Estimates of unrecorded cross-border trade between Mozambique and her neighbors : implications for food security

Specifically, the study: (1) profiles informal traders in terms of gender and geographical location, business category and size, commodities traded, marketing channels and functions, ICBT costs and revenues, and public officials" perceptions of informal trade; (2) presents results of border monitoring of ICBT between Mozambique and its neighbors from December 1995 to November 1996; and (3) assesses the causes and implications of ICBT in Mozambique. The study shows that Mozambique depends on its immediate neighbors for agricultural food products (the main ICBT commodity), particularly in the south, since imports of these products decrease and exports increase as one moves north. The total trade in agricultural commodities was estimated at more than $77 million, with imports accounting for $55 million. In terms of informal trade, exports from Mozambique to its immediate neighbors amounted to $37 million and imports to $98 million, resulting in a negative trade balance for Mozambique of $61 million. A major feature of ICBT in Mozambique is the fact that it is practiced by both small and large commercial traders. Causes of ICBT include economic hard times, high customs duties and rent-seeking by public officials, and unfavorable agricultural and macro-economic policies. ICBT also reflects the comparative advantages of Mozambique"s southern neighbors in agriculture and manufacturing, and of Mozambique"s own northern region in maize production, though not in storage, processing, and trade. The effects of ICBT are both positive (e.g., provision of income-generating opportunities, opening up of new markets) and negative (e.g., loss of tax revenue, violation of health and environmental requirements). It is recommended that, in order to maximize the positive effects of ICBT, the Government of Mozambique liberalize the practice -- repression would be counterproductive -- by gradually introducing customs and tax rates that are lower than the costs of evasion. This would provide informal traders a sufficiently attractive incentive to declare their goods, especially if such policy actions were supported by improved infrastructure (particularly road networks) and the availability of foreign exchange at the border posts. Includes references.