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.  The government increasingly promotes 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 current administration, elected in 2016, has been investing in administrative decentralization, reduction of the state’s role in the economy, and the empowerment of the private sector, all with a view to improving the business climate to attract investments.

Cabo Verde is pursuing a dynamic economic strategy to encourage investment in the country in a wide variety of fields.  It has a clearly defined strategy for attracting investors, international financial institutions, banks, insurance companies, venture capital companies, bilateral partners, and all those interested in investing in the country in tourism, transportation, technology, industry, and trade, and other areas.  The government, in conjunction with international partners, is intensifying its efforts in promoting Cabo Verde’s opportunities for investment in a series of extensive roadshows and international conferences which started in Paris last December and are expected to cover Cabo Verde in July, the United States in late September, as well as in Senegal, Macau, Portugal and Spain.  These events are an opportunity to hear more about the measures Cabo Verde is taking to realize its sustainable development ambitions and the opportunities for new strategic partnerships with international donors and opportunities for investors.

The Cabo Verdean National Assembly approved a bill that creates tax benefits for foreign citizens who decide to buy a second home in Cabo Verde and grants permanent residence to all foreigners whose investment exceeds 180 million escudos (USD 2 million).

Cabo Verde TradeInvest (CVTI), the agency responsible for investment promotion, is the one-stop-shop for foreign 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 CVTI, the government maintains dialogue with investors using personalized meetings, round tables, conferences, and workshops.

Services provided for the investor:

• Helping formalize the expression of interest in investment and uploading project documents into the CVTI’s platform
• Monitoring the investment process using a monitoring code
• Facilitating the payment of certificate issuance fee

CVTI 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.

CVTI has an After Care service aimed at supporting investors after they obtain their Investment Registration Certificate and implement their investment project.  CVTI 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 Cidadão provide similar services for investors.

Limits on Foreign Control and Right to Private Ownership and Establishment

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

Other Investment Policy Reviews

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

During 2018, the United Nations Conference on Trade and Development (UNCTAD) conducted an Investment Policy Review (IPR) at the request of the government of Cabo Verde.  The IPR analyzed the legal and regulatory framework for investment. The report contains strategic analysis on how Cabo Verde can utilize FDI in the tourism sector as a leverage for sustainable development.  https://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=2248  

Business Facilitation

In an effort to improve the investment climate and reduce the government’s approval time for investment projects, the government established a maximum period of 15 days for analysis and attribution of Tourist Utility status and 30 days for approval of the investment and export projects.

The 2019 State Budget law has adopted measures to facilitate and stimulate business activity, including lowering the maximum personal income tax (IRPS) one-percentage point to 24 percent,  and easing the Special Scheme for Micro and Small Businesses. The legislation has undertaken some new tax benefit measures, i.e., the elimination of double taxation, the release from payment in installments for taxpayers who had negative results or began their activity in the previous year, and the elimination of the obligation to pay the minimum installment.

The tax benefit package aimed to provide easier access to the benefits.  It reduced to 500 million escudos (USD 4.8 million) the investment level required to obtain contractual benefits and reduced the requirements on number of jobs created and expansion into new strategic sectors of the 50 percent investment credit. It also extended to 15 years the period for deduction of credit for investment.

The 2019 State Budget law contained governance clauses that commit the Cabo Verdean government to paying its bills within 45 days;  the law further commits the government to paying interest on late payments. These measures were adopted to ensure predictability in the payment of the state’s obligations to companies.  Parliament approved a law that limits public debt to less than 60 percent of GDP.

Registering a company is straightforward.  In 2008, the concept of business-in-one-day was introduced to expedite the establishment of companies (Decree-Law 9/2008).  The Commercial Registry Department (Casa do Cidadão), 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 now more streamlined, and licensing requirements are less burdensome.

Websites with information on business registration procedures are 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, CVTI 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 CVTI, 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.

All information pertaining to investing in Cabo Verde can be found on CVTI’s website, 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 to de-bureaucratize the investment process, ensuring that the process is completed within a maximum period of 75 days.

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.

Cabo Verde has neither a bilateral investment treaty nor a taxation treaty with the United States. For more than a decade, Cabo Verde has maintained its interest in establishing a bilateral trade and investment framework agreement with the United States in its continuing efforts to diversify trade partnerships and to lessen its dependence on Europe.  However, as a member of ECOWAS, Cabo Verde will benefit from the TIFA agreement that was signed in August 2014 but has not yet entered into force. Cabo Verde also benefits from AGOA.

Cabo Verde has bilateral investment agreements with Angola, China, Cuba, Germany, Italy, Mauritius, the Netherlands, Portugal, and Switzerland.  It enjoys a special partnership with to the European Union as a Peripheral Region Nation and ECOWAS.

Cabo Verde has tax treaties in force with Portugal, Macau, Spain (2019), Guinea-Bissau, and Senegal (2019).

Under the tax treaties with Senegal, Portugal, and Macau, taxation is 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

The National Assembly’s 2019 Resolution no. 106/IX/2019 approved ratification of the Convention between Cabo Verde and Spain respectively for the avoidance of double taxation and prevention of fiscal evasion on matter of taxes on income (tax treaty).  The tax treaties foresee among other measures:

• Dividends: 0 percent in case the beneficial owner is a company; 10 percent in the remainder cases
• Interest: 5 percent
• Royalties: 5 percent

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 2018, Cabo Verde ranked 45th on Transparency International’s Corruption Perception Index, making it third among African nations, behind Seychelles and Botswana.

Laws to promote exports, incentives to export, and free-zone enterprises stress the government’s commitment to encouraging 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.

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 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. 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.

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.

Laws and Regulations on Foreign Direct Investment

Foreign Direct Investment (FDI) has greatly influenced the recent economic history of the islands.  The continued implementation of sound macroeconomic policies have fostered solid inflows of FDI particularly in the tourism sector.  Cabo Verde has adopted open if scattered FDI legislation.

Law n. 13 / VIII / 2012, “the Investment Law,” of July 11, 2012, applies to both foreign and domestic investors, and it preserves the principle of freedom of investment.  The law clearly states that investors of any nationality are welcome to invest, reflecting the government’s commitment to creating a dynamic business environment. The Industrial Development Statute regulates granting incentives and simplifies the investment approval process.

Other relevant legislation includes Law n. 41 / 2016 of July 26, 2016, which defines the mandate of Cabo Verde TradeInvest as the one-stop shop for external investors.

In Cabo Verde, there is free online access to all laws through the government’s official register website.  This is viewable at: https://kiosk.incv.cv/  .

Regulations on economic activity sectors can also be viewed on the CaboVerde TradeInvest website:  http://cvtradeinvest.com/  .

Competition and Anti-Trust Laws

Different regulatory agencies (depending on the sectors) are in charge of and 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

The investment law protects against direct and indirect expropriation.  Private property is protected against requisition and nationalization, except for public interest reasons (Investment Law, art. 6.1).  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. The Investment Law provides for the right to seek constitutional guarantee or other forms of dispute resolution provided by any agreement between the investor and the Government.  There has been no reported case of unlawful expropriation, and the government has never shown any pattern of discriminatory behavior against foreigners.

Legislative Decree No. 3/2018 approved the new legal regime for economic and financial operations with foreign countries and foreign exchange operations in Cabo Verde.  It liberalized economic and financial relations with the outside world, especially capital transfers which are no longer subject to verification and prior authorization by the central bank.  Only in exceptional circumstances will the government be able to impose temporary restrictions on economic and exchange transactions

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

In March, representatives from the Brazilian telecommunications company Oi and the government of Cabo Verde reached an agreement to resolve a dispute regarding telecommunications company Cabo Verde Telecom (CVT).  The Cabo Verdean government settled out of court, agreeing to buy back the equivalent of forty percent of Cabo Verde Telecom (CVT) for USD 29.4 million. Cabo Verde believed that the previous owner, a Portuguese company, had violated agreements by agreeing to sell shares held in CVT to Oi without the prior permission of Cabo Verdean authorities.

International Commercial Arbitration and Foreign Courts

Disputes between the government and investors 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.

Law 108 / VIII / 2016 approved the legal regime of tax arbitration, through Decree-Law no. 20/2018, of April 23, 2018, and regulates the arbitrators’ performance, appointment, the requirements to be an arbitrator, and the reasons for refusal, replacement, and removal. In 2018, the Tax Arbitration Center was created to promote the resolution of disputes regarding tax matters, and its statutes were approved (Decree-Law no. 25/2018, of May 24).

Other Legislation:

• The principal national arbitration statute in Cabo Verde is the Arbitration Law No.  76/VI/2005 of August 16, 2005.
• Law No. 89/IV/93 of December 13, 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 September 6, 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 October 10, 2005, provides for institutional arbitration.

Bankruptcy Regulations

Cabo Verde made major developments in resolving insolvency by adopting a law that introduces a reorganization procedure and simplifies continuation of the debtor’s business during insolvency proceedings.  The law provides a framework that allows creditors more involvement in important resolutions regarding the insolvency proceedings. The law was published in December 2015, entered into effect in September 2016, and is expected to contribute to improving Cabo Verde’s ranking in the Doing Business Report in the near future (2018 Resolving Insolvency ranking: 168).

Bankruptcy is not criminalized in Cabo Verde.

Investment Incentives

Corporate Income Tax

The Corporate Income Tax (CIT) rate applicable to entities taxed under the organized accounting regime was reduced to 22 percent (previously 25 percent) in 2019. .

Industrial Activity

The following tax and customs benefits are provided for industrial activity:

• A CIT credit is available for up to 50 percent of the eligible investments made in an industrial activity. Unused tax credit may be carried forward for ten years, subject to certain limitations.
• Eligible investments include the acquisition of new fixed assets, patents, and licenses regarding technologies.
• Property tax (IUP) on the acquisition of property used exclusively for industrial purposes.
• Custom duties on the import of construction material, machines, utensils, semi and finished materials, products, and raw materials used in the production of goods.
• Financing transactions of industrial projects are exempt from stamp duty.

Contractual Tax Benefits

There are exceptional incentives, regarding customs duties, corporate income tax (CIT), personal income tax (PIT), IUP, and stamp duty for:

• Investment value over CVE 550 million (USD 5.6 million) or CVE 275 million (USD 2.8 million) if placed outside the municipalities of the Praia, Sal, and Boa Vista.
• Relevant investment for the promotion and acceleration of economic development identified under the government’s program.
• Creation of at least ten jobs.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Government created Special Economic Zones (SEZ) through legislative decree 1/201 (amended by decree-laws 38/2013 and 57/2017).  To be eligible, a company must obtain authorization for and define its area of economic activity in industrial, commercial or financial services arenas.  Commercial and industrial companies are geographically restricted while financial services are not.

International Business Center (IBC) of Cabo Verde

The Cabo Verdean Agency for Foreign Investment is the entity responsible for granting the licenses to operate within the IBC, which it coordinates with CVTI, to companies proposing to work in free trade areas.

The following tax benefits are applicable to entities licensed to operate in the IBC on income from industrial or business activities and services with respect to operations carried out with other IBC licensed entities or with non-residents entities.  These tax benefits are not applicable to entities engaged in tourism, banking and insurance, real estate, or construction.

• Reduced CIT rates of 5 percent, 3.5 percent, or 2.5 percent are applicable to entities that create respectively 10, 20, or 50 jobs.
• The CIT rate of 2.5 percent applies when at least four jobs are created by entities licensed to operate within the International Service Centre.
• Entities licensed to operate within the IBC are granted to benefit from reduced CIT rates until 2030.
• Shareholders of the entities licensed to operate within the IBC are exempt from taxation on dividends and interest received.
• VAT and customs duty benefits exemptions.
• All the exemptions foreseen in the VAT regulation and customs law apply.
• An exemption from customs duties with respect to certain goods, equipment, and materials used within the scope of the activity developed and licensed under the IBC.

Performance and Data Localization Requirements

Access to work and residence permits by foreign workers, managers, and investors is regulated by the Labor Code and Law 80/VIII/2014.  Foreigners are required to apply for a work permit. The authorization process, however, is easy and affordable, and there is no “forced localization” in any sector in Cabo Verde.  Investors are granted work and residence permits independently of the amount they invest.

The regime for foreign hire differs among categories of skills.  Access to work and the Labor Code regulate residence permits for foreign workers, managers, and investors.  There are four categories of permits for foreigners, including investors, employees, independent professionals and highly qualified employees.

Data protection still lacks sufficient legislative support.

Real Property

The access, use, and transfer of land and real estate are recognized and guaranteed by a series of norms that include the Constitution, the Civil Code and Legislative Decree 2/2007 (Land Law). Everyone, regardless of nationality, may acquire ownership rights or obtain special permits to occupy and use land.

There is a legal entity that records secured interests in property.  Property documents are obtained in the land registry (Certidão de Registo Predial), including an official map with the property’s exact location (Planta de Localização).  A tax information certificate (Certidão Matricial) is requested at the municipality.

If the property is unregistered, it is necessary to obtain a certificate confirming that the property is not registered in anyone else’s name (Certidão Negativa) and a tax certificate confirming this (Certidão Matricial). With these two documents, it is possible to register the property.  In 2016, the government made transfers of property less costly by lowering the property registration tax.

In 2017, Cabo Verde completed its second MCC Compact, worth USD 66.2 million, USD 17.3 million of which was dedicated to a Land Management for Investment Project.  The project aimed to improve Cabo Verde’s investment climate by supporting the government’s efforts in creating a single, reliable, and easily accessible source of land rights and land boundaries information.  It is expected to improve confidence in investment conditions for large and small investors and reduce land registration time and costs. The project has refined 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.  It developed and implemented a new land information management system and clarified parcel rights and boundaries on four targeted islands with high investment potential. The islands of Sal, Boa Vista, and Maio have been finalized, as well as all rural and high potential tourism zone parcels on the island of Sao Vicente. Cabo Verde ranks now number 70 in terms of Registering Property in the World Bank’s Doing Business report.

Despite progress, the process of the land cadaster (land information database) and registration reforms remains incomplete.  The government has expressed its determination to expand the reforms to the remaining islands.

Intellectual Property Rights

Legislation on intellectual property rights (IPR) is in line with international standards.  The legal framework has been revised in accordance with provisions of the World Intellectual Property Organization (WIPO) agreements and those of the World Trade Organization (WTO).  The law provides for the protection of intellectual property and establishes limits to protection.

On April 4, 2019, Cabo Verde completed the ratification of three important copyright treaties – the two so-called “Internet Treaties” and the Marrakesh Treaty to facilitate access to published works for persons who are blind, visually impaired, or otherwise seeing disabled.

The main laws and regulations for the protection of IPR are Decree-Law 1/2009 (amending the Law on Copyright 101/90), the Industrial Property Code (Decree-Law 4/2007), and the Resolution 25/2010 that created the Intellectual Property Institute of Cabo Verde (IPICV).

Cabo Verde is not listed in the United States Trade Representative (USTR) Special 301 Report or Notorious Markets List.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/  .

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 into the country.

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 (BCV).  BCV is responsible for regulation of the sector and has demonstrated itself as a reliable and stable entity.

The onshore segment is composed of seven banks

• Banco Comercial do Atlântico
• Caixa Económica de Cabo Verde
• Banco Interatlântico
• Banco Cabo-Verdiano de Negócios
• Banco Angolano de Investimentos
• Ecobank-Cabo Verde
• Banco Internacional de Cabo Verde

Banks have branches in all inhabited islands; the islands are also served by an extensive network of ATM and widely available point-of-sale (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 to obtain a taxpayer number from the Casa do Cidadão.  The process is independent of nationality. 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 and 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.  The seven banks in the market are embracing technological innovation. They are becoming more dynamic and attractive, contributing 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 through the internet.

Overall, the banking sector is still relatively small and offers a limited supply of financial products.  It is relatively well-managed and exhibits stable performance indicators. Credit risk is mainly controlled through a limited exposure and strict compliance with prudent 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 that prevented contagion of the sector and reinforced the authority of the banking watchdog institutions.

Banking represents more than 80 percent of the assets of the entire Cabo Verdean financial system.

There are only two insurance companies, and the BVC operates the capital market.  According to BCV, the banking sector plays a key role in capturing important resources to finance the economy.  Although smaller banks have been progressively gaining market share from the seven existing banks, two are systemically relevant: Banco Comercial do Atlantico (BCA) and Caixa Economica de Cabo Verde (CECV). In 2017, these two banks held 67.3 percent of the market share in credit and 71.8 percent in deposits.

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.  Foreign investors, however, are often discouraged by the high interest rates. Credit above certain values may dictate partnerships with more than one bank, and sometimes requires a foreign bank’s participation. Both local and foreign investors complain about the lack of commercial products to support investment.

Foreign Exchange and Remittances

Foreign Exchange

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, CVTI.

The regulatory legislation specifies that for the company’s first five years of operation, its 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 low as the escudo has been pegged at the rate of 110.27 escudos per euro since its introduction in 1999. 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 (Comissão do Acordo de Cooperação 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 tourist islands and in main hotels and restaurants of the country.

In June 2018, the government completely liberalized foreign exchange operations in Cabo Verde, allowing the free movement of money overseas.

Remittance Policies

Current law permits a foreign investor to request transfer loan repayment, revenue/profits, and capital gains overseas from the BCV within 30, 60, and 90 days, respectively.

Sovereign Wealth Funds

Cabo Verde has no sovereign wealth fund but is in the process of proposing a sovereign wealth fund law.  A fund will be created once the law is approved and all conditions are in place.

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 major state-owned enterprises (SOEs) to be privatized and where the state owns the majority of the capital has decreased from forty in the 1990s to five today (ENAPOR, ASA, EMPROFAC, ELECTRA, and CABENAVE).

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 government interference. 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. 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. Even though not all directors are politically appointed, they must maintain the confidence and support of the government.

Cabo Verde is not party to the Government Procurement Agreement (GPA) within the framework of the World Trade Organization (WTO).  It 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 comes either through private sector sales or through liquidation. Cabo Verde Airlines, two main utility companies, Electra (electricity and water), Cabo Verde Telecom, 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 Combustíveis (ENACOL) and local bank Banco Comercial do Atlântico (BCA) via the stock exchange. The long-struggling national airline, Cabo Verde Airlines, has been finally privatized after years of bloated payrolls, non-performance, and growing costs to the government.

On March 1, Cabo Verde and Icelandair signed a deal transferring 51 percent ownership of Cabo Verde Airlines (CVA, formerly known as TACV) to Loftleidir Cabo Verde (LCV).  The state will progressively divest itself of its holdings in the company: 10 percent of its equity will be made available to former CVA employees and the diaspora community (with a 15 percent discount rate), and the remaining 39 percent of the shares will be made available to national and international investors in 2019.  Per the terms of the contract, LCV will not be able to sell its shares for a five-year period without prior government consent. After five years, the government will retain pre-emption rights.

Also on hold are the privatizations of the management of the national Port and Airport authorities (ENAPOR and ASA respectively), and the pharmaceutical company EMPROFAC.  The conclusion of the privatization processes of the management of ASA and ENAPOR are expected by the end of 2019.

This privatization agenda is aligned with the current’s government strategic development plan (PEDS 2017 – 2021), looking at privatizations and concessions as tools to bring new dynamics to the economy, through new business and investment opportunities to national and international private sector.  The government hopes to align its progress on the UN’s Sustainable Development Goals to private sector-driven investment rather than international aid or cooperation. It has selected seven big sectors – transportation, tourism, the blue economy, ICT, agriculture, logistics, and energy – as the major drivers.  As the bid for private sector investment advances, the government hopes these key sectors will be see reduced fiscal and budgetary risks and improved performance; it should also diminish the role of certain SOEs and the presence of the government in the economy.

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

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 administrations, 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 out of 14).  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. Women represent 24 percent of elected parliamentarians, and 35 percent of leadership positions in businesses.  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.

In 2018, Cabo Verde ranked 45th on Transparency International’s Corruption Perception Index; it was third among African states, following Botswana and Seychelles. Cabo Verde is considered the second-best democracy in Africa and ranks third in good governance in Africa (Mo Ibrahim Index).

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 responsible for combating corruption:

Oscar Tavares
Attorney General
Procuradoria Geral da Republica
CP 268 Praia – Cabo Verde
Tel +238 261 1665

Contact at international organizations:

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

Political and Economic Section
U.S. Embassy
Abilio Macedo 6
Phone: +238 2608925
Email: Praia_PolEcon@State.gov

Cabo Verde is considered a free country by the Freedom house Index.  It was recently ranked the 33rd strongest democracy in the world and the second strongest in Africa by The Economist’s Democracy Index.  Its greatest strengths are its political and social stability, both of which are reinforced by its economic stability.  Cabo Verde has a tradition of peaceful political transition in its 44 years of independence, and it promotes and defends these values in many international fora.  There have never been any political, social, or religious conflicts resulting in violence.

In 2017, the unemployment rate dropped significantly from 15 percent to 12.2 percent and remained unaltered in 2018 despite two consecutive severe drought years.  Creating jobs continues to be the major concern for the Cabo Verdean government. In 2018, unemployment among youth under age 25 was estimated around 30 percent while the unemployment rate among those aged 25-34 was 15 percent. The government is striving to stimulate national production and attract foreign investment to create jobs and support entrepreneurial initiatives.

Labor is low cost, productive, and widely available in Cabo Verde.  Unskilled labor represents some 30 percent 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 CVE (USD 115) per month, which 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 CVE (USD 141) per month. The minimum wage is barely sufficient for the cost of living in Cabo Verde.

The law to introduce unemployment benefits 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 in some sectors 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 minors continue to perform some of these tasks.  Enforcement of the labor laws by the government in the formal sector is inconsistent, and it is nearly impossible in the informal sector.

In recent years there have been some labor strikes, but they were all peaceful.  All workers except those in restricted sectors are free to form and join unions of their choice 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.  Labor 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 if there is a need to ensure a smooth operation of businesses, and/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 are 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 World Bank, IMF and African Development Bank, as well as local and foreign small investors consider the rigidity of the labor laws and severance pays 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. The process is transparent and clearly legislated. Both foreigners and nationals have equal rights under those laws.

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).

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

* Source for Host Country Data:  Cabo Verde’s National Institute of Statistic (INE).

Table 3: Sources and Destination of FDI

Source:  Cabo Verde’s National Institute of Statistic (INE).   – 2017 Data (estimates)

Table 4: Sources of Portfolio Investment

Data not available.

Economic and Commercial Section
U.S. Embassy Praia – Cabo Verde
Rua Abilio Macedo n0 6
Telephone:  +238 2608900
Email: PraiaEconComm@State.gov