the Economic History of Cote D'Ivoire

Much like its political history, Cote d'Ivoire's economic history is one of highs and lows. It was once the jewel in France's colonial empire, far exceeding all other French colonies in Africa in prosperity. Today, Cote d'Ivoire seems to be a shell of its former self, with the potential for greatness, but nonetheless lacking the means.

In the years following independence, Cote d'Ivoire experienced a period of rapid growth (http://www.state.gov/r/pa/ei/bgn/2846.htm#econ). From 1960 to 1981, the gross national product (GNP) increased on an average of 7.2 per cent each year. The growth seen in the economy was fueled by the export of cash crops, specifically cocoa and coffee. At the time, cocoa and coffee comprised more than half of agricultural workers, one-third of government revenue, and more than half of earnings from exports (Ridler 301-302). In 1960, Cote d'Ivoire produced 104,000 tons of cocoa (Meredith 287).

By 1978 Cote d'Ivoire surpassed Ghana as the world's top cocoa producer and exporter (Ridler 302). It also grew to be the number one exporter of coffee in Africa as well as a major exporter of pineapples, bananas, palm oil, and hardwood worldwide (Meredith 287).

However, it was the boom of 1975-1977 in cocoa and coffee that eventually led to the economic decline of the country in the 1980s (Ridler 302). 450,000 peasants grew cocoa and coffee in southeastern Cote d'Ivoire by 1975 (Meredith 287). By 1980, Cote d'Ivoire was producing 300,000 tons of cocoa (Meredith 287). During this period, income from exports doubled and the trade surplus tripled (Ridler 302).

At the same time, there was a rapid increase in investment in response to the boom (Ridler 302). French investment encouraged Cote d'Ivoire to increase its then non-existent industrial sector. Agro-industries and import-substitution enterprises increased by 10.5 per cent each year in the 1970s. The manufacturing sector brought in $3.1 billion in revenue with over 700 enterprises by 1980 (Meredith 287). Unfortunately, the boom was short lived and investment projects fell flat during the 1980s (Ridler 302) when restructuring took place (Nugent 337).

By 1980, Cote d'Ivoire accrued $7.4 billion dollars in debt and had a debt service ratio of 39.4 per cent; higher than any other African nation an over four times the average of all African nations (Nugent 337). This made the country's debt ten times higher than it had been only three years earlier in 1978 (Ridler 303). This economic decline, paired with a rapid growth in population, significantly decreased the standard of living in the 1980s and early 1990s (http://www.state.gov/r/pa/ei/bgn/2846.htm#econ).

After four years of negative growth, the economic situation of Cote d'Ivoire improved in 1985. The 1984-85 crop season brought a record breaking cocoa crop and coffee production recovered from its low performance of the early 1980s. This unexpected growth stimulated the commercial and industrial sectors of the economy as well. U.S. companies such as Johnson and Johnson, Colgate-Palmolive, and Boeing reopened their offices in Cote d'Ivoire (Business America 16).

Simultaneously, the government was able to reschedule its foreign debt and obtain a stand-by agreement with the International Monetary Fund (IMF). As a result, investment returned to the nation in the form of a World Bank loan to build highways with the participation of commercial banks. In 1986, Cote d'Ivoire established an agreement with the London Club to reschedule its commercial debt due in 1986-89 (Business America 16).

To spite what seemed like advances in the economy in the late 1980s, Cote d'Ivoire experienced a constant decline in GNP entering the 1990s. During this time, the value of the CFA franc was unstable, with both increases and decreases. Income per capita declined by 15 per cent from 1988-1993. Moreover, Cote d'Ivoire continued to have the largest per capita debt of any sub-Saharan African nation in the early 1990s (Ridler 304).

These negative economic conditions were caused by several circumstances. First, Cote d'Ivoire had a steady decrease in its trade in cocoa and coffee. From 1985-1990, cocoa and coffee prices were cut in half. Prices fell another 20 per cent in the next three years as well. Another cause for the decline was the privatization of certain industries and the effect it had on trade relations (Ridler 304). The World Bank had been large supporters of President Houphouet-Boigny's efforts to privatize. However, when his efforts did not lead to more local ownership but instead a more dependent parastatal sector, the World Bank withdrew its support (Meredith 374). At that time, government parastatal investment accounted for 61 per cent of total investment in Cote d'Ivoire (Business America 27).

The early 1990s saw an increase in unemployment and a decrease in earnings from exports. Fixed prices by the government hindered the further growth of business along with wage and job security regulations (Business America 27). However, economic tensions such as these were eased in 1994 when the CFA franc was devalued by 50 per cent. This process increased Cote d'Ivoire's competitiveness in the global market and improved prices on goods such as cocoa and coffee (http://www.state.gov/r/pa/ei/bgn/2846.htm#econ).

Following the devaluation, foreign investment boomed. This investment came coupled with donor-mandated reforms that led to economic growth and stability. Banking liberalization also occurred. Foreign aid increased. In addition, the Paris Club rescheduled Cote d'Ivoire's bilateral debt in March 1994. The London Club also rescheduled the country's debt in November 1996. In 1997, the G-7 countries included the nation in the IMF-World Bank debt forgiveness initiative for poor countries with high levels of debt (http://www.state.gov/r/pa/ei/bgn/

2846.htm#econ).

Since the devaluation, Cote d'Ivoire met all of its IMF targets for growth, inflation, government finance, and balance of payments. Inflation fell from 32.2 per cent pre-devaluation to7.7 per cent in 1995. The gross domestic product (GDP) grew by 7 per cent in 1995, 6.8 per cent in 1996, and 6 per cent in 1997. Domestic arrears were almost completely eliminated by 1996. Export industries such as pineapples and rubber grew. Additionally, commodities were increasingly processed locally in Cote d'Ivoire and the services sector grew (http://www.state.gov/r/pa/

ei/bgn/2846.htm#econ).

Economic growth had slowed by 1999. By the end of 1999, Cote d'Ivoire faced serious economic hardships due to government corruption, falling prices for trade commodities, and fiscal negligence. The coup of that year led to a withdrawal of foreign financial support. In turn, private foreign investment declined. In 2000, GDP growth was negative due to the inability of the country to meet foreign donors demands, the decline of prices for its key exports, and the continued civil unrest The armed rebellion of 2002 further discouraged foreign assistance, pushing Cote d'Ivoire further into economic decline (http://www.state.gov/r/pa/ei/bgn/

2846.htm#econ).

Today Cote d'Ivoire has an economy that is fundamentally market based. Its economy relies heavily on the agriculture sector with its largest exports continuing to be cocoa followed by coffee, tropical woods, and palm oil (http://www.state.gov/r/pa/ei/bgn/2846.htm#econ). Agriculture makes up 27.7 per cent of the economy while services are 55.6 per cent and industry is 16.7 per cent. (http://www.odci.gov/cia/publications/

factbook/geos/iv.html#Econ).

The industrial growth rate as of 1998 is 15 per cent. Major industries include foodstuffs, beverages, wood products, oil refining, truck and bus assembly, textiles, fertilizer, building materials, ship construction and repair, and electricity. According to 2003 statistics, Cote d'Ivoire produces 5.127 billion kWh of electricity while it consumes only 3.418 billion kWh, leaving it 1.35 billion kWh to export (http://www.odci.gov/

cia/publications/factbook/geos/iv.html#Econ).

Approximately 70 per cent of the country's people work in agriculture, an industry that is highly sensitive to changes in weather conditions and international prices (http://www.state.gov/r/pa/ei/bgn/

2846.htm#econ). The labor force numbers 6.95 million (http://www.odci.gov/cia/publications/factbook/geos/iv.html#Econ) with most of these workers depend on small holder cash crop production. The government continues to encourage local processing of agricultural goods and diversification of the economy (http://www.state.gov/r/pa/ei/bgn/

2846.htm#econ).

In 2005, Cote d'Ivoire's GDP was $24.81 billion with a per capita GDP of $1,400. 37 per cent of people were reported to live below the poverty line in 1995. The poorest 10 per cent of individuals make only 3.1 per cent of the GDP while the wealthiest 10 per cent receive 28.8 per cent of the nation's GDP. Public debt totals 70.4 per cent of the GDP (http://www.odci.gov/cia/publications/factbook/geos/iv.html#Econ).

The GDP growth rate for 2005 was -1.5 per cent. The unemployment rate has not been calculated since 1998 when it was 13 per cent in urban areas. The rate of inflation in 2005 was at 2 per cent. The government maintains a budget that is made up of $2.434 billion in revenues and $2.83 billion in expenditures. Currently the government is running a deficit of $289 million and its current external debt is $13.26 billion. In addition, Cote d'Ivoire receives $1 billion in economic aid (http://www.odci.gov/cia/publications/factbook/geos/iv.html#Econ).

28 per cent, or $4.759 billion (http://www.odci.gov/cia/publications/

factbook/geos/iv.html#Econ), of Cote d'Ivoire's GDP is spent on imports. In 2003, $113.6 million was spent on imports from the United States alone. Cote d'Ivoire primarily imports rice, wheat, plastic materials, resins, kraft paper, agricultural chemicals, telecommunications, gas equipment, and oil from the United States. Other countries the country imports from are France, Nigeria, the United Kingdom, Italy, and Germany (http://www.state.gov/r/pa/ei/bgn/2846.htm#econ). France is Cote d'Ivoire's largest import partner, comprising 24.3 per cent of the country's imports (http://www.odci.gov/cia/publications/factbook/geos/iv.html#Econ).

Exports account for 41 per cent of Cote d'Ivoire's GDP. The nation exports cocoa, cocoa products, petroleum, rubber, and coffee to the United States. Other major exports include timber, coffee, cotton, palm oil, pineapples, and bananas. Other major markets for Ivoirian products include France, Germany, and the Netherlands (http://www.state.gov/

r/pa/ei/bgn/2846.htm#econ). The United States is its largest export partner, encompassing 11.6 per cent of Cote d'Ivoire's exports (http://www.odci.gov/cia/publications/factbook/geos/iv.html#Econ).

Foreign Direct Investment (FDI) comprises 40-45 per cent of the total capital in Cote d'Ivoire's firms (http://www.state.gov/r/pa/ei/bgn/

2846.htm#econ). It accounts for 8.7 per cent of the nation's GDP (http://www.odci.gov/cia/publications/factbook/geos/iv.html#Econ). France is the largest investor, holding 25 per cent of the total capital and 55-60 per cent of the total stock in the nation's firms (http://www.state.gov/r/pa/

ei/bgn/2846.htm#econ).

In 2005, French businessmen fled, travel decreased, and trafficking in diamonds and weapons increased as political tensions mounted. However, the 2005 crop of cocoa was largely unaffected by the fighting, allowing the government to survive from its sale. Still, the government stands to lose 10 to 20 per cent of revenues from the crop to rebels who smuggle the cocoa into neighboring countries where prices are higher. The government of Cote d'Ivoire hopes to increase its productivity by exploring offshore oil reserves. It hopes to increase crude oil productions from 33,000 barrels to over 200,000 by 2010 (http://www.state.gov/

r/pa/ei/bgn/2846.htm#econ). The country is estimated to have 220 million barrels of oil on reserve (http://www.odci.gov/cia/publications/factbook/

geos/iv.html#Econ).

With elections to be held in 2006, one can only hope that some degree of stability can be returned to Cote d'Ivoire. Until the political turmoil of Cote d'Ivoire is put to rest, the economic future of this nation does not look bright. Without foreign investment the nation cannot grow, and without growing they will be left behind in today's global economy.
Works Cited

"CIA - The World Factbook - Cote d'Ivoire." CIA. 10 Jan. 2006. 18 Feb. 2006. .

"Cote d'Ivoire". US Department of State. February 2006. February 2006. .

"Ivory Coast; economy appears back on path of sustainable growth." Business America 9 (1986): 16-18.

Meredith, Martin. The Fate of Africa. New York: PublicAffairs, 2005.

Nugent, Paul. Africa Since Independence. New York: Palgrave Macmillian, 2004.

"Reforms aimed at reversing downward turn in economy." Business America 113 (1992): 27-29.

Ridler, Neil B. "Fixed Exchange Rates and Structural Adjustment Programmes: Cote d'Ivoire." The Journal of Modern African Studies. 1993: 301-308.