Vulnerabilities and Market Size: Cabo Verde’s low proportion of arable land, scant rainfall, lack of natural resources, territorial discontinuity, and small population make it a high-cost economy (particularly in terms of energy, water, and transportation) with few economies of scale. Cabo Verde is vulnerable to external shocks, as demonstrated by the COVID-19 pandemic and Russia’s war on Ukraine. The country’s GDP had been expected to grow by at least 5 percent in 2020, but according to the International Monetary Fund (IMF), it contracted by 14 percent. In addition, Cabo Verde’s public debt reached a record estimated 157 percent of GDP in 2020, one of the highest levels in the world. Meanwhile, the unemployment rate rose to an estimated 14.5 percent in 2020, the same estimate for 2021.
Access to Credit and Additional Policy Changes: Cabo Verde has implemented reforms that create an economic and regulatory climate favorable to foreign investment, including specific investment incentives for the key sectors identified in the government’s strategy. Access to credit has been a common challenge for Cabo Verdean importers and businesses. However, the government offers technical assistance and guarantees access to credit for viable projects to support or build micro-, small-, and medium-sized companies. Procurement laws that guide international tenders and privatization processes are based on international standards, and the process is generally transparent. However, the complexity of these processes can strain the capacity of small- and medium-sized entities looking to bid on these tenders and of the government institutions responsible for issuing the tenders. In the energy sector, although the government continues to pursue a transition to renewable energy, additional policy reforms are necessary to ensure the viability of private investments in the sector.
Competition: American businesses and exporters face competition in Cabo Verde from European competitors, some of whom have been active in Cabo Verde since its colonial days. European companies are already familiar with aspects of the business culture, financing, regulations, and standards. The PRC’s commercial presence is also growing and diversifying beyond small sundry shops to include more significant investments, especially in the ICT sector.