The Government of Cabo Verde welcomes international investment, provides prospective investors “one-stop shop” assistance through its investment promotion agency Cabo Verde TradeInvest, and offers incentives and tax breaks for investments in multiple sectors, most notably tourism and information and communication technology. The record amount of USD 1.5 billion – equivalent to 75 percent of GDP – in proposed investment projects Cabo Verde TradeInvest approved in 2020 suggests high investor confidence in the country’s post-pandemic recovery. Remittances, donations, and overall foreign direct investment also increased. Cabo Verde’s political stability, democratic institutions, and economic freedom lend predictability to its business environment. Free and fair elections, good governance, prudent macroeconomic management, openness to trade, increasing integration into the global economy, and the adoption of effective social development policies all contribute to a favorable climate for investment. Cabo Verde receives high marks on international indicators for transparency and lack of corruption. There are few regulatory barriers to foreign investment in Cabo Verde, and foreign investors receive the same treatment as Cabo Verdean nationals regarding taxes, licenses and registration, and access to foreign exchange. The country’s strategic location and growing connectivity with other West African nations make it a potential gateway for investors interested in a foothold from which to expand to the continent.
As 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 with few economies of scale, the country relies on foreign investment, imports, development aid, and remittances. Despite the challenges, in 2007 the country became one of the first to graduate from least developed to developed country status, and it met most of its Millennium Development Goals by 2015. As the COVID-19 pandemic has demonstrated, the economy’s dependence on tourism, which accounted directly for 25 percent of GDP and more than 40 percent indirectly pre-pandemic, makes it vulnerable to external shocks. In addition, the pandemic caused the government to put plans to privatize state-owned enterprises on hold, though privatization of ports and airports management and water and electricity could move forward later. While the business and investment climates continue to improve, there remain bureaucratic, linguistic (relatively few English or French speakers), and cultural challenges to overcome.
The government’s new Cabo Verde Ambition 2030 plan builds on its earlier Strategic Plan for Sustainable Development (PEDS 2017-2021) and promises to open opportunities in sustainable tourism, renewable energy, blue and digital economies, and the transformation of Cabo Verde into a transportation and logistics platform. Diversification of the economy remains a priority, but high public debt levels, which reached a record estimated 151 percent of GDP in 2020, limit government funding capacity.
Table 1: Key Metrics and Rankings
|TI Corruption Perceptions Index||2020||41 of 180||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2020||137 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2020||100 of 131||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2019||-$2.0||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2019||$3,630||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|