"Everything I have comes from the cashew. Cashews bought these clothes, they paid for oil to light the house, they enabled my children to go to school."

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That's what a cheerful middle-aged woman told me as she stood outside her thatched, mud-walled house half an hour's drive out of the Mozambican capital, Maputo.

Around the clearing in the bush with its clucking chickens and playing grandchildren were the trees she depends on.

The cashew grows three or four times the height of a man, with glossy, pear-shaped leaves on pale grey branches.

The hard shell of the nut, which appears in September, the southern Spring, looks rather like a shiny, purply-brown worm wriggling out of the base of a huge yellow apple.

Juice from the cashew apple is distilled into a strong liquor. But it's the nut that people prize most.

The snack that's casually nibbled with a glass of beer in Europe and America provides a livelihood for a million small farmers in Mozambique.

The cashew nut shells

Until recently, it also meant employment for ten thousand industrial workers, the people who processed the raw nuts for export abroad.

Today, however, Mozambique's cashew processing industry is in ruins. Of the 14 factories that were operating four years ago, only three remain open.

The reason is that most cashews are now being exported unshelled, mainly to India.

And many people, both in Mozambique and abroad, put the blame for that firmly on the shoulders of the World Bank, the Washington-based development agency that exists to help poor countries. It's accused of arrogance and inflexibility in forcing Mozambique to reduce the export tariff on raw nuts that was designed to protect the local processing industry.

Closed factory in Manjacaze

You can see the effect in the small town of Manjacaze, set amid rolling hills in the southern province of Gaza. The main employment came from a factory that's now been forced to close, putting more than 500 people out of work. And that's had a major knock-on effect on shops and businesses.

Today the town, with its pretty square dating from Portuguese colonial times, feels eerily quiet.

An hour down a dirt road in the provincial capital Xai Xai, devastated by the floods earlier this year, one cashew factory is still functioning - though its future is uncertain.

Derek Higgo

The managing director, South African Derek Higgo, says he simply can't get enough raw nuts to operate. He claims India can afford to pay more because it subsidises its cashew industry, which he says works on lower safety standards than that in Mozambique.

Cashew shells contain a highly acidic fluid, used as an alternative to asbestos in brake linings, which damages human skin.

In his factory, workers never come into direct contact with it. But that's not the case in India, where small hand-shelling machines are the norm.

The World Bank's representative in Maputo, James Coates, denies there was any intention to force the closure of factories. He believes that with time they can still get back on their feet.

But he admits that moves to reduce export tariffs - demanded by the Bank as a condition of its "country assistance strategy" - may have been too abrupt.

And he insists that while several thousand industrial workers may have suffered, the million or so peasants who grow cashews have gained from the higher prices made possible by trade liberalisation.

This is the crux of the argument between the World Bank and its critics.

The late Carlos Cardoso - shot dead in November 2000

Newspaper editor Carlos Cardoso told us that no price rises have ever reached the peasants - they've simply been swallowed up by the traders who buy the nuts and sell the farmers everything they need in return. Sadly, a few months after we met him, Carlos was shot dead - some say by people angered by his investigative journalism.

He told us that he saw the World Bank's policy as a form of neo-colonialism, designed to keep Mozambique as a producer of raw materials which never gains the added value to be obtained from processed goods.

He also accused the Bank of secrecy and stubbornness in its dealings with his country. A report the Bank itself commissioned from international consultants Deloitte & Touche was ignored because it called for support for the domestic processing industry.

Different qualities of cashew nuts

It concluded that Mozambique could earn between US $130 and $230 more for a tonne of shelled cashews than for a tonne of raw nuts.

Back in the World Bank office, James Coates denies the report was shelved. And he has figures to prove that prices to producers are steadily rising.

To try to establish the truth, I flew a thousand miles north of Maputo to the main cashew-growing region in Nampula province.

But what immediately becomes clear is that the reality of life in rural Mozambique does not fit any economic model that can be constructed in Washington.

People are unsure of their earnings from cashews

Most peasants I met were unable to say whether or not they were earning more from their cashew trees now than they did a few years ago.

Most are illiterate, and often do not know exactly how many trees they own. They have no means of weighing their crop, and they suspect the scales used by the traders they sell to are unfairly weighted.

They sell to the same middleman year after year, and he is likely to raise the prices of the goods they want to buy to match any extra he pays for the cashews.

The result is that peasants' lives remain unchanged, and they have no incentive to plant more trees or improve the quality of those they already have.

Cashew trees

This is the real tragedy of the cashew business in Mozambique - that while the World Bank, the government and the trades unions have been arguing about free trade, the nut trees themselves have been dying at the rate of a million a year, and still more have been producing ever smaller yields as they're affected by disease.

Mozambique exported about 200,000 tonnes of cashews - raw and shelled - before the country achieved independence in the mid 1970s, making it the world's top producer. Today, it's fallen to fifth or sixth position with exports of only about 50,000 tonnes.

The first major positive effort to reverse the trend can now be seen in Nampula province.

Spraying the trees

The government's newly established Cashew Institute has embarked on a programme to spray trees with fungicide to prevent an infection called powdery mildew.

Already some treated trees have increased their yield sevenfold. Peasants must pay a small amount to get their trees sprayed, and the idea is that if they see they can increase their incomes through their own efforts, they will gain the motivation to consider more ambitious projects.

Joao Aragao, a former cashew factory manager who now helps operate the spraying programme, says the hope is that peasants will eventually band together to form their own marketing associations.

That way, he says, they will cut out the middlemen and begin to control their own lives. In the long run, he believes, they could set up small scale deshelling industries themselves.

The existing factories could then concentrate on the final, most lucrative stage of the process - roasting, salting, packaging and marketing the nuts so that all income could return to Mozambique.

Factory workers could concentrate on the profitable final stage of cashew processing

That dream is a long way from becoming reality. Today, if you look at a packet of cashews, you probably won't see any indication of where they come from - a sign that most of the profit is not reaching the country of origin.

But the World Bank's admission that it's been "abrupt" in the past, and the government's new interest in getting to the roots of the problem, provide hope that one of the world's poorest countries will eventually be able to capitalise on its hard-shelled, kidney-shaped treasure.

Also in this edition of Crossing Continents: how Mozambique achieved a lasting peace after 16 years of brutal civil war, and the sculptors who've turned weapons from the war into works of art.