Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
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 exclusive economic zone (EEZ) is roughly the size of Texas. According to the 2021 census, 491,233 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 been smooth transitions of power since the country gained independence from Portugal in 1975. 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.
Despite several years of impressive progress, economic contraction caused not only by the COVID-19 pandemic, but also as a consequence of Russia’s unprovoked war on Ukraine, is proving to be an obstacle to the 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 has remained approximately 14.5 percent since 2020.
The program of the current government, re-elected in April 2021, falls within the larger scope of its Ambition 2030 plan to achieve Sustainable Development Goals and builds on its Strategic Plan for Sustainable Development. Cabo Verde continues to offer opportunities for private investment and public-private partnerships in renewable energy, sustainable tourism, the blue and digital economies, maritime and air transportation, and water for agriculture and agribusiness. Cabo Verde’s strategy is to position the country as a mid-Atlantic hub in a variety of sectors to capitalize on the country’s geostrategic location at the crossroads of the African, European, and American continents. The strategy includes an ambitious restructuring and privatization agenda for strategic state-owned enterprises such as the electricity and power utility ELECTRA, the state pharmaceutical company EMPROFAC, and the port services department, although privatization plans were temporarily suspended due to the global pandemic. COVID-19 was also 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 2021. The government continues with its plans to privatize ELECTRA and anticipates releasing a tender by the end of 2022. Despite the size of the market, the current needs of the energy sector and the expected increase in energy demand when tourism returns to former levels may offer 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 the People’s Republic of China (PRC) provided funding for the ZEEEM-SV’s viability study, the government has been clear that it seeks a diverse range of investors and projects in the zone, including deep-water ports, fisheries, ship repair, and other related services. The government also plans to create a tax-free Special Economic Zone for Technology (ZEET) with incentives to attract international companies. In March 2022, parliament approved a Special Economic Zone for the Island of Maio (ZEEIM), and there are plans to create a tax-free zone for the island of Fogo.
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. A record amount of $1.8 billion in proposed investment projects were approved by the Cabo Verde trade and investment promotion agency in 2021, suggesting high investor confidence in the country’s post-pandemic recovery. As of 2021, foreign investment in Cabo Verde remained concentrated in tourism.