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Low Export Prices Hurt Ivory Coast

Low Export Prices Hurt Ivory Coast
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November 19, 1989, Section 1, Page 16Buy Reprints
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The Ivory Coast, whose fast-growing free-market economy was once held up as a model for other developing nations, has fallen on hard times.

When prices of the country's main exports, coffee and cocoa, soared to records in the 1960's and 1970's, the Ivory Coast used its surplus earnings to build the largest road network, the most reliable telephone system and the best-educated labor force in West Africa.

None of this has changed. But after three years of slumping commodity prices, this nation of 11 million people has been plunged into the worst recession since records were first kept at the turn of the century.

''Our economy is in very bad shape,'' President Felix Houphouet-Boigny said last month. In 1981 the annual per-capita gross national product was $1,200, the highest in black Africa. This year, per-capita G.N.P. will fall to about $700. A Common Ailment

The Ivory Coast has joined the growing list of African countries tottering on an economic precipice, and it has done so in a way that illustrates the vulnerability of developing nations in which a narrow range of crops or raw materials become the fountainhead of economic life.

''Things are very bad right now, very tense,'' said an economist with the African Development Bank who asked not to be further identified, ''And it's not likely we'll see a turnaround in commodity prices anytime soon.''

The Ivory Coast's Government, slow to react to the slump in agricultural products, continued to spend, running up $12 billion in foreign debt - among the highest in the world, per capita.

Often in recent months factories have been forced to cut production and lay off workers. Dozens of companies have collapsed, and several of the nation's banks are reported to be virtually insolvent.

Central to the uncertainties of economic life here is the question of a successor to Mr. Houphouet-Boigny, Africa's oldest and longest-serving head of state.

The President, who has served since 1960, is lucid and relatively robust at what he says is the age of 84. But many people insist that he is closer to 90. The nation shares borders with five countries, every one of them ruled by a military or repressive regime; a sudden void of leadership here could be convulsive. Fear of Common Crime

A surge in crime has also aroused anxiety, and while statistics are unavailable, just about everyone here has a favorite story to illustrate that things are out of hand. Earlier this year, hundreds of French nationals called a one-day strike to protest lax security and to attend a memorial Mass for three people murdered by armed bandits.

Early last month, in response to growing complaints, Mr. Houphouet-Boigny sent several military battalions to patrol the streets. Throughout this city, especially at night, the menacing sight of groups of soldiers with automatic rifles at roadblocks is becoming increasingly familiar. As cars push slowly ahead, passengers are often pulled aside and questions are asked, papers scrutinized and bundles examined.

Increasingly, newspapers say, the soldiers are also looking for terrorists. After a French airliner broke up over the desert of southern Niger in September, killing all 171 people on board, a French magazine reported that a number of terrorist attempts were being prepared against French interests in Africa by Lebanese radicals operating from the Ivory Coast.

Driving home the point that these are difficult times, Mr. Houphouet-Boigny asked all residents to help pay for the increased security. The President was the first to donate, giving $100,000; nearly every day the state-controlled newspaper runs a list of new contributors to the security fund.

Abidjan residents also say that the city has grown shabby as people have become poorer. There are still wide, tree-shaded boulevards and handsome high-rise buildings, but there has been virtually no major construction downtown in several years.

Complaints from people on the streets and in nearby villages now have a ring often heard elsewhere in Africa: Everything costs too much and jobs are scarce. ''A lot of people here are scared; nothing like this has ever happened to them,'' said a mechanic in the Treichville market near the center of the city.

Elsewhere, the villas of the upper-middle class and the wealthy are increasingly surrounded by high walls topped with shards of glass, and the private security-guard services do a brisk trade.

Another blow to the Government, with effects on the economy, has come from a growing exodus of French nationals. In 1958, two years before the country won independence, 15,000 French nationals lived here. By the early 1980's, the number had swollen to more than 60,000. As Profits Fall, French Leave

But since the economic downturn, the number of French here is said to have been halved, and the departures could have far-reaching implications. More than half of the country's major businesses are French-owned, and the Government is full of French technical advisers.

In the early 1960's, amid the euphoria of independence, Mr. Houphouet-Boigny decided to avoid the grandiose industrialization schemes popular among some other African leaders. He concentrated instead on stimulating farm production.

By the 1970's the Ivory Coast had overtaken Ghana as the world's largest producer of cocoa - 820,000 tons last year, nine times the level of 1960. At the same time, it passed Angola, Kenya and Ethiopia to become Africa's largest coffee grower.

Reflecting on those years of prosperity, a Western economist said: ''The Ivory Coast was an oasis in a desert of misery. We called it Africa's miracle economy.''

A 1978 World Bank study of the economy here was titled, simply: ''The challenge of success.''

But according to a theory popular here now, the conspicuously buoyant economy of the 1960's and 1970's is at the root of the current problems. ''The World Bank and other international aid agencies, seeing how well we were doing with cocoa and coffee, encouraged other third-world countries to do the same thing, and ended up flooding the market,'' a Government official said.

Indeed, high prices during the 1970's encouraged several countries - notably Malaysia, Indonesia and Brazil - to plant more cocoa trees, which take seven to nine years to mature. The harvest from those trees is a major reason for the current surplus and low prices. Cocoa prices are now at half their level of three years ago. An Unsuccessful Gamble

At first, officials refused to acknowledge the severity of the crisis. The President attributed the country's deepening recession to avaricious ''international speculators'' and the whims of markets in London and New York.

In a bold and ultimately unsuccessful effort to prop up prices, the Government began withholding cocoa from the market early in 1988. Reacting to the loss of resources, the Government also declared a moratorium on foreign-debt payments.

But cocoa prices remained low. In June, faced with a liquidity crisis, and with a substantial portion of its record 800,000-ton crop this year still unsold, the Government capitulated, selling at current market prices.

For the moment, to the surprise of some Western economists, the Government has apparently remained solvent. Despite the downturn, it continues to pay the salaries of public employees and hefty subsidies to state enterprises. Longer term, however, the prospects are uncertain. New Reliance on Foreign Aid

As the Ivory Coast's economic malaise has worsened, it has become increasingly dependent on foreign assistance. Two weeks ago, for example, the World Bank granted a program of aid totaling $216 million.

Many citizens and Westerners agree that radical surgery is needed to revive the economy. One move would be to lay off civil servants from the bloated bureaucracy; another would be to devalue the currency. But for now, political sentiment appears to be against such measures.

''They're putting off the tough decisions,'' said an African diplomat from a neighboring country. ''And if they keep doing so, they'll end up just like the rest of us - broke and begging.''

A version of this article appears in print on  , Section 1, Page 16 of the National edition with the headline: Low Export Prices Hurt Ivory Coast. Order Reprints | Today’s Paper | Subscribe

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