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Zaire's mixed economy has long been stagnant owing to crumbling infrastructure, mismanagement and capital depletion in the parastatal sector, and official corruption. Zaire's economic problems include increasing arrears to creditor countries and international financial institutions, a budget deficit exacerbated by unaccounted expenditures by President

ZAIRE

Mobutu, the printing of large volumes of paper money and its introduction into the economy through unaccountable nonofficial channels and consequent hyper-inflation; a major fall in export earnings due mainly to lower copper production, opening an annual gap of over $200 million in the balance of payments; depletion of hard currency and gold reserves, and continuing infrastructural deterioration.

The national economy, which by late summer had been on the verge of collapse, has been in a virtual free-fall since September 23 when a series of military and civil riots (sparked by discontent with the economic situation and impatience with the pace of democratic reform) began in Kinshasa and later spread to urban centers throughout the country. The crisis has crippled Zaire's modern economic sectors. Transportation, food distribution, energy production and distribution, banking, communications, mining, and manufacturing have broken down. Thousands of expatriate managers and engineers, a key factor in maintaining infrastructure and industry, have fled, leaving the economy ever more dependent upon traditional subsistence agricultural production and barter exchange.

a

Zaire remains in a state of political crisis as consequence of these disturbances. The government does not enjoy the confidence of the population and has not demonstrated an ability to restore political, social, and economic order. Short- to medium-term prospects for economic reform in the country are poor.

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In August 1991 the government permitted the zaire, the national currency, to float because the central bank had run out of foreign exchange with which to support the official exchange rate. The float resulted in an immediate 50 percent devaluation of the zaire against the dollar, but had only a moderate effect on inflation because most imports were already priced at the parallel rate. Since then, the zaire has continued to depreciate. Availability of foreign exchange has depended on production levels and world commodity prices for Zaire's major exports (copper, diamonds, gold, oil, and coffee), and on government adherence to a floating exchange rate system no longer determined by supply and demand.

By statute, the government no longer controls the import or export of capital or the foreign exchange markets. Large capital movements, however, can be blocked by capricious application of bureaucratic regulations. The government tries to allocate foreign exchange for the politically-sensitive purchase of refined petroleum products and food, but since October 1991 exports have been so reduced that the government has been unable to maintain allocations at a minimal level. Foreign exchange is expected to be in increasingly short supply through 1992.

3.

Structural policies

In early 1990 Zaire's adjustment programs with the

ZAIRE

International Monetary Fund (IMF) and World Bank collapsed because of uncontrolled government spending largely by increasing the money supply and accumulating arrears. Since then relations with both institutions have been strained. Zaire's disagreements with the IMF include control of government disbursements, monetary restraint, the opening of financial markets to allow competitive interest rates, and repayment of arrears. Other donors will not resume substantial aid until Zaire agrees to a Structural Adjustment Program (SAP) or a meaningful shadow structural adjustment program. The IMF and the World Bank believe Zaire's economic crisis has advanced beyond the point where partial remedies could work: only a fundamental reorganization of government priorities, sustained over a credible period, could induce these institutions and other donors to return to Zaire.

Over the short term, the disastrous state of Zaire's economy will depress U.S. exports. Long-term prospects would be better if Zaire were to restructure its economy in conformity with donor requirements. Since 1983 Zaire has gained experience with deregulated internal markets, including the development of a moderately sized entrepreneurial class. This human capital, if supported by stable economic infrastructure, could produce economic growth and expanded trade opportunities.

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At the end of 1990, Zaire's total external public and publicly-guaranteed debt was estimated to be $9.1 billion. Payment arrears were estimated to have reached about $891 million. Debt forgiveness plans initiated in 1989 and 1990 by Belgium, France, Germany, and the United States nevertheless had improved Zaire's debt situation. Zaire received $59.2 million from the United States in debt forgiveness under Section 572 in 1989; if it had had one of the legislatively-required SAPs in effect, Zaire's debt could have been reduced by an additional $67.3 million in FY91 and $64.7 in FY92. It would have also been eligible in FY91 under Section 411 for a further $277 million of debt forgiveness. Zaire's last Paris Club debt rescheduling was concluded in 1989. In 1991 Zaire failed to make most of its debt service payments to bilateral and multilateral creditors and to commercial banks.

5.

Significant Barriers to U.S. Exports

The major barriers to U.S. trade and investment in Zaire are the country's economic collapse, the continuing political crisis, corruption, and the sporadic breakdown of law and order.

6.

Export Subsidies Policies

There are no export subsidies in Zaire.

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7.

Protection of u.s. Intellectual Property

Zaire is a member of the World Intellectual Property Organization. Zaire is party to the Berne Convention for the Protection of Literary and Artistic Works, and the Paris Convention for the Protection of Industrial Property. No incidents of patent infringement have been reported.

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Until April 24, 1990, the labor movement in Zaire was limited by law to the National Union of Zairian Workers (UNTZA). On that day President Mobutu, in a speech promising political reforms, also promised to permit labor pluralism. Shortly thereafter, the UNTZA, which had been an arm of the ruling Popular Movement for the Revolution (MPR), reorganized and declared itself independent. Several additional worker groups were organized in the intervening months and have since applied for approval as legal unions. Some of these had existed independently until the late 1960s.

The right to strike is recognized in Zairian law. Because the law establishes lengthy (and mandatory) arbitration and appeal procedures, legal strikes have been rare. While the Government has used force to put down strikes in the past, there were no attempts to coerce workers to return to work in 1991.

b.

The Right to Organize and Bargain Collectively

Over the past several years, the UNTZA has negotiated nearly 1,000 collective bargaining agreements. Under an existing arrangement between the UNTZA and the Zairian Employers Association, wages and prices have been fixed jointly on an annual basis with minimal government supervision. This system, which functioned reasonably well prior to 1991, has since broken down as a result of the Zaire's current economic chaos and has yet to be replaced. Neither the UNTZA nor the emerging unions have demonstrated the capability to protect worker interests or defend worker rights in the current environment. The government has yet to promulgate revisions to the Labor Code promised in 1990, which would strengthen provisions of the law safeguarding the right to form unions and bargain collectively.

C.

Prohibition of Forced or Compulsory Labor

The Constitution and Labor Code forbid forced labor. There are no indications that it is practiced.

d.

Minimum Age for Employment of Children

The legislated minimum age for employment is eighteen years, although minors fourteen years of age and older may be legally employed with the consent of a parent or guardian. Employment of children of all ages is common in the informal economic sector and in family subsistence agriculture.

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The majority Zairians are engaged in subsistence agriculture or small-scale commerce outside the formal sector. The meager wage levels in the modern economy have been devastated by four-digit inflation, and workers must rely on the extended family and subsistence agriculture to survive. Public sector employees typically work at a second job or resort to corrupt activities. The maximum legal workweek is 48 hours with one 24-hour rest period required every seven days. The Labor Code specifies health and safety standards, but enforcement is minimal.

f. Rights in Sectors with U.S. Investment

There are U.S. investments in the petroleum, manufacturing, agribusiness, and service sectors. These enterprises are subject to the labor laws that cover all Zairian workers. There is no forced labor or child labor at U.S. companies in Zaire. Although health benefits and salaries are low at some companies, they generally compare favorably with local practice.

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(D)-Suppressed to avoid disclosing data of individual companies

Source:

U.S. Department of Commerce (unpublished)
Bureau of Economic Analysis, August 1991

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