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Country Commercial Guides for FY 2000: Cape Verde Report prepared by U.S. Embassy Praia, released July 1999

CHAPTER I:   Executive Summary

This Country Commercial Guide (CCG) presents a comprehensive look at Cape Verde's commercial environment, using economic, political and market analysis. The CCGs were established by recommendation of the Trade Promotion Coordinating Committee (TPCC), a multi-agency task force, to consolidate various reporting documents prepared for the U.S. business community. Country Commercial Guides are prepared annually at U.S. embassies through the combined efforts of several U.S. government agencies.

Cape Verde is a small nation consisting of ten islands with a very poor natural resource base, aggravated by sustained drought. This lack of water, combined with other infrastructural deficiencies have hindered economic activity in the country, resulting in its total dependency on imports. Its most important resources are the sun, the ocean, the wind and its people.

In 1991, after fifteen years of a state-controlled economy, the government of Cape Verde adopted a development strategy based on market-oriented policies, including an ambitious privatization program. It became strongly committed to the implementation of macroeconomic and structural reforms and to the development of institutions and infrastructure to exploit the opportunities offered by an increasingly competitive global economy.

Despite slow progress in some sectors, Cape Verde's economic reform policies appear to be paying off, as new businesses are being created, private investment projects are being implemented, especially in the tourism sector, construction is booming, and businessmen are eager to explore new import markets. Furthermore, trade and investment opportunities are likely to increase as tourism, fisheries and export-oriented industries become established in the country creating new opportunities to support and enhance these sectors.

One of Cape Verde's most important assets is its location which makes the country an invaluable crossroads for passengers moving across the Atlantic Ocean by air or sea. Cape Verde holds an untapped potential as a launch site for doing business with Portuguese speaking African countries as well as with countries in the West African region, and the international airport at Sal could become an airline transportation hub for the region. With that in mind, the government has placed emphasis on the development of airports, ports and telecommunications facilities.

Cape Verde depends almost completely on imports to meet basic consumer needs and for industrial products and inputs. Its trade balance is characterized by a constant and large trade deficit, with an average import growth rate of 14.96 percent, much higher than the average GDP growth rate. The total Cape Verdean import market in 1998 is estimated at approximately USD 220 million. Portugal is Cape Verde's most important trading partner. In 1998 it was the leading supplier, with a 46.9 percent share of the country's total import market. The U.S. share of imports was 5.6 percent, ranking third.

Cape Verde is a non-traditional market for U.S. businesses. Aside from the cultural and language differences, several other factors have constituted major bottlenecks to doing business with U.S. companies. First, lack of access to commercial credit is a nearly universal complaint among Cape Verdean importers who are accustomed to soft payment terms from their Portuguese suppliers. Second, the high costs of transportation adversely affect profit margins. Third, importers fear that the small size of the domestic market may not be appealing to American suppliers. However, with the government's policy of encouraging diversification of import markets, many importers have expressed an interest in establishing relations with U.S. suppliers. Due to its strategic position, trading with Cape Verde means more than meeting Cape Verde's own import needs. Trade with regional countries must be factored in.

Country Commercial Guides are available for U.S. exporters from the National Trade Data Bank's CD-ROM or via the Internet. Please contact STAT-USA at 1-800-STAT-USA for more information. Country Commercial Guides can be accessed via the World Wide Web at http:// www.stat-usa.gov; http://1997-2001.state.gov/; and http://www.mac.doc.gov. They can also be ordered in hard copy or on diskette form from the National Technical Information Service (NTIS) at 1-800-553-NTIS. U.S. exporters seeking general export information/assistance and country specific commercial information should contact the U.S. Department of Commerce, Trade Information Center by phone at 1-800-USA-TRADE or by fax at (202)482- 4473.