The Multinational Monitor


N E W S   M O N I T O R

International Lending Dries Up for Angola

by Jonathan S. Friedland

Less than a year after they were lauding Angolan officials for being "good businessmen" in spite of their Marxist bent, U.S. bankers are now shying away from lending to the strife-ridden southern African country. The bankers, who along with oil company officials dominate U.S. private foreign policy towards Angola, are becoming increasingly resigned to the fact that their presence has only a negligible impact on the political direction of the Angolan government.

"I don't think that you'd find a U.S. banker who would lend money to Angola under any circumstances," said a senior official at a New York bank. "The economic situation has just deteriorated too much."

This remark contrasts sharply with statements made last year by such influential financiers as David Rockefeller, chairman of Chase Manhattan Bank, who told Congressmen at a private dinner that Angolans were "pragmatic businessmen" with an eye on the profits that the oil companies could bring in.

A combination of declining oil prices, civil conflict between the government and South African-backed guerrillas, repeated invasions by South Africa itself, and the alleged rise of the ideological wing of the government since that time have left bankers with cold feet. The continuing impasse in Namibia-the result of the U.S. policy of linking the removal of Cuban troops from Angola to independence for the South Africanoccupied territory-is also putting pressure on Luanda. Up to 60 percent of Angolan government spending reportedly goes towards the military.

But despite these troubles, many of which are longstanding, U.S. bankers had generally believed that Angola's vast mineral and petroleum deposits were worth banking on (see MM, August 1981). And up until now, the ruling Popular Movement for the Liberation of Angola, the MPLA, had a good reputation with bankers because it used its oil revenues for establishing a conservative debt buildup with prompt repayments.

Angola's credit was good enough in 1981 to obtain a $50 million European loan for the state oil company Sonangol, a joint venture with the U.S. company Gulf Oil. The syndicate was led by Morgan Guaranty Trust and included participation by Bankers Trust, Banque National De Paris, Citicorp, Lloyds Bank International, Chase Manhattan Bank, Saudi International Bank, and Manufacturers Hanover. Access to the loan was enhanced by earlier approval of a controversial $85 million credit by the U.S. ExportImport Bank and a $16 million loan backed by Italy's Export Credit Agency, SACE.

The aim of the loans was to expand Angola's oil output from 80,000 barrels per day (BPD) to 200,000 BPD by 1985. Oil production currently stands at approximately 130,000 BPD, according to oil analysts in Washington, and accounts for almost 80 percent of export earnings.

The Angolan Central Bank was also able to borrow $30 million for short-term financing from a syndicate led by France's Credit Agricole. Since these loans-the MPLA's first borrowings from western credit markets-a variety of short-term financing has been provided by French, Portuguese, British, Saudi, and U.S. banks as well as by the Soviet Union.

But more recently, the Angolan government has been wary of borrowing more money, and has kept its ratio of debt burden to foreign exchange earnings to about 15 percent-very low by the standards of other developing nations. The Angolans simply cooled their heels to Western credit after the beginning of 1982.

The collapse of oil prices earlier this year, however, has impaired Luanda's ability to come up with short-term cash. Bankers in Washington and New York said that the Gulf Oil Company was pressuring the banks to lend Sonangol money to meet Gulf's cash needs arising out of the joint venture arrangement.

But the bankers are increasingly wary of the buddy-buddy arrangement between Gulf and the MPLA. "In the past [Angola's] petroleum and finance sectors have been ruled by men we can do business with," said one money-center banker. "But the technocrats are in eclipse-the men at the top are mixing up theory and practice."

In addition, increasing frustrations with U.S. efforts to find a settlement in Namibia, stepped-up attacks by Jonas Savimbi's UNITA guerrilla forces on economic targets, and a rapidly deteriorating economy have made the bankers think that political survival may be overtaking economic pragmatism.

Although a protracted civil war has plagued the southwest African nation of seven million people since its in dependence from Portugal in 1975, it is only in recent months that the South African-backed UNITA has been effective against a wide variety of economic targets, according to reports in the U.S. Savimbi's forces have reportedly succeeded in crippling the essential Benguela railway, which formerly carried Zambia's mineral riches to Angolan seaports. In January, UNITA destroyed the country's second largest dam and hydroelectric facility.

"If UNITA carries on the way it has the last four months for the rest of the year," said a Reagan administration official, "you can forget about the MPLA." Some forces within the administration liken the Angolan government to an overripe piece of fruit ready to fall into the hands of the West.

Recent reports from Angola claim that Savimbi's forces are gaining in confidence, although some State Department analysts maintain that UNITA simply has a more effective propaganda strategy than before. In any case, say analysts, the offensive by UNITA and the South African forces ensures the continued presence of the approximately 20,000 Cuban combat troops that Washington wants out of Southern Africa. The Cuban troops are also costing the MPLA government a fortune in scarce hard currency.

Complicating the burden on the Angolan economy is the possibility that foreign exchange earnings will remain depressed throughout 1983. Aside from the drop in oil prices-which the Angolans are trying to circumvent by boosting production-earnings from diamonds and coffee have remained far below pre-independence levels.

The MPLA has drawn up an emergency plan to stabilize the economy. Apparently, much of the plan is designed to feed Angola's numerous refugees and strengthen its army rather than investing in sectors that the bankers feel are promising. Currently, Angola imports about 90 percent of its food needs and President Dos Santos has made it clear that boosting agriculture is at the heart of the new measures. The banks, however, would like to see a greater commitment to the petroleum and mineral sectors.

"The price of oil going down, the continuing military burden, and declining burden in diamonds and coffee are making things very tough for the Angolans," said a New York banker. "I would be very surpassed if we saw any conciliatory gestures by the government towards Western capital-it is too politically imprudent." He also noted that the drawn out negotiations in Namibia were undermining the Angolan economy in the eyes of the bankers. "The longer that the carrot and stick approach goes on," he said, "the more that the Angolan economy will be strapped."

Bankers feel that it is not so much a question of Angola losing any of its potential, but that the situation has deteriorated so much for the immediate future that they can not do business there. Many also feel that the Angolans know that they are caught between a rock and a hard place.

"I haven't had Angolans coming to me for a loan since the end of 1981," said another banker, "and we would be high on their list if they were out in search of money."

Jonathan Friedland is a freelance journalist for Inter Press Service and South Magazine.

Table of Contents