The Ivory Coast's Laurent Gbagbo has announced plans to nationalize the country's cocoa sector, in a move the U.S. State Department has deemed an act of "theft." But what's behind the headlines? What's this debate over cocoa really about?
Background: Gbagbo is locked in a bitter power struggle with Alassane Ouattara, the internationaly recognized winner of a disputed presidential election in November. The struggle has resulted in hundreds of deaths--just today, four anti-Gbagbo protesters were shot and killed in a march to honor International Women's Day--and analysts believe the country is on the brink of civil war.
Why Cocoa Matters: The Ivory Coast is the world's largest producer of cocoa, and the turmoil in the country has sent the price of cocoa soaring to a 32-year high. In recent months, the European Union has frozen the assets of the Ivory Coast's ports and Ouattara has banned cocoa exports in an effort to deprive Gbagbo of the money he needs to pay the army and government employees. Gbagbo, it appears, believes he can harness the revenue he needs to stay in power by nationalizing the cocoa sector.
How Does One Nationalize Cocoa? According to Gbagbo's plan, the state would become the country's sole purchaser and exporter of cocoa, buying beans from producers at a fixed price and selling them to world markets.
The Obstacles to Gbagbo's Plan : Ouattara has informed exporters who cooperate with Gbagbo that they'll lose their licenses if Ouattara takes control of the country. But Gbagbo also confronts logistical challenges. The Western countries that purchase the majority of Ivory Coast cocoa won't do business with Gbagbo, Reuters notes, and these governments are pressuring multinationals to do the same. What's more, Gbagbo will have trouble borrowing the money he needs to pay farmers for their cocoa because the country's banking sector has been hollowed out. Gbagbo could pay farmers with "IOU" notes, Reuters adds, but his popularity would suffer if the state fails to pay the farmers back.
The Implications: About a third of the Ivory Coast's annual cocoa crop--about $1.7 billion worth of beans--is currently sitting in the country's ports deteriorating because of the export ban, according to Reuters. So far it's unclear whether Gbagbo will seize the stock. The Financial Times explains that "industry hopes the beans will start to flow before chocolate company stocks start to run low," but an industry analyst tells Bloomberg that “the real risk is if the [export] ban is extended beyond May, when the mid-crop comes." In the meantime, Ghana--the world's second largest cocoa producer--has picked up some of the slack. The Ivory Coast's cocoa farmers, meanwhile, are caught in the middle of the country's power struggle, and they're suffering as a result.