Casablanca Wikileak

Classified By: Principal Officer Douglas Greene for reasons 1.4 (B)
1. (SBU) Summary: In Casablanca, Morocco's largest city and economic
capital, prosperity is increasingly on display, raising the question
of where it comes from. Family money, the banking and real estate
sectors, and a strong-performing stock market account for some
wealth. Remittances from Moroccans living abroad, tourism, and
foreign investment, especially from Gulf countries, comprise the
major external sources of money. Illicit sources of income including
drug trafficking, money laundering and endemic corruption play a role
in the growing economy as well. Increased consumption has been a
boon to the economy, but Casablanca's wealth must be shared more
broadly to benefit all segments of society. End Summary.
2. (SBU) The easily-observable phenomenon of wealth in Casablanca
begs the question of where the money comes from. Many Casablancans
cite family money as one key contributor to the city's affluence.
According to Samir Benmakhlouf, president of Century 21 Morocco, the
textile industry, based in Fez, traditionally drove the Moroccan
economy. In the 1970s and 80s, textile producers relocated to
Casablanca for retail opportunities, creating economic momentum and
bringing money to the city. An article in the Middle East Report on
Morocco's bourgeoisie supports this historical view, though dates the
shift to the end of World War II: "The economic center of gravity
shifted to the coastal cities, especially Casablanca. Enterprising
businessmen left Fez for Casablanca, where they continued to be known
as Fassis." Even today, natives of Fez retain their reputation as
members of a business-savvy elite. One of Morocco's richest men,
Othman Benjelloun, hails from Fez and is Chairman and CEO of BMCE,
Morocco's third largest bank. According to BMCE employees, a 'Fez
mafia' dominates the bank's culture. Benjelloun and others like him
belong to a long-standing, moneyed elite who contribute to
Casablanca's prosperity.

 3. (U) The banking sector, based in Casablanca, also generates
wealth. Morocco's 15 banks include five Moroccan-owned private banks
and five foreign banks. Thanks to expanding geographic networks and
increased banking products and services, including e-banking,
mortgages and consumer credit, the sector has enjoyed impressive
growth. Overall, bank revenues rose 10.5 percent in 2006 to reach
USD 2.56 billion. The same year, Morocco's banks registered net
profits of USD 825 million, a 68 percent increase over the previous
year. Such strong performance has triggered an increase in hiring,
particularly of young, well-educated Moroccans. It has also led
several of the six banks listed on the Casablanca Stock Exchange to
offer employee stock options, enabling staff members to share in
their bank's profitability. BMCE Bank's 2007 Annual Report notes
that employees averaged gains of 380 percent from the bank's second
public offering, "which is the equivalent of roughly 15 times the net
monthly salary." Such tremendous performance has a spillover effect
on Casablanca's economy.
4. (SBU) Just as the banking sector contributes to Casablanca's
wealth, so does the real estate market, due to a convergence of
factors. The scarcity of land in densely-packed Casablanca puts
property at a premium. According to the Oxford Business Group, the
city covers 69.5 square miles of land, but needs over 100 square
miles to support the current population of over three million. As
Moroccans have moved from rural areas to Casablanca, land prices have
risen. The influx of foreign direct investment (FDI) compounds this
effect. Of the seven billion dollars of FDI that Morocco received in
2007, real estate accounted for 26 percent - second only to tourism
at 29 percent. Given that 63 percent of investors find Casablanca
the most attractive locale for investment in Morocco, FDI has had a
significant impact on property values in the city - and on the
development of a market for high-end goods and services.
5. (SBU) In such an environment, speculation occurs, pushing prices
upward and enabling landowners to make staggering profits. No sooner
is a new Master Plan for Urban Development (SDAU) announced than
speculators buy up property in targeted areas with the sole intention
of flipping them. According to Century 21's Benmakhlouf, "you can
buy property for one million dirham and it'll be worth 1.5 million in
six months."
6. (SBU) The tremendous performance of Casablanca's Stock Exchange is
also a factor in wealth-creation. According to Jawad Kerdoudi, an
economist who is President of the Moroccan Institute of International
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Relations, many companies attract investors by listing shares at weak
prices for the initial public offering. After a few weeks, prices
shoot up, allowing shareholders to sell at a considerable profit. As
Morocco's largest city and economic center, Casablanca sees much of
the money that Moroccans make in the stock market.
7. (U) As indicated above, Casablanca has benefited from an influx of
money from outside the country. First, remittances from Moroccans
resident abroad (MREs) have risen since Mohammed VI became king in
1999, reaching about USD 7.8 billion in 2007. Second, tourism brings
in significant capital. The sector has increased 12 to 14 percent
per year since 2001, when the king launched the strategic tourism
development policy "Vision 2010." According to a 2007 report issued
by Casablanca's Regional Investment Center, tourism accounted for
more investment in Casablanca than any other sector.
8. (U) Foreign investment is a third significant source of wealth in
Casablanca. Benefiting heavily from rising oil prices, oil-exporting
Gulf countries seek substantial investment opportunities in the
Middle East, including Casablanca. Dubai Holding, for example, has
begun a USD 500 million project to build a multi-purpose marina
adjacent to Casablanca's port. A Kuwaiti-Moroccan group has plans
for a residential development in the city. Investors outside the
Gulf are also pursuing financial opportunities in Casablanca. As
money from MREs, tourism and foreign investors is channeled into
banks, real estate, the stock market and other investments,
Casablanca's economy expands.
9. (C) Most Casablancans acknowledge that at least some of
Casablanca's wealth comes from illicit activities such as
drug-trafficking and money laundering. In the words of Khalid
Belyazid, CEO of the publishing group Eco-Medias, "We have dirty
money. The problem is we don't know how much." Statistics do not
exist to quantify how much of Casablanca's wealth can be traced to
illicit activities. However, one indication can be found in the
USG's own 2007 International Narcotics Control Strategy Report:
"Morocco is the world's biggest producer of cannabis resin (hashish)
and is consistently ranked among the world's largest producers of
cannabis." The report estimates that Morocco's drug trade (mostly to
Europe) nets about USD 13 billion per year, more than twice the
amount brought in by tourism in 2007. Some portion of this money
finds its way to Casablanca, where it is either spent on jewelry,
cars, houses and other items, or it is laundered. Referring to the
use of cafes as fronts for illegitimate business activities, one
finance professional joked that "money laundering creates a nice cafe
culture in Casablanca."
10. (C) Corruption also accounts for a certain amount of Casablanca's
wealth. "You cannot imagine how big the impact is," said one
long-time resident after explaining the phenomenon of officials
exploiting inside information and/or power for financial gain. In
one notorious case, a police officer created a business to import BMW
motorcycles after learning that the police force had plans to equip a
motorcycle brigade. Century 21's Benmakhlouf noted that building
permits for land set aside by the city sometimes become available to
developers who pay bribes. Such corruption enables those who benefit
from it to amass significant, if undeclared, wealth.
11. (SBU) The informal economy is yet another vector by which
individuals amass wealth. While the term conjures up images of
small-scale retailers or undocumented laborers, it can include
full-fledged businesses that operate outside the legal framework and
its requirements. In Morocco's textile industry, for example, entire
plants have closed their formal operations, only to reopen outside
city limits as all-cash enterprises that function under the radar of
Moroccan authorities (or with their complicity). The Casablanca
mattress factory that burned down in late April 2008, killing 58
workers (REF A), offers a prime example of a situation in which a
business owner flouted labor, safety and building codes in the name
of profit.
12. (C) The Consulate's own experience trying to purchase land for a
new facility illustrates how entrenched informal, under-the-table
arrangements are in the Moroccan economy. Ninety percent of property
transactions in Casablanca are done informally. Of over 30 sites
identified, more than 20 fell off the list immediately because the
brokers were unwilling to sell in an official deal. Others declined
to sell because they are waiting for prices to appreciate. Of those
who would sell, many wanted money under the table in addition to the
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asking price. Whether selling property, running a company or
starting a business, the high volume of activity conducted outside of
formal channels is part and parcel of doing business, and often
enables individuals to skirt regulations and increase financial gain.
13. (SBU) Explaining the sources of Casablanca's wealth, however,
does not necessarily explain consumption. As Khalid Rouggani of
BMCE's research division sees it, Moroccans are 'cultivated to be
open' and want to know what exists outside their country. As a
result, they are aware of foreign brands and products, and willingly
purchase them, particularly in cosmopolitan Casablanca. In contrast,
Rouggani cited Algeria - a country with USD 120 billion in reserves
that is less open to foreign culture and less apt to consume foreign
goods. Sales clerks at Dior and Roberto Cavalli seemed to support
the view that culture plays a role in stimulating consumption, noting
that "Moroccans like to be stylish" and make up the majority of their
14. (SBU) Strict foreign currency exchange controls may also
contribute to consumption in Casablanca. While Morocco has loosened
restrictions on the amount of currency Moroccans can take out of the
country, external controls are still in place. Unable to put
significant savings overseas, many Moroccans invest and spend
15. (C) Comment: The wealth that is evident in Casablanca indicates
many positive developments, including stock market and real estate
booms, fueled by remittances and strong foreign investment. It also
suggests some tough-to-track, but significant, negative elements,
such as drug-trafficking and deep-seated corruption. No matter what
the sources of wealth, however, the contrasts between rich and poor
in Casablanca are likely to persist, as there are few signs of
trickle down. If Casablancans do not have opportunities to share in
the wealth that surrounds them, the risk of broader social tensions
is likely to increase. End Comment.