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Brazilian economist urges Zimbabweans to pressure Mugabe
Shame Makoshori, The Zimbabwe Independent
October 13, 2006

http://www.theindependent.co.zw/viewinfo.cfm?linkid=12&id=7725

A BRAZILIAN economist has urged Zimbabweans to put pressure on President Robert Mugabe to step down, saying they should not "watch hopelessly" while the country "turns into a desert".

Speaking to businessdigest after a business meeting in Harare, Caio Megale, an IBMEC University Economics Professor brought into the country last week by the American Business Forum, said Zimbabweans had to act to save their country from continued decline.

"With a government that is not worried about the problems facing the private sector, it is either you challenge the status quo and set the tone for economic recovery, or you keep the current situation and your country turns into a desert," Megale said.

"The people are not happy; they really want change, but with politicians not likely to talk to each other I see almost 100% uncertainty in Zimbabwe."

Megale said the stalemate between the ruling Zanu PF party and the opposition and the continued interference by government in the pricing of goods and services were a recipe for further economic disintegration.

"Economic recovery depends on the action that you take, but you need dialogue between government and the opposition, there must not be someone imposing issues," Megale said.

Once one of Africa’s most promising economies, Zimbabwe has degenerated into the continent’s worst economy with four digit inflation, fuel and foreign currency shortages, persistent power cuts and acute food shortages which critics blame on corruption, economic mismanagement and poor international relations by government.

Gross domestic product growth has slumped by between 30% and 40% in the last six years.

The World Bank and the International Monetary Fund (IMF) have withheld critical balance of payments support since 1999.

Most major companies are operating below 50% of their capacity.

Critics say the country’s economic woes were precipitated by a government-backed land reform programme that drove productive white farmers from their land and replaced them with landless black peasant farmers with little or no farming experience.

This had drastically reduced agricultural output.

Megale said Brazil went through similar experiences as Zimbabwe.

Inflation hit 6 000% at one time and government slashed zeroes from the country’s currency more than 10 times in the last 30 years.

In the same period, Brazil had changed its currency at least seven times but was able to get over the bad spell by maintaining sound relations with international financiers.

The difference between Zimbabwe and Brazil was that the latter did not condone land invasions, he said.

In Zimbabwe the violent invasions were blessed by government, sending wrong signals to the international community and investors about the country’s potential as an investment destination, Megale said.

Megale said those who had been resettled on Zimbabwe’s farms felt insecure because they did not hold any titles or leases on the pieces of land.

"Farmers cannot plant on land that they know government can come tomorrow and say it is no longer yours. Implement policies that give assurance to the farmer that the land is his to give him stability. In Brazil government was careful in identifying and buying land in a gradual process," he said.

During his brief stay in Zimbabwe, Megale had witnessed the arrest of management at bakery firms for hiking bread prices to remain viable. Government had imposed a ban on any bread price increases.

Megale said it was unfortunate government adopted such a tough stance against an industry that was struggling to survive under spiralling flour and wheat prices, widespread power cuts and a restive labour force agitating for regular wage increments to cushion them from prices hikes.

"There is no reason to keep an official price where the parallel market has become the official (determinant for the pricing system)," he said. "People think of price controls as good for lower income groups but if you impose prices products vanish from the market. You are subsidising fuel in Zimbabwe but are you getting it? Free the prices and let market forces dictate prices," he said

Megale added that it was surprising that a country with so much infrastructure, natural resources and specialised human capital with 90% literacy levels was failing to feed its people.

The problem, he added, was that the few people who had money to invest had shifted from manufacturing foreign currency generating goods to dealing on the stock market.

"You have the best infrastructure, better than the rest of the region and parts of Latin America. What you need is investment in plant and machinery for industrial production. A lot of investors are waiting to invest but they look for stable environments. No one can invest where returns will come after five years."

"The first thing is to make the economy stable in order to attract foreign investment. The high rate of inflation discourages investors so you cannot wait for outsiders to solve the problem," said Megale.

He said Reserve Bank of Zimbabwe governor Gideon Gono should stop his controversial quasi-fiscal operations.

These created wide holes in the national budget, which can only be plugged by printing more money, leading to the increase in inflation, he said.

"Each economy presents peculiar problems, but there are pillars that must be similar whether you are in Brazil, Nicaragua or Zimbabwe. One of the pillars is that the central bank must concentrate on the monetary policy," he pointed out.

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