Neoliberalism was in the ascendency at the time, and the World Bank and Pomerantz believed in the myth that the free market and globalization on their own would end poverty. The idea was that if unprocessed cashew was sent to India, peasants would earn more. It was a total failure; without the guaranteed domestic market, production collapsed. Not only did 10,000 people (mainly women) lose jobs in the factories, but peasants lost income from an important cash crop. The story became a global scandal. Perhaps because they did not want to lose face, the World Bank and some donors refused to back down.
After five years, the government began to work, literally in secret so the Bank and allied donors did not have to see, to rebuild the industry. New factories were opened, with support from government and friendly donors. Peasant farmers were helped with tree seedlings and spraying. Most important, government worked quietly with the cashew traders to reach agreement that there would be an export duty on unprocessed cashew, and that no unprocessed cashew would be exported until the demand of local factories was satisfied. This went totally against everything Pomerantz and the Bank had demanded. But it worked. Cashew returned as an important peasant crop in coastal areas, and the processing industry grew. By the time we wrote "Do Bicycles Equal Development in Mozambique?" in 2008, we could do a whole chapter on the revival of cashew. The State Secretariat for Cashew was willing to be more open about rebuilding the industry though state intervention and in opposition to World Bank demands, but it was still careful not to discuss protection openly.
Finally, last week, President Filipe Nyusi declared publicly that cashew and industrial protection were successes. The 20 year secret battle to reverse the imposition of Phyllis Pomerantz was finally over.
The imposition of a surtax on the export of raw, unprocessed cashew nuts has been a success in stimulating the growth of the cashew processing industry, declared President Nyusi on 9 December, as he inaugurated a new cashew processing factory in Nampula. This, Nyusi said, was an example of a policy to protect Mozambican industry bearing fruit. The 18-22% surtax on raw cashew exports ensures that, instead of all being exported (mostly to India), some nuts stay in Mozambique to feed the processing factories.
The new factory is the second to be opened by the Export Trading Group. It can process 2500 tonnes of raw nuts per year, exports 500 tonnes of cashew kernels, and employs 700 workers; there are plans to increase capacity to 10,000 tonnes per year. (AIM Pt 9 Dec)