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Country Commercial Guides for FY 2000:
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CHAPTER VIII: Trade and Project Financing
Banking System: Financial services to the private sector are limited, with the result that the existing system is considered inadequate to efficiently and effectively satisfy the private sector's needs for credit. Until 1993, the Cape Verdean financial system comprised two public institutions, the Banco de Cabo Verde (BCV) and the Caixa Económica de Cabo Verde (CECV). The BCV was the principal financial institution in the country, combining the functions of a central bank, commercial bank and a development bank. The BCV, however, has limited experience and expertise with the essentials of a modern economy, especially in investment and export policy. As a result, entrepreneurs who wanted to start a new business or expand an existing one were indirectly discouraged from doing so. The CECV operated somewhat like a savings bank.
With the liberalization of the economy and the subsequent reform of the financial sector, the BCV was divided, in September 1993, into a central bank and a commercial/investment bank called the Commercial Bank of the Atlantic (BCA). While this was an encouraging sign, the bank remained majority state-owned, and because of the lingering bureaucratic tradition, major changes that would directly benefit private sector customers have not been felt. The BCA corresponds with some twenty international banks. In the U.S. it corresponds with American Express and Citibank.
The CECV has undergone a complete restructuring and modernization. New statutes changed it from a public institution into a corporation and a universal bank. The portion of the share capital reserved for the private sector has not been raised. The CECV is, however, expected to be privatized sometime this year. It currently offers normal banking services, including international operations.
The CECV's structure is allowing it to offer relatively quick service which is highly beneficial to the development of the private sector. The CECV corresponds in the U.S. with Chase Manhattan Bank and the Bank of Boston.
Legislation which allows for establishing private banks was passed in March 1993. There are no restrictions on establishing foreign banks. The law requires authorization from the central bank and that 50% of the workers be Cape Verdean nationals.
Two Portuguese banks Totta & Açores, and Caixa Geral de Depósitos have opened a branch in Praia, while the Banco Nacional Ultramarino (BNU) and Banco Mello have opened a representational offices that may lead to full branches. In 1999, Caixa Geral de Depósitos joined with Cape Verdean business people and created the Banco Interatlantico the first totally private Cape Verdean bank.
Although the legislation does not foresee any foreign exchange controls affecting trade, in practice, due to the fragility of the Cape Verdean economy, there may be at times some constraining measures.
General Financing Availability: In spite of financing being generally available for short term private sector projects, one of the greatest obstacles commercial borrowers are faced with is lack of access to credit. Consequently, it is the general rule that medium to long term public sector projects are financed by multilateral financing institutions such as the World Bank, the African Development Bank or by foreign aid programs. Current non-discriminatory credit facilities available in Cape Verde include bank loans, letters of credit and lines of credit (the BCA itself provides no lines of credit). In order to promote the development of private sector activity, several lines of credit are being established such as the one sponsored in part by the World Bank to allow the participation of the local private sector in the privatization process underway.
How to Finance Exports/Methods of Payment: Traditional trade finance instruments such as letters of credit, documentary collections and funds transfers are available to the exporter. Although an irrevocable letter of credit eliminates the commercial risk of an export sale, and to some extent it also protects the buyer, it is not the most attractive instrument to the importer due to its high cost and to the time that it may take. So American exporters should consider the possibility that the European competitor may be willing to offer payment terms more favorable to the buyer.
Types of Export Financing Insurance: Several federal agencies, as well as certain state governments, offer loan guarantee programs and other types of financing assistance for exporters. The U.S. Department of Agriculture's Commodity Credit Corporation (CCC) administers the Export Credit Guarantee program (GSM-102) to insure financing for sales of U.S. agricultural products. Other Washington-based agencies offering financing and insurance programs include the International Finance Corporation (IFC), the Overseas Private Investment Corporation (OPIC), the Export-Import Bank of the United States (Eximbank) and the U.S. Small Business Administration (SBA).
Project Financing: The U.S. Trade and Development Agency (TDA), the World Bank and the African Development Bank provide funds to finance feasibility studies and other planning services for major projects that are economic development priorities of the country.
List of Cape Verdean Banks and their U.S. Correspondents:
Banco Comercial do Atlântico - American Express Citibank Caixa Económica de Cabo Verde - Chemical Bank Bank of Boston
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[end of document] Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.
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