Kevin Daly, who helps manage $6 billion in emerging market funds at Aberdeen Asset Management Plc in London. “There’s no way investors will come back if you can’t address the various interests that both his supporters and rivals have and establish a functioning government.”
Ivory Coast has missed out on a wave of foreign investment in Africa from nations such as China, crimping economic growth to an average of 1.1 percent between 2002 and 2009, compared with 5.6 percent in neighboring Ghana. To make up for the lost decade, Ouattara pledged tax cuts during a presidential election in November, while donors considered scrapping $3 billion of Ivory Coast’s $14 billion debt.
Aging Cocoa Trees
Millions of aging cocoa trees need to be replaced to protect an industry which contributes a third of Ivory Coast’s export earnings. While the country’s cocoa production was little changed in the 2009-10 season from 2002-03 at 1.22 million metric tons, Ghana’s output almost doubled to 662,000 tons over the same period.
Ouattara, who has a Ph.D. in Economics from the University of Pennsylvania, served as director for the IMF’s African department between 1984 and 1988 and governor for the Central Bank of West African States over the next two years. The prospect of him assuming power has helped the price of the country’s Eurobond rally 25 percent in 10 days.
“He’s a technocratic guy,” said Alex Vines, Africa director at the London-based Chatham House think tank. “It remains to be seen if he’ll be able to handle the in-your- faceness of African politics, where he needs to be juggling the demands of armed groups and even his political rivals.”
Ouattara enjoys most of his support in the mainly Muslim north, which has pitted its interests against a predominantly Christian south.
Gbagbo Bunker
Troops loyal to Ouattara, 69, are currently surrounding the residence of Laurent Gbagbo, who is holed up in a bunker at the house in Abidjan, the commercial capital, and refuses to surrender. Gbagbo triggered the political crisis when he refused to accept defeat in the Nov. 28 election, claiming voter fraud. The United Nations, the U.S. and the African Union all recognize Ouattara as the winner.
Cocoa fell 7.8 percent in the past two weeks on optimism that Ouattara’s victory was imminent. Cocoa for delivery in May yesterday gained 0.8 percent, or $24, to $2,999 per metric ton. The country’s Eurobond also rose yesterday, gaining 0.3 percent to 51.67 cents on the dollar, the highest close in four months.
Gbagbo remains key to pacifying his youth militias, known as the Young Patriots, according to Pierre Schori, the head of the United Nations peacekeeping mission in Ivory Coast between 2005 and 2007.
Stooge of France?
The former president has portrayed his rival and the rebels as stooges of former colonial power France, a view enforced by joint UN and French strikes that wiped out much of the army’s heavy artillery on April 4.
“What Gbagbo says now is extremely important,” Schori said in an interview from Stockholm, Sweden, where he also acted as foreign minister. “If he is taken out and his hate message is still hanging in the air, the Young Patriots will still believe all the propaganda and continue fighting him.”
The massacre of at least 800 people in the western town of Duekoue last month as Ouattara’s Republican Forces swept south, may undermine his attempts to unify the country. Ouattara’s justice minister has denied responsibility for the killings.
“When you use violence to come to power, those who you’ve violated will obviously seek revenge,” Ohoupa Sessegnon, a spokesman for Gbagbo’s Ivorian Popular Front party, said in a phone interview from Johannesburg.
Foreign-Born Parent
After having acted as prime minister under President Felix Houphouet-Boigny, who led the country to independence, Ouattara was banned from contesting the 2000 elections under a law that disqualified those who had a foreign-born parent. Ouattara’s father was born in neighboring Burkina Faso.
The political exclusion of Ouattara and other northerners, many of whose families came from Mali and Burkina Faso to work on cocoa, coffee and cotton plantations, led to the 2002 attempt to topple Gbagbo.
Still, having won 45.9 percent of the vote against Ouattara’s 54.1 percent in the election, Gbagbo retains considerable support, especially in the south.
Ouattara’s “election victory wasn’t a landslide,” Vines said. “It’s about trying to tie Ivory Coast back together again after having been divided for about a decade. If he doesn’t show wisdom in reuniting Ivorians, it’s recipe for further serious problems.”
--With assistance from Pauline Bax in Johannesburg, Olivier Monnier in Abidjan, Jason McLure in Accra, Chris Kay in London, Michael Cohen in New York and Riad Hamade in Dubai. Editors: Philip Sanders, Riad Hamade
To contact the reporter on this story: Franz Wild in Johannesburg at fwild@bloomberg.net
To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net
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