Endemic poverty and low purchasing power make Madagascar a challenging market for American imports, particularly for mass consumption products. The World Bank estimates Madagascar’s poverty rate at around 79.8 percent, based on the international poverty line of $2.15/day, in 2017 PPP. With the worst famine in four decades now affecting the south of Madagascar, the fight against poverty and hunger is even more urgent. More than 80 percent of the population depends on subsistence agriculture to meet basic needs.

The country’s limited and dilapidated infrastructure poses significant obstacles to market entry. Road and rail transport infrastructure covers only a small fraction of the country; where transportation infrastructure does exist, it is poorly maintained and susceptible to damage from recurrent cyclones and floods. A lack of reliable electricity and water supply has hamstrung the expansion plans of major private sector players. These infrastructure constraints limit production and job creation, impose additional costs on traded goods, and inhibit potential investors.

Madagascar’s legal system is based on French jurisprudence. The backlogs in the judicial system, uneven enforcement of existing laws, and lack of transparency in regulatory decision-making make it difficult to do business in Madagascar. Widespread corruption, “elite capture”, influence peddling, and inside connections shut out fair competition, with the complicity of some government officials.