Cabo Verde

Bureau of Economic and Business Affairs
July 19, 2018

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Executive SummaryShare    

The archipelago of Cabo Verde is composed of 10 volcanic islands and eight islets located in the central Atlantic Ocean, some 450 kilometers west of Senegal. It has a land area of 4,033 square kilometers, and a 700,000 square kilometer Economic Exclusive Zone (EEZ).

This small African nation has a population of approximately 550,000 people spread over nine inhabited islands with limited natural resources. The country's climate is extremely arid, and prolonged drought frequently affects its economy. 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 lacking economies of scale. Cabo Verde’s economy is vulnerable to external shocks, and the country depends on development aid, foreign investment, remittances, and tourism. Despite that, Cabo Verde achieved middle-income country status at the end of 2007.

The country enjoys political stability and has a history of parliamentary democracy and economic freedom that is unusual in the region. Elections are free and fair, and there has always been smooth transition of power. Good governance, prudent macroeconomic management, including strong fiscal, monetary, and exchange-rate policies, trade openness and increasing integration into the global economy, and the adoption of effective social development policies have produced relatively positive results throughout the archipelago. The new government is preaching more proactive investment reforms. Broad political stability is expected to prevail in Cabo Verde, underpinned by strong democratic institutions and decent 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 program includes a commitment to privatizing various sectors of the economy, and addressing macroeconomic challenges in order to provide 45,000 new jobs by the end of the term. The government has implemented some economic reforms aimed at developing the private sector and attracting foreign investment to diversify the economy and mitigate high unemployment, which in 2017 came down from 15 percent to 12.2 percent. However, signs of progress in creating jobs have been limited. Recent reforms to the national airline are starting to have positive impacts in the quality of the air transportation business, although in financial terms the major impacts will be felt primarily in coming years. Meanwhile, the government’s elevated debt level limits its capacity to finance any shortfalls. The economy is service-oriented, with tourism, transport, commerce, and public services accounting for more than 60 percent of GDP. Tourism alone accounts for approximately 25 percent of GDP, and it is expected to continue its strong performance.

There are few regulatory barriers to foreign investment in Cabo Verde, and foreign investors receive the same treatment as the nationals regarding taxes, license approvals and registration, and access to foreign exchange. Foreign investment in Cabo Verde is concentrated in tourism and light manufacturing. In terms of transportation, Cabo Verde’s strategic and geographic location places the country in a position to become a regional and international shipping hub for both passengers and cargo. Nevertheless, the country remains underserved, with insufficient and inefficient maritime interisland transportation and undeveloped deepwater ports. Although the government has promoted tenders that aimed at addressing the issue, there have been no changes to the current inadequate situation. The energy sector in Cabo Verde is undergoing important regulatory changes and attracting investment, which may result in a clearer framework to promote investment opportunities in the sector. As a regional leader in renewable energy, Cabo Verde has wind farms built on four islands. Currently, about 27 percent of the energy consumed in Cabo Verde comes from renewable sources. The government’s goal is to increase this number to 50 percent by 2020, which presents additional investment opportunities for American companies in this sector.

Cabo Verde’s constitution provides women the same rights as men, and in terms of women’s empowerment, it has fared exceptionally well when compared to the region. However, there are still inequalities in terms of opportunities, and domestic violence is a concern. Although women’s participation within central government is acceptable, they have less representation in local community associations and city councils. The youth literacy rate is 98.11 percent while female youth literacy rate is even higher at 98.73 percent.

Table 1

Measure

Year

Index/Rank

Website Address

TI Corruption Perceptions Index

2017

48 of 180

http://www.transparency.org/
research/cpi/overview

World Bank’s Doing Business Report “Ease of Doing Business”

2017

127 of 190

http://www.doingbusiness.org/rankings

Global Innovation Index

2017

N/A

https://www.globalinnovationindex.org/
analysis-indicator

U.S. FDI in partner country (M USD , stock positions)

2015

N/A

http://www.bea.gov/
international/factsheet/

World Bank GNI per capita

2015

2 970

USD

http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign InvestmentShare    

Policies Towards Foreign Direct Investment

The Government of Cabo Verde looks to both private and foreign investment to drive the country's economic growth with a focus on tourism, transportation services, renewable energy, and export-oriented industries. A great effort has been made to promote a market-oriented economic model where all investors, regardless of their nationality, have the same rights and are subject to the same duties and obligations under the law. The government, elected in 2016, is investing in administrative decentralization, reduction of the state’s role in the economy, and the empowerment of the private sector, improving the business climate to attract investments.

Cabo Verde TradeInvest (CI), the agency responsible for investment promotion, is the one-stop-shop for external investors. It provides investor assistance based on the One-Stop-Shop approach, whereby all the services required for approving projects are centralized. The investor can express interest in investing, attach the necessary documents for formalizing a project, and monitor all the project approval stages. The investment approval process has been expedited with the revision of the external investment code. Although bureaucratic procedures have been simplified in a number of cases, there is still room for improvement. Through CI, the government maintains dialogue with investors using personalized meetings, round tables, conferences, and workshops.

Services provided for the investor:

  • Expression of interest in investment and upload of project documents;
  • Monitoring the investment process using a monitoring code;
  • Payment of certificate issuance fee.

CI also provides the investor/exporter support with the following services:

  • Information about preferences of the country trade agreements Act (AGOA, ECOWAS, and others);
  • Market information;
  • Organization of and participation in exhibitions, fairs, congresses, conferences, seminars or other events in the field of exports of goods and services in the country;
  • Contacts with other State institutions, providing or promoting partnerships, etc.

CI has an After Care service aimed at supporting investors after they obtain their Investment Registration Certificate and implement their investment project. CI assists investors in their implementation process, in resolving bureaucratic issues in conjunction with other public institutions, and in establishing reinvestment and export processes such as:

  • Obtaining operating authorization and licensing;
  • Obtaining tax and customs incentives;
  • Obtaining work permits for foreign workers;
  • Obtaining visas for company workers;
  • Assistance with obtaining housing for foreign workers;
  • Assistance with registering workers with social security;
  • Assistance to investors and their families in the process of settling in the country;
  • Assistance with obtaining premises for company offices;
  • Introduction to service providers, such as banks, lawyers, accountants, estate agents;
  • Export assistance.

For investments of less than USD 500,000, ProEmpresa and the Casa do Cidadao provide similar services for investors.

Limits on Foreign Control and Right to Private Ownership and Establishment

The country is investment-friendly as foreign investors, regardless of their nationality, have the same rights and are subject to the same duties and obligations under the laws of Cabo Verde.

Other Investment Policy Reviews

No reviews have taken place under Organization for Economic Cooperation and Development (OECD) or the-United Nations Conference on Trade and Development (UNCTAD). The first review of the trade policies and practices of Cabo Verde under the World Trade Organization (WTO) took place on 6 and 8 October 2015.

Business Facilitation

Cabo Verde has made significant progress in recent years in simplifying its business registration process. The Commercial Registry Department (Casa do Cidadao), is a one-stop-shop where a company can be created and registered in less than a day. The overall business environment has become more efficient. The process for launching a business is more streamlined, and licensing requirements are less burdensome.

An information website on business registration is available at https://portondinosilhas.gov.cv/ and http://caboverde.eregulations.org/show-list.asp?l=pt&mid=1.

Step by step information on procedures, time and cost involved in starting a company can be found at http://www.doingbusiness.org/data/exploreeconomies/cabo-verde/starting-a-business/.

As the agency in charge for the promotion and facilitation of investment in Cabo Verde, CI is the first point of contact for foreign investment in Cabo Verde. It offers an Electronic Platform, “One Stop Shop for Investments,” which is important for the promotion, settlement, and monitoring of investments in the country. The platform aims to increase the efficiency and effectiveness of the investment processes, improving understanding and communication between CI, its customers, other stakeholders, public and private entities, and project developers of domestic and foreign investments. The “One Stop Shop” offers a single platform containing all the necessary services once scattered through various institutions.

CI’s website is where all information pertaining to investing in Cabo Verde can be found, including Cabo Verde's Investment Law, the Code of Fiscal Benefits, and the Contractual Tax Benefits-Incentives http://www.cvtradeinvest.com/en/. The platform is helping with de-bureaucratization of the investment process, ensuring that the process is completed within a maximum period of 75 days.

The State Budget law of 2017 contained measures to facilitate and stimulate business activity, including a one percentage point lowering of the maximum personal income tax (IRPS) to 24 percent, the easing of the Special Scheme for Micro and Small Businesses, and the introduction of new tax benefits.

Elimination of double taxation, release from payment in installments for taxpayers who had negative results or began their activity in the previous year, and elimination of the obligation to pay the minimum installment are some of the new measures undertaken by the 2017 State Budget law.

The tax benefit package included in the 2017 State Budget aims to make accessing the benefit easier than previously: it reduces the amount of investment to benefit from contractual benefits to 500 million escudos (USD 4.8 million) and reduces the requirements on number of jobs created and expansion into new strategic sectors of the 50 percent investment credit. It also extends the period for deduction of credit for investment to 15 years.

Outward Investment

Incentives for outward investment in developing countries are not included in the legislation, but they have been provided on an ad hoc basis.

2. Bilateral Investment Agreements and Taxation TreatiesShare    

Cabo Verde does not have a bilateral investment treaty with the United States. However, as a member of ECOWAS, Cabo Verde will benefit from the TIFA agreement, which was signed in August 2014 but has not yet entered into force.

Cabo Verde has bilateral investment agreements with Angola, China, Cuba, Germany, Italy, Netherlands, Portugal, Russia, and Switzerland. Cabo Verde also enjoys a special partnership with to the European Union as a Peripheral Region Nation. Cabo Verde also benefits from AGOA.

Bilateral Taxation Treaties

Cabo Verde does not have an Income Tax Treaty with the United States.

Cabo Verde has tax treaties in force with Portugal, Macau, and Guinea Bissau.

Under the tax treaties with Portugal and Macau, the taxations are limited as follows:

  • Dividends: 10 percent;
  • Interest: 10 percent;
  • Royalties: 10 percent.

The tax treaty signed with Guinea Bissau is limited as follows:

  • Dividends: 5 percent. Nevertheless, there is a tax exemption if direct or indirect participation in share capital or voting rights of at least 5 percent is held, consecutively, for 24 months prior to the date at which the profits are made available;
  • Interest: 10 percent;
  • Royalties: 10 percent.

3. Legal RegimeShare    

Transparency of the Regulatory System

Cabo Verde is a model for much of Africa because of its transparency and good governance. The government is committed to improving the conditions for foreign investment and to encouraging a more transparent and competitive economic environment. In 2017, Cabo Verde ranked 48th on Transparency International’s Corruption perception index, second among African nations, trailing only Botswana.

Laws to promote exports, incentives to export, and free-zone enterprises stress the commitment of the government to encourage investment in export-oriented industries. The tax regime encourages entrepreneurial activity, and government policies support free trade and open markets. Although bureaucratic procedures have been simplified in a number of cases, there is still room for improvement. CI is the one-stop shop for external investors.

The Investment Law - Law n. 13 / VIII / 2012 of 11 July 2012 - establishes the general basis for accelerating and facilitating investment in Cabo Verde, as well as the rights, guarantees, and incentives to be granted to investments. These laws establish the principle of equal treatment for both national and foreign investment and confirm the government’s commitment to the creation of a dynamic business environment. The Industrial Development Statute regulates the granting of incentives and simplifies the investment approval process.

In addition, the code for Fiscal Benefits, Law no. 26 / VIII / 2013, January 21 and the amendments made by Law 102 / VIII / 2016 of January 6 and by the State Budget for 2017 establish the principles and rules applicable to tax benefits, establish the content, and set the corresponding rules for granting and monitoring

The following is the government official register site for the entity responsible for the official publication of all approved laws: https://kiosk.incv.cv/.

Laws on economic activity sectors can also be consulted on the following websites:

In Cabo Verde there is free access to all laws through the Government Official Register Site.

International Regulatory Considerations

Cabo Verde is a member of UNCTAD’s international network of transparent investment procedures [http://caboverde.eregulations.org/]. Foreign and national investors can find detailed information on administrative procedures applicable to investment and income generating operations including the number of steps, name and contact details of the entities and persons in charge of procedures, required documents and conditions, costs, processing time, and legal bases justifying the procedures.

In January 2008, four years after the United Nations Resolution 59/210 recommendation, Cabo Verde graduated from Least Developed Country status to Lower Middle Income Country status. On May 26 of the same year, five months after the World Trade Organization (WTO) approved its application, Cabo Verde’s legislature unanimously ratified the agreement and formally acceded to the WTO. Cabo Verde has not notified the WTO of any measures that are inconsistent with its TRIMS obligations.

Legal System and Judicial Independence

Cabo Verde was a Portuguese colony until 1975; consequently, its legal system is based on the civil law system of Portugal, and it has systematic codification of its general law. The 1992 constitution provides for a judiciary independent from the executive branch. The judicial system is composed of the Supreme Court, the Constitutional court, and the regional courts. There is no interference from the government, and judges cannot be affiliated with political parties.

The Supreme Tribunal (Court) of Justice has a minimum of five members, one appointed by the president, one appointed by the National Assembly, and three appointed by the Supreme Council of Magistrates. The Ministry of Justice and Labor appoints local judges. The judiciary generally provides due process rights; however, the right to an expeditious trial is constrained by a seriously overburdened and understaffed judicial system. Criminal defendants are presumed innocent and have the right to counsel, to a public, non-jury trial, and to appeal. Cabo Verde has modern commercial and contractual laws. Cases brought to court often linger for years.

The right to private ownership and establishment is guaranteed under the constitution. Property rights are recognized and guaranteed by several Cabo Verdean laws, as well as by the constitution. There is a legal entity that records secured interests in property, both chattel and real estate. The legal system also protects and facilitates acquisition and disposition of all property rights.

The judicial system in Cabo Verde is widely seen as transparent and independent. There is no government interference in the court system, but judicial decisions are often delayed by years.

Laws and Regulations on Foreign Direct Investment

Foreign investment is regulated by the Cabo Verde Investment Law (Decree-Law No. 13/VII/2012) and the Law of Industrial Development. These laws establish the principle of equal treatment for national and foreign investment and confirm the government’s commitment to the creation of a dynamic business environment. The Industrial Development Statute regulates the granting of incentives and simplifies the investment approval process. In addition the codes for Fiscal Benefits (Laws: No. 26/VIII/2013, 102/VIII/2016, and State Budget 2017) establish the principles and rules applicable to tax benefits, establish the content, and set the corresponding rules for granting and monitoring. Laws to promote exports, incentives to export, and free-zone enterprises stress the government’s commitment to encourage investment in export-oriented industries.

During the past year, there have been a few changes in regulations encouraging free investment initiatives, creating Special Zones to encourage private investment outside municipal urban areas, creating Special Economic Zones for the implementation and operation of specific economic activities according to their nature, and establishing the regime of the rights and obligations of the investor. There has also been a clarification of the concept of an Investor's Certificate, and the right to transfer funds abroad from any investment or reinvestment made in Cabo Verde has been strengthened.

Competition and Anti-Trust Laws

The regulatory agencies are the bodies in charge of y responsible for competition-related concerns.

The law establishes the regime of protection of competition applicable to all economic activities, carried out on a permanent or occasional, in private, public and cooperative basis.

Decree Law 53/2003 substituted Decree-Law Nº 2/99 of February 1.
Issue date: 24/11/2003
Date of Entry into force: 23/01/2004

Expropriation and Compensation

Cabo Verde laws allow for expropriation if done for public interest. In the event of expropriation, the government will compensate the owner on the basis of prevailing market prices or the actual market value of the property on the day of expropriation. Compensation may be repatriated at the exchange rate in effect on the day of expropriation.

There have been no cases of illegal expropriations, and the government has never shown any pattern of discriminating against foreigners.

Dispute Settlement

ICSID Convention and New York Convention

In 2011, Cabo Verde became a contracting state to the International Centre for the Settlement of Investment Disputes (ICSID convention). Cabo Verde is not a signatory to the convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention).

Investor-State Dispute Settlement

Representatives from the Brazilian telecommunications company Oi and the government of Cabo Verde are trying to work towards the resolution of a boardroom dispute relating to the country’s telecommunication company, Cabo Verde Telecom (CVT). According to the government of Cabo Verde, the Portuguese company that held 40 percent of the company violated agreements by agreeing to sell its shares held in CVT to Oi without the prior permission of the Cabo Verde authorities.

International Commercial Arbitration and Foreign Courts

Disputes between the government and any investor concerning the interpretation and application of the law, which cannot be resolved amicably or via negotiation, are submitted for resolution by the judicial authorities, in accordance with Cabo Verdean laws. Disputes between the government and foreign investors on investments authorized and made in the country, if no other process has been agreed upon, are settled by arbitration.

The law favors arbitration as a mechanism for settling investment disputes between the government of Cabo Verde and foreign investors, under national and international dispute resolution rules, and the courts recognize and enforce foreign arbitral awards. Generally, arbitration will be carried out in Cabo Verde and in Portuguese, unless the parties agree on another location and language. Arbitration is generally accepted as a dispute resolution mechanism. The decision of the single referee or the arbitration committee is final and there is no appeal.

Legislation:

  • The principal national arbitration statute in Cabo Verde is the Arbitration Law No. 76/VI/2005 of 16 August 2005;
  • Law No. 89/IV/93 of 13 December 1993 provides that disputes between the State of Cabo Verde and foreign investors shall be resolved through arbitration and conciliation subject to Cabo Verde arbitration law;
  • Decree-Law No. 35/2010 of 6 September 2010 provides that disputes related to the validity, interpretation, and non-fulfillment of insurance agreements may be addressed by arbitration;
  • Decree No. 8/2005 of 10 October 2005 provides for institutional arbitration.

Bankruptcy Regulations

Cabo Verde made resolving insolvency easier by adopting a law that introduces a reorganization procedure and facilitates continuation of the debtor’s business during insolvency proceedings. The law also allows creditors greater participation in important decisions during insolvency proceedings. The law, published in December 2015, entered into effect in September 2016 and positively affected Cabo Verde’s rating on the Doing Business Report 2018.

4. Industrial PoliciesShare    

Investment Incentives

The Tax Benefits Law foresees specific tax benefits for investments made in the industry sector, provided that these are made under the Investment Law. Tax benefits available to the industry sector relate to Corporate Income Tax (CIT or IUR), Property Tax (IUP), Stamp Duty, and Customs Duties. Additionally, the investor has access to other tax incentives (not specific for the industry sector), namely, the contractual regime for investment projects, job creation, donation regimes, internationalization, and the International Business Center.

Foreign Trade Zones/Free Ports/Trade Facilitation

Cabo Verde repealed the Free Enterpot Trade Law Act, Law no. 99/V/993establishing a set of tax and customs benefits granted to companies under this regime, in order to comply fully with the World Trade Organization regulations.

In order to promote international trade and foster investments with export potential, Cabo Verde promoted by law (Decree Law n. 32/2013) the creation of international trade and industrial centers where it confers a set of incentives for investors, in terms of tax benefits for companies, tax benefits for exemption from stamp duty, VAT exemption, and customs incentives. On December 6, 2017, Cabo Verde passed Decree Law nº 57/2017 that establishes the Cabo Verde International Business Centre (CIN-CV), set the rules governing the establishment and functioning of economic operators that develop economic activities, and also the tax and customs regimes within the CIN-CV framework.

Economic agents may be licensed to carry out industrial activities in the International Industrial Center (IIC), commercial activities in the International Trade Center (CIC), and export-oriented service activities in the International Service Delivery Center (CIPS). They have the following tax benefits on revenues:

  • International Industrial Center and International Trade Center:
    • 5 percent for entities with five or more employees;
    • 3,5 percent for entities with twenty or more employees;
    • 2,5 percent for entities with fifty or more employees.
  • International Service Delivery Center:
    • 2,5 percent for entities with two or more employees.

These benefits are applicable for revenue generated by activities between entities established and operating at CIN-CV or non-resident entities without formal establishment in Cabo Verde.

Entities that are shareholders of companies licensed and operating in CIN-CV are exempt from revenue tax on:

  • Profits already taxed under special tariffs;
  • Interest and other forms of revenue and/or losses caused by the under exploitation of revenue and/or assets placed at their disposal.

Customs Benefits

Companies licensed under the CIN-CV can benefit from import customs duties exemptions on the following goods:

  • Material and equipment directly related to the installation, expansion, or remodeling of the project not intended for sale, including metallic structures, construction materials, sanitary equipment, electrical equipment, and complementary accessories and spare parts;
  • Industrial equipment, machinery, instruments, and utensils, and their respective accessories and spare parts;
  • Brand new mass transport vehicles (for urban transport) and heavy duty vehicles (for logistics purposes);
  • Material for the packaging of manufactured goods;
  • Raw materials and derivatives as well as finished and semi-finished materials and products needed for the production of the final product;
  • Imports of goods, products, and raw materials by the companies installed and operating in the CIN-CV that do not require an import license.

International Business Center Licensing

The license application may requested by the legal entity/person or a representative acting on his behalf for the company/branch that will be registered at Cape Verde TradeInvest.

Performance and Data Localization Requirements

Foreigners are required to have an authorized work permit to work in Cabo Verde. However, the authorization process is easy and affordable.

There is no “forced localization” in any sector in Cabo Verde.

Data protection still lacks sufficient legislative support.

5. Protection of Property RightsShare    

Real Property

Property rights are recognized and guaranteed by several Cabo Verdean laws as well as by the Constitution. There is a legal entity that records secured interests in property.

Property documents are obtained in the land registry certificate (Certidao do Registo Predial), including an official map with the property’s exact location (Planta de Localizacao), and the tax information certificate (Certidao Matricial).

If the property is not registered, it is necessary to obtain a certificate confirming that the property in not registered in anyone’s name (Certidao pela negative) and a tax certificate confirming this (Certidao Matricial). With these two documents, it will be possible to register the property.

Cabo Verde recently completed its second MCC Compact, worth USD 66.2 million. USD 17.3 million of this total was dedicated to a Land Management for Investment Project. This investment is expected to improve Cabo Verde’s investment climate by refining the legal, institutional, and procedural environment to create conditions for increased reliability of land information, greater efficiency in land administration transactions, and strengthened protections of land rights. The project consists of developing and implementing a new land information management system and clarifying parcel rights and boundaries on targeted islands with high investment potential. The islands of Sal and Boa Vista were completely updated; work began on Sao Vicente and Maio.

The Land Management and Investment Project supports the government’s efforts in creating a single, reliable, and easily accessible source of land rights and land boundaries information, which is expected to strengthen Cabo Verde’s investment climate for large and small investors, and reduce land registration time and costs.

In 2016, the government made transfers of property less costly by lowering the property registration tax.

Intellectual Property Rights

The government entity charged with protecting patents and trademarks in Cabo Verde is the Institute of Quality Management and Intellectual Property. It was formerly known as the Patent and Trademark Office. However, in the midst of a public administration reform, the government merged the Intellectual Property Institute with the Institute of Quality Management.

The Prime Minister’s office justified the merger with need to rationalize structures, reduce costs, and optimize synergies existing in the fields of industrial property and copyright, with the areas of quality management systems. All powers and duties in the area of intellectual property of the IPICV were transferred to the new authority.

Cabo Verde is not on USTR’s Special 301 Report, nor is it on the Notorious Markets list. The country does not publish data on seizures of counterfeit goods, but they are usually covered by the media.

For additional information about treaty obligations and points of contact at local IP offices (http://www.igqpi.cv/), please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

6. Financial SectorShare    

Capital Markets and Portfolio Investment

Limited capital market and portfolio investment opportunities exist in Cabo Verde. The Cabo Verdean stock market, Bolsa de Valores de Cabo Verde (BVC), is fully operational. It has been most active in the issuance of bonds. Foreign investors must open a bank account with a local bank in Cabo Verde before buying stocks or bonds from BVC.

The regulatory system does not stop the free flow of financial resources. Foreign interests may access credit under the same market conditions as locals. However, foreign investors typically bring capital in from outside the country.

The financial sector is supervised and regulated by a single institution: the Central Bank of Cabo Verde (BCV). The financial sector consists of:

  • Credit institutions (banks and other institutions that are qualified by law);
  • Special credit institutions (credit unions and savings banks);
  • Nonbanking institutions;
  • Insurance companies;
  • Stock Exchange.

In the 1990s, the statute of International Financial Institutions (IFI) was created for institutions whose activities are directed primarily at non-residents. Most IFI banks in Cabo Verde are foreign branches or subsidiaries of Portuguese banks, which were established in Cabo Verde to benefit from tax advantages in their transactions with non-residents.

The onshore segment is composed of seven banks:

  • Banco Comercial do Atlantico;
  • Caixa Economica de Cabo Verde;
  • Banco Interatlantico;
  • Banco Cabo-Verdiano de Negocios;
  • Banco Angolano de Investimentos;
  • Ecobank-Cabo Verde;
  • Banco Espirito Santo-Cabo Verde.

There are 10 non-bank institutions:

  • A venture capital management company – A Promotora;
  • Three currency exchange offices;
  • Cotacambios de Cabo Verde;
  • Arisconta - Cambios Lda.;
  • Girassol - Cambios Lda.;
  • A company that issues credit cards and handles the payment system - SISP;
  • A leasing company, Promoleasing - Sociedade de Locacao Financeira SA;
  • Three securities fund management companies;
  • Innovation Box;
  • Sociedade de Gestao de Fundos de Habitacao de Interesse Social;
  • Novagest SA;
  • A money transfer agency - Global Money Transfer-Cabo Verde SA.

The offshore market comprises of nine institutions licensed to operate, eight in banking activities and one acting as fund manager:

  • Banco Fiduciario Internacional;
  • Banco Sul Atlantico;
  • Banco Portugues de Negocios;
  • Banco Montepio Geral;
  • Banco Espirito Santo;
  • Banco Privado Internacional;
  • Caixa de Credito Agricola Mutua;
  • Atlantic International Bank);
  • CA Finance SA (fund manager).

Banking, insurance, and securities market regulations comply with international regulations and meet international best practices. Foreign investors have the same access to credit in the local market. However, foreign investors are often discouraged by the high interest rates. Credit above certain values may dictate partnerships of more than one bank, and sometimes requires the participation of a foreign bank. Both local and foreign investors complain about the lack of commercial products to support investment.

Money and Banking System

Cabo Verde has a small but relatively sound, efficient, and well-managed financial sector supervised and regulated by a single institution: the Central Bank of Cabo Verde.

The onshore segment is composed of seven banks:

  • Banco Comercial do Atlantico;
  • Caixa Economica de Cabo Verde;
  • Banco Interatlantico;
  • Banco Cabo-Verdiano de Negocios;
  • Banco Angolano de Investimentos;
  • Ecobank-Cabo Verde;
  • Banco Espirito Santo-Cabo Verde.

Overall, the banking sector is still relatively small, with a limited supply of financial products. However, it is relatively well-managed and exhibits stable performance indicators. Credit risk is mainly controlled through a limited exposure and strict compliance with prudential ratios. In March 2017, shortly after a political transition, the BCV took strong and adequate actions when Novo Banco’s non-compliance threatened Cabo Verde’s banking sector. The measures taken prevented contagion of the sector and reinforced the authority of the banking watchdog institutions.

Banks have branches in all inhabited islands, which are also served by an extensive network of ATM and widely available POS machines. Debit cards, credit cards, and prepaid Visa cards are available through all banks. International credit cards are seldom accepted except on the major tourist destination islands of Sal and Boa Vista.

Establishing a bank account is easy as long as the client provides proper identification independent of nationality and obtains a taxpayer number from the Casa do Cidadao. Bank credit is available to foreign investors under the same conditions as for national investors. The private sector has access to some credit instruments such as loans, letters of credit, and lines of credit. Local and foreign investors complain about the lack of commercial products for accessing credit. The legal guidelines for accounting systems are clear but are not totally consistent with international norms.

According to data from BCV, since 2012 more than 90 percent of the Cabo Verdean population has been serviced by banks, following a long positive trend. Technological innovation in information and communications technology (ICT) has contributed to the revolution in the banking industry with significant impacts on the services traditionally offered by banks. Internet-based tools and services in the banking sector continue to grow in Cabo Verde, gaining an increasing importance and changing the model of the client-bank relationship of the past. New ICT products allow customers to make certain decisions without the constraints of working-hours and from any place with internet access.

Foreign Exchange and Remittances

Foreign Exchange Policies

Foreign investors have the right to convert their investment to any other freely convertible currency and transfer all of their income. The government gives foreign investors important guarantees, such as privately managed foreign currency accounts, which can be credited from abroad or from other foreign accounts in Cabo Verde. In addition, it allows undisputed repatriation of dividends, profits, and capital from foreign investment operations. To receive these benefits the investor has to qualify for foreign investor status through the government’s investment agency, CI.

The regulatory legislation specifies that for the first five years of operation, dividends may be freely expatriated without tax and that for the next fifteen years dividends may be expatriated with a flat tax rate of ten percent. Incentives for outward investment in developing countries are not included in the legislation, but they have been provided on an ad hoc basis.

Cabo Verde’s exchange-rate fluctuation risk is as low as the escudo has been pegged to the euro since its introduction in 1999 at the rate of 110.27 escudos per euro. This fixed exchange rate arrangement is a credit facility granted by Portugal to Cabo Verde – Credit Facility Contract – and managed by a joint Cabo Verdean and Portuguese body named the Commission on the Agreement for Exchange Cooperation (Comissao do Acordo de Cooperacao Cambial – COMACC). Both residents and non-residents may hold foreign exchange accounts, subject to government approval and regulations. Most payments and transfers have been liberalized. Cabo Verde is looking at the possibility of introducing the use of the euro in the local economy. The euro is already accepted as form of payment in the most touristic islands and in the main hotels and restaurants of the country.

Remittance Policies

Current law permits a foreign investor to request transfer loan repayment, revenue/profits, and capital gains overseas from the Bank of Cabo Verde (central bank) within 30, 60, and 90 days, respectively.

Sovereign Wealth Funds

Cabo Verde does not maintain a sovereign wealth fund.

7. State-Owned EnterprisesShare    

Starting in the mid-1990s, Cabo Verde implemented a series of reforms that have transformed a centrally-planned economy into a market-oriented economy. The number of state-owned enterprises (SOEs) has decreased from forty in the 1990s to six today.

Government interference in state-owned enterprises (SOEs) in Cabo Verde is relatively minor. With the exception of certain industries which remain protected (e.g., freight handling at the airport, port authority, importation of pharmaceutical products, and distribution of electricity), private and state-owned enterprises compete freely and without major interference from the government. In these liberalized markets, both private and state-owned enterprises have the same access to credit, markets, and business opportunities. SOEs in Cabo Verde are most active in the transportation sector. SOEs are generally managed by a board of directors which is nominated by the Minister in charge of the respective sector. These boards of directors have anywhere from three to five members. Overall, there is little government interference in the day-to-day management of SOEs, and they are generally evaluated based on their economic or financial performance. However, even though not all directors are politically appointed, they must maintain the confidence and support of the government. All SOEs are required to produce annual reports and must submit their books to independent auditors. Allegations about the qualifications of the CEOs of SOEs abound; many purport to believe that the importance of political connections outweighs the importance of technical qualifications in leadership of these behemoths.

Cabo Verde is not party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO). Cabo Verde tries to adhere to the OECD’s guidelines on Corporate Governance. In general, there is fair competition between SOEs and private sector enterprises, except in the transportation and utilities sectors.

Privatization Program

Privatization came either through private sector sales or through liquidation. The two main utility companies, Electra (electricity and water) and Cabo Verde Telecom, the country's three banks, and the main state-owned entities in the tourism sector have all been sold off. All privatization or liquidation processes ran smoothly with the exception of Electra, which reverted to government ownership. The decision to repossess Electra resulted from a breach of contract with the Portuguese investor. Consensual agreement was reached during the negotiations.

The government sold its shares of fuel company Empresa Nacional de Combustiveis (ENACOL) and local bank Banco Comercial do Atlantico (BCA) via the stock exchange. The long-struggling national airline, TACV, may be on the path towards privatization after years of bloated payrolls, non-performance, and growing cost to the government. Icelandair is currently managing the airline, and it has shown some interest in the privatization of the airline. Also on hold are the privatizations of the port authority ENAPOR and the pharmaceutical company EMPROFAC. ENAPOR’s process of privatization of it management is expected to reach a conclusion as many companies (European and Asian) have shown interest in the tender.

Both foreign and national investors can participate in the public bidding process, which is transparent and non-discriminatory.

8. Responsible Business ConductShare    

The private sector, government, and regulators are increasingly aware of the importance of environmental and corporate social responsibility (CSR) in Cabo Verde. The government encourages companies to engage in responsible business conduct. Many companies conduct campaigns to promote social awareness in areas such as health, environmental protection, and cultural preservation. For instance, all investment projects are required to provide an environmental impact study prior to approval. However, companies’ specific CSR efforts in Cabo Verde tend to be more reactive than proactive. For example, during the recent outbreaks of dengue fever and malaria in the country, companies launched and supported public awareness campaigns.

In terms of women’s issues, Cabo Verde is a leader in the region. During previous governments, women have achieved equal representation in ministerial level positions. Unfortunately, in the current Cabinet, there has been a decline in the number of women in government (3/12). While there is still room for improvement, Cabo Verdean women are well represented among businesses in the country, especially when compared to other countries in the region. Sexual and gender-based violence (SGBV) plagues the country and was one of two subjects in an April 2018 Council of the Republic called by the president.

Cabo Verde does not adhere to the OECD guidelines for multinational enterprises.

9. CorruptionShare    

In 2017, Cabo Verde ranked 48th on Transparency International’s Corruption perception index; it was third among African states, following only Botswana and Seychelles.

Cabo Verde has signed and ratified the UN Anticorruption Convention. Corruption is a crime punishable by law. Giving or accepting a bribe is a criminal act and conviction could result in up to eight years in prison. To combat corruption effectively, the Cabo Verdean government established the High Authority against Corruption, and Parliament has added three additional prosecutors to enforce the law. Other institutions active in combating corruption include the Judicial Police, the Prosecuting Counsel and the courts. Although periodically there have been rumors of alleged corruption, corruption or the bribery of political officials and/or public servants is not a significant concern in Cabo Verde.

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:

Oscar Tavares
Attorney General
Produradoria Geral da Republica
CP 268 Praia - Cabo Verde
Tel/Fax +238 261 1665

Contact at "watchdog" organization (international, regional, local or nongovernmental organization operating in the country/economy that monitors corruption, such as Transparency International):

Cristina Andrade
Senior National Coordinator
UNODC - United Nations Office on Drugs and Crime
Av OUA, ASA
Praia - Cabo Verde
Phone: +238 260 9644
E-mail: cristina.andrade@unodc.org

10. Political and Security EnvironmentShare    

Cabo Verde’s greatest strengths are its political and social stability. Cabo Verde is a strong African democracy with a tradition of peaceful political transition in its 43 years of independence. Cabo Verde demonstrates a strong commitment to values of democracy, respect for human rights, and the rule of law, and it promotes and defends these in many international fora. There have never been any political, social, or religious conflicts resulting in violence.

11. Labor Policies and PracticesShare    

In 2017 unemployment rate dropped significantly from 15 percent to 12.2 percent. Creating jobs continues to be the major concern for the Cabo Verdean government. Unemployment among youth and highly skilled labor is even higher, estimated around 40 percent in 2016. The government is striving to stimulate national production and attract foreign investment to create jobs and support entrepreneurial initiatives.

The low cost, high productivity, and wide availability of labor in Cabo Verde is economically enviable. Unskilled labor represents some 30 to 40 percent of the total labor force and is readily available. However, technical, managerial, and professional talent is more difficult to find.

In 2013, Cabo Verde’s Commission for Social Dialogue approved the archipelago’s first minimum wage and set it at 11,000 Cabo Verdean escudos (USD 115) per month. The minimum wage went into force in January 2014. In January 2018, the Cabo Verdean government approved an increase in the minimum wage for employees to 13,000 escudos (USD 141) per month.

The law to introduce unemployment benefit in Cabo Verde came into effect in April 2016. The fund is managed by the National Social Security Institute (INPS).

The legal workweek is limited to 44 hours for adults, with 12 consecutive hours per week for rest and premium rates of pay for overtime. Larger employers generally respect this restriction, but agricultural and domestic laborers work longer hours. The law sets the minimum work age at 16, but child labor is a problem. Minors under the minimum age (18) cannot work at night, over seven hours per day, or in places that produce toxic products. Cabo Verde produced a list of dangerous and prohibited work for minors in 2014, but many minors continue to perform these tasks. Enforcement by the government is rare in the formal sector and nearly impossible in the informal sector.

In recent years there have been some strikes, promoted by labor unions, but they were all peaceful. All workers are free to form and join unions of their choosing without interference from the government. The government respects the worker's right to strike, but the law also provides for government interference in emergency situations or when essential services might be affected. Labors laws are respected and there have been no instances in which labor laws were waived in order to attract or retain investment.

Cabo Verde has ratified all of the International Labor Organization (ILO)'s eight fundamental conventions. The law protects the rights of workers to form or join unions of their choice without previous authorization or excessive requirements, to engage in collective bargaining, and to conduct legal strikes. The law allows unions to carry out their activities without interference. The labor code provides for protection against antiunion discrimination and for the reinstatement of workers. However, other provisions limit these rights. The “Civil Need” law states the government can force the end of a strike when there is an emergency or “to ensure the smooth operation of businesses or essential services of public interest.” Services provided by telecommunications, justice, meteorology, health, firefighting, postal service, funeral services, water and sanitation services, transportation, ports and airports, private security, and the banking and credit sectors are considered "essential," which are beyond the intended scope suggested by the ILO's respective convention. The Directorate General for Labor (DGT) has a conciliation mechanism to promote dialogue.

Worker organizations were independent of the government and political parties. There were no reports of violence, threats, or other abuses during the year by the government against union members or leaders. There was no reported evidence of antiunion discrimination. Public projects were contracted to private companies who hired workers directly. Workers that do not have a labor contract with public or private companies have no legal protection. Few companies adopted collective bargaining, but the ILO worked with local unions and government bodies to provide guidance on conducting a dialogue between parties. Labor unions complained the government sporadically restricted the right to strike for certain critical job categories. Case resolution time can be severely protracted, and the justice system can be very slow.

The rigidity of the labor laws and severance pays has been considered by the World Bank, IMF and African Development Bank, as well as local and foreign small investors, to be an obstacle to industrial investment and development.

Cabo Verde does not impose local employment quotas. Work permits and visas are regulated by law, and easily obtained as long as the defined prerequisites are met. The costs are minimal. There are no conditions to invest other than the ones stated by law. The process is transparent and clearly legislated. Both foreigners and nationals have equal rights under those laws.

12. OPIC and Other Investment Insurance ProgramsShare    

The Overseas Private Investment Corporation (OPIC) has signed an agreement with Cabo Verde. OPIC offers political risk insurance, which includes coverage for exchange inconvertibility, expropriation, and war.

Cabo Verde is also a member of the Multilateral Investment Guarantee Agency (MIGA).

13. Foreign Direct Investment and Foreign Portfolio Investment StatisticsShare    

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

 

Host Country Statistical Source*

USG or International Statistical Source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

Economic Data

Year

Amount

Year

Amount

 

Host Country Gross Domestic Product (GDP) (M USD )

2016

USD 1,658

2016

USD 1,627

www.worldbank.org/en/country

Foreign Direct Investment

Host Country Statistical Source*

USG or International Statistical Source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

U.S. FDI in partner country (M USD , stock positions)

N/A

N/A

BEA data available at
http://bea.gov/international/direct_
investment_multinational_
companies_comprehensive_data.htm

Host country’s FDI in the United States (M USD , stock positions)

N/A

N/A

BEA data available at
http://bea.gov/international/direct_
investment_multinational_
companies_comprehensive_data.htm

Total inbound stock of FDI as % host GDP

N/A

* Source: Cabo Verde Central Bank (BCV) & Institute of Statistics (INE)
 

Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data

From Top Five Sources/To Top Five Destinations (US Dollars, Millions)

Inward Direct Investment

Outward Direct Investment

Total Inward

1717

100%

Total Outward

Amount

100%

United Kingdom

319

18.6%

N/A

Portugal

318

18.5%

 

Spain

188

10.1%

 

Italy

123

7.1%

 

Ireland

43

2.5%

 

"0" reflects amounts rounded to +/- USD 500,000.


Table 4: Sources of Portfolio Investment

Data not available. 

14. Contact for More InformationShare    

Molly Runyon
Political/Economic Officer
US Embassy
Praia, Cabo Verde
+2382608925
RunyonAR@state.gov