Publication site: International Trade Administration
Publication date: 2021
Type of publication: Article
The archipelago of Cabo Verde is composed of 10 volcanic islands and eight islets in the mid-Atlantic Ocean approximately 450 miles west of Senegal. It has a land area of 4,033 square kilometers, and its 700,000 square kilometer maritime Economic Exclusive Zone (EEZ) is roughly the size of Texas. Approximately 570,000 people live on the nine inhabited islands.
Cabo Verde graduated to developed country status in 2007 and met most of its Millennium Development Goals by 2015. It invested in political stability and has a history of parliamentary democracy and economic freedom that is unique in the region. Elections are free, fair, and regular, and there have always been smooth transitions of power since the country gained independence from Portugal in1975. Good governance, prudent macroeconomic management (including strong fiscal, monetary, and exchange-rate policies), trade openness, increasing integration into the global economy, and the adoption of effective social development policies have contributed to its success. Broad political stability is expected to prevail in Cabo Verde, underpinned by strong democratic institutions and robust protection of human rights and civic freedoms. The business and investment climate continues to improve, although there are bureaucratic and cultural challenges to overcome.
The government remains committed to reforms aimed at supporting and developing the private sector
Despite several years of impressive progress, economic contraction caused by the COVID-19 pandemic is proving an obstacle to achievement of the country’s development goals. In this difficult economic context, the government remains committed to reforms aimed at supporting and developing the private sector, increasing competitiveness, and attracting foreign investment to help relaunch and diversify the economy as well as decrease the unemployment rate, which rose to 14.5 percent in 2020 from approximately 11 percent in 2019.
The program of the government, re-elected in April 2021, falls within the larger scope of its Ambition 2030 plan to achieve Sustainable Development Goals and builds on the earlier Strategic Plan for Sustainable Development (PEDS 2017-2021). Cabo Verde continues to offer opportunities for private investment and public-private partnerships in renewable energy, sustainable tourism, blue and digital economies, maritime and air transportation, and water for agriculture and agribusiness. Like the PEDS before it, Ambition 2030 seeks to position Cabo Verde as a mid-Atlantic platform across a variety of sectors to capitalize on the country’s geostrategic location at the crossroads of the African, European, and American continents. The PEDS included an ambitious restructuring and privatization agenda for state owned enterprises, but plans were suspended due to the pandemic. The new program continues to envision the privatization of strategic public companies such as the electricity and power utility ELECTRA, the state pharmaceutical company (EMPROFAC), the airport management entity, and port services body. The COVID-19 pandemic was a contributing factor to turmoil in the air transportation sector, featuring the abrupt departure of the sole domestic carrier in May 2021 followed by the government’s re-nationalization of once-privatized Cabo Verde Airlines in June. The government continues with its plans to privatize Electra, with an anticipated tender in mid-2022. Despite the size of the market, the current needs of the sector and the expected increase in demand when tourism resumes may bring opportunities for interested companies to explore.
In July 2020, as part of its efforts to develop the country’s maritime economy, the government approved a Special Economic Zone around the island of São Vicente (ZEEEM-SV). Although China provided funding for the ZEEEM-SV’s viability study, the government has been clear that it seeks a diverse range of investors in the zone’s projects, including expanding deep-water ports, fisheries, ship repair, and other related services. In 2021, the government also plans to establish a tax-free Special Economic Zone for Technology (ZEET) with special incentives to attract international companies.
There are few regulatory barriers to foreign investment in Cabo Verde, and foreign investors receive the same treatment as Cabo Verdean nationals regarding taxes, licenses and registration, and access to foreign exchange. The record amount of $1.5 billion in proposed investment projects approved by the Cabo Verde trade and investment promotion agency in 2020 suggests high investor confidence in the country’s post-pandemic recovery. As of 2020, foreign investment in Cabo Verde remained concentrated in tourism.
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